Starting a Touch-less IBA in Los Angeles

[chagenwashllc]

Hey ya'll! I'm ignorant to the car wash bizz and would like your guidance. My wife and I want to get our feet wet (ha!) and start a touch-less IBA in LA-proper.

We both work full-time in the corp world, want out in the next 10 years, and see that a successful attempt at an IBA could help get us started on that path. We get this is a lot of work and won't make us rich overnight, but see the value to build some bizz experience and cash flow on the side. We work 100% remotely, so are we assuming incorrectly that we could manage an IBA if it were nearby w/ zero staff at a gas station w/ an attendant?

We have some cash saved up and are looking at SBA loans to cover the capital. I'm careful about my car and handwash it, but was lazy one day and found a company in LA called "Spotfree" owns about 7 locations at gas stations in LA with 5 being touch free, and I loved that they prevent scratches. We ALWAYS wait about 20-40 mins in peak times to get a wash and they range from $12-$20 w/o membership. I ran some analytics software and saw the locations they have receive around 15K - 25K visitors per month (to the gas station itself, not necessarily to the wash). Interestingly most of the car washes in LA are full or partial service on tracks. The IBAs at gas stations are usually pretty old, are not touchless, leave spots and water all over the car and look plain scary when you enter them!

Questions:

• Obvious issues with our plan, or details we could provide that would help you guide us better?
• Best way to determine most optimal/competitive locations? (directly across the street from a preexisting IBA, or where there is none, or not even at a gas station?)
• Is it better to approach current gas stations w/ old/inefficient IBAs and pitch replacing with touchless OR should we build a new bay where there is no IBA to begin with to add value to area?
• What's the general profit sharing model with a gas station?
• Can a manufacturer like PDQ provide an overview of how much costs look like (or does this forum have a calculator to figure out costs of opex/maintenance)?
• Are there certain manufacturers you recommend over others? (I pretty much see PDQ down here and most work well).
• What's the typical "life" of an IBA? 100K washes, 20 years?
• It it stupid to even consider this idea in LA where there are car washes every few miles?

Many thanks and incredibly grateful for your wisdom and knowledge!

Best,
Ross

 

[Car Wash Man]

I would personally not advise starting up your first wash, with you two both working other full time jobs. I here it so many times from friends that say it would be great to open a wash and " have cash flow coming in on the side" when this is usually a recipe for disaster. Running a car wash is a lot more work then stopping in once a week to collect the cash. If you go in with this mind set and aren't able to give it your all from the get go, the wash will either under perform or you will realize real quick how much more work it is and get burnt out. If you are looking for more info on specific wash machines and location logistics I would recommend talking to a distributor as they will see you as a potential customer and have the most info on the different types of machines.

 

[Waxman]

I agree with the above statements wholeheartedly. I also would not be that interested in starting a car wash as a part of a gas station that already exists. I'm sure there are plenty of people that do it successfully, but it seems like there would be many obstacles in not owning the real estate and having to share the lot with another business. I think you should do more research, including creating a business plan with Three years of cash flow projections. That's a good start

 

[Axxlrod]

LA is going to be a tough market to start up in. Most (all) the gas stations are owned by large corporations, and even if you find one that is willing to lease out the car wash, I imagine the rent is going to be expensive.

As with any leased facility, you need a long lease to give yourself time to ramp up and enjoy the profit and not just have the LL kick you out and take over your successful business for themselves. The flip side to having a long lease is that if the business fails, you're still on the hook for years of lease payments.

 

[Blanco]

LA is going to be a tough market to start up in. Most (all) the gas stations are owned by large corporations, and even if you find one that is willing to lease out the car wash, I imagine the rent is going to be expensive.

As with any leased facility, you need a long lease to give yourself time to ramp up and enjoy the profit and not just have the LL kick you out and take over your successful business for themselves. The flip side to having a long lease is that if the business fails, you're still on the hook for years of lease payments.

My second wash I ever bought a long time ago was a lease. My father who is here but isn't because of Alzheimers told me do not sign a personal guarantee and put it under its own llc. I listened to him and a year later I had an offer for 350K. I bought the place for 30K but grew it to 50k month revenue. All the other washes around either sold out to other types of business or burnt down at that time. I was the only one in a nice city and killing it. After a year two washes were being built brand new less than a mile away across the street from each other. I knew it was time to sell but when I found the buyer the landlord would not sign off because I was the only one to pay him on time monthly out of the last 5 owners. I told him I would just walk away since he cant do anything since I didn't sign a personal guarantee and he would be stuck with an empty building (I owned the equipment), no rent payments, and a hard time finding someone to take over a old wash bay when there is new ones are around the corner. He finally agreed to sign the lease transfer for 10K cash in an envelope. Best 10K I spent and lesson learned never operate a leased car wash. You never know what the landlord will do.

 

[chagenwashllc]

@Car Wash Man , @Blanco , @Waxman , @Axxlrod Greatly appreciate all of your seasoned input and I understand the juice is not worth the squeeze on a lease-structured wash. Thank you for the forewarning.

If I were to purchase my own land, set everything up myself and hire a single employee for a multi-bay (self service + IBA), I'm assuming that would be more in line with your suggestions? Given we're remote employees and mostly dictate our own hours, we have very flexible schedules. I understand this wouldn't be a 'set and forget it' bizz, however would you realistically estimate more than 1 hour daily of time invested on a self service/IBA set up with a single employee? (perhaps you may say yes, but margin wise a full time employee may not allow adequate growth?)

Not necessarily trying to convince myself not to explore a carwash bizz (or try to make a quick buck), but attempting to be as realistic as possible. I would think a logical option to your above points is to draw out a business plan and maybe find someone in the industry who's done it in LA and ask for their guidance.

Thanks again everyone!

 

[Axxlrod]

Your biggest hurdle, besides being a complete newb, is your market. LA real estate is insanely expensive to both buy or lease.

Car Washes on leases are rather common in major cities. About half the washes I know personally in the greater LA area are leased, and most of those are high-dollar express tunnels. Leases are not the preferred arrangement, but they def can work fine if structured properly. They are harder to get financing approved on due to the fact that the property cannot be collateralized, and lender will usually require property owners to subordinate to the lender.

I developed many washes in CA, but none in LA, and I don't think I would try. It will be that difficult.

Also, you can't really quantify the time requirement to run a wash properly. Repairs/maintenance take time. All of us here have spent birthdays/holidays/anniversaries wrenching on our washes to make a repair to keep them running. I've spent many a night burning midnight oil to make a repair so that I can wash cars the next morning. That's the X factor that is impossible to quantify.