Would you run a wash for $2000 a month?

[Ghetto Wash]

My local bank just took over a 6 bay SS. Its been shut down for about a month now. Before the forclosure, the previous owner did virtually no maintenance. The bank wants me to run it for them for all the profits up to $2000/month maximum until they can get it sold.

I've told the bank what I think it will cost to get it back up and running and they have agreed to pay that.

No one knows what kind of volume it will have, the bank just thinks they will get more for a running carwash than a shuttered building and dirt. It's kind-of out of the way from my washes (30 miles) but I figure I have the time and plan on hiring a local clean-up guy for the day to day.

The way I see it I will be first in line to purchase it if I choose to and I will know exactly what kind of producer it is.

Am I missing anything?

What would you do?

 

[Bubbles Galore]

I run my wash and I have had to pay to work there. I wish I could work there and break even. I hate Michigan's economy and winter

I say go for it, if you have the time and ability, do it up.

Good Luck!

 

[Greg Pack]

"Try before you buy"- sounds like a good plan to me.

 

[pitzerwm]

I would have the bank guarantee some amount like $1000, since they are limiting you to $2K. At first you will spend a lot of time getting it up to speed and they can sell it out from under you before you reap the rewards. I'd also get a "right of first refusal" on any sale. Also, "never trust a banker", I've been a charter stockholder in a bank and made a lot of money "in banking". Trust me there is no loyalty.

 

[Indiana Wash]

Ditto.....

 

[Indiana Wash]

I would have the bank guarantee some amount like $1000, since they are limiting you to $2K. At first you will spend a lot of time getting it up to speed and they can sell it out from under you before you reap the rewards. I'd also get a "right of first refusal" on any sale. Also, "never trust a banker", I've been a charter stockholder in a bank and made a lot of money "in banking". Trust me there is no loyalty.

Ditto that

 

[Patrick H. Crowe]

Dear Ghetto Wash:

I sold two of my washes to a man after he had worked them for a year for a percentage of gross revenue - - 15% if memory serves. There were major differences. Here are two: 1. these was no limit on the amount he could make. 2. Both washes had well above average incomes but were on leased land though with good leases and one included an option to buy.

Much of what needs to be decided os what the bank means by "run". This must be spelled out in detail. For example can you "sub" all repairs, improvements and day to day help and thus reduce the time you put in to a minimum?

Bill's idea's of minimum guaranteed pay and a right of first are both rock solid, get those for sure; especailoly get more than minimum pay for the first six months because there are not apt to be any profits especially at first.

I see good potential. Is thos in an area where the temp is below freezing sometimes? Has the heat been off?

Patrick H. Crowe

 

[Ghetto Wash]

$500 minimum is guaranteed. First two months I get 100% of profits. After that my income will be capped at $2k. Right of first refusal is a good idea, I'll be sure to include that. I am planning on subbing out as much as possible, especially in the start up phase where it will be needed most. The bank has agreed to this. I was there for an hour tonight and four people wanted to wash - good sign.

 

[smokun]

I agree with Bill and Patrick, and also suggest that you have an employee/employer agreement with any/all employees that manage and operate the wash in your absence.

Even with the right of first refusal, the bank could approach the on-site operator and submarine you. Keep in mind, especially now, that banks are known for their deviant stealth. CYA every way you can.

And remember to keep things in perspective. Essentially, you become a contractor for the bank, so be cautious as to how much information you choose to share, and with whom. Today an adjunct employee, tomorrow a buyer.

It would be much wiser for the bank to open the site with you as a short-term tenant, and allow you to keep all the profits. That incentive would offer the best for both because you wouldn't give the project your all unless it was YOURS. Ownership is a powerful motivator. I suggest crafting an alternative arrangement whereby you can walk away after a given time if the business is unable to sustain itself properly. Conditional agreements are as common as snowflakes, especially in times of distress.

Everything Is Negotiable... except death.

-Steve

 

[Dirt]

when you say run it for them, does that mean you would have to buy stuff like chems., light bulbs, pit pumping, utilities, etc., or would they pay for the things that you tell them they need?

 

[rph9168]

Make sure you can walk away if you need to before the term is done without any problems. I have seen situations where things go from bad to worse rather quickly and people have found themselves unable to get out of the deal. On the other hand, make sure that you lock in the sales price and loan terms before you get started so they cannot force you into bidding with any new people interested in the deal. Keep as much information regarding profitability away from the bank as possible. As many have mentioned most banks cannot be trusted and few bankers are good business people. How much they let you negotiate depends on how badly they want to get this off the books. Good luck.

 

[Waxman]

Sure I'd run a wash for $2k/mo. I'd put it right on my loan principle.

 

[Indiana Wash]

$500 minimum is guaranteed. First two months I get 100% of profits. After that my income will be capped at $2k. Right of first refusal is a good idea, I'll be sure to include that. I am planning on subbing out as much as possible, especially in the start up phase where it will be needed most. The bank has agreed to this. I was there for an hour tonight and four people wanted to wash - good sign.

Is the bank paying your for maintaining the wash too? Is it a percentage of the net profit? Does the cost of funds factor into the net profit? Everyone counts their money a little differently. You need an agreement which clearly defines each party's obligations and what money each party will receive. GET IT IN WRITING. I considered buying a sandwich franchise. I asked about the reports on the internet of the sandwich franchise competing with its franchisees and trying to take all profit form the franchisees. The sandwich representative said that they don't do that any more. I asked them to put it in writing. They said no. My point of view was, "well yes, we have ripped people like you off before, but you have our good word that we won't do that to you even though our written agreement with you says that we can if we want."

My advice. CONSULT AN ATTORNEY. You can have a contract reviewed for a nominal amount of money. Once the bank drafts a contract, you will have a clear idea of the bank's intent. I am always amazed at the number of people who want to save $200 and cost themselves tens of thousands.

This is the best advice you will receive. What you do with it is up to you.

 

[Earl Weiss]

I'd try to get a right of First Refusal AND an option to buy at a set price. Keep some idiot from bidding way too much. Then again, perhaps that would be a good thing. You could run it again when forclosed on.

 

[PaulLovesJamie]

Would I operate a wash for 200/month? Maybe. (Well, no, probably not - doesnt fit my situation.)

But that's not exactly what you're being asked to do ... yes, they're asking you to operate it, but you are also being asked to use your expertise to build a business, ie to make this wash more profitable/valuable than it is right now. Ask yourself this: can they hire any schlep to achieve what they want to achieve, or do they need somebody with CW experience? If its just "taking out the trash" then its probably a fair rate.
Something to think about IMO.

 

[PaulLovesJamie]

I forgot to mention - I would not do it for $500/month, which is apparently a distinct possibility in this deal.

 

[smokun]

Makes sense!

Paul said what many of us feel, that it would take an experienced car wash operator to do what is needed to resusitate this wash and make it valuable enough for someone to buy.

That's why I suggested that keeping all the profits is a necessary incentive. The bank isn't simply hiring labor to operate it, regardless of how they low-key their appeal. They want someone who knows what they're doing, and having that savvy is a valuable asset in creating value for them. YOU are doing THEM a favor.

The difference in the value of the car wash from currently being a loser that is closed... to one that is open and functioning well equates to huge $$$. And Paul rightfully balks at the disparity, as do most others.

Your plan is to rejuvenate "damaged goods" and knowing what to do... and how to do it must be assessed prior to taking any interim deal.

Decide what you'd like as a bottom-line deal for the wash (price, financing, grace period, etc.) and make it a condition before you fix it. If the operation needs funding to fix it up. that should be on the bank, not you. If, after all that, it fails to justify its perceived worth, you can still walk away. Safeguard yourself with all the appropriate exit clauses and come to a drop-dead deal with the bank. Have all the approvals in hand before you do a thing. Then decide if you want to exercise your first rights or not. If so, turn it around... and make it worthwhile.

In my opinion, you do not owe the bank a thing except a good faith effort to try and help them out of a bind... and turn lemon into lemonade.

Knowledge is power.

Hope this helps...

-Steve