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I want to enter the SS business

26 replies created over 6 years ago
posted by Levim3 over 6 years ago

Hi, owning one or multiple SS car washes has been a goal of mine for a long time. I am now in a position to do so and seek a mentor and pointers to get started. This site seems to be a wealth of knowledge and I look forward to engaging.

LM

Replies

reply by Robert Roman over 6 years ago

There is plenty of self-service propaganda that can be found easily on the www.

I also have a “new-to-the-industry” section on my website that you can check out.

http://www.carwashplan.com/new_to_industry

Self-service is still a viable business model in new and emerging markets. However, it has been the most hard-hit segment in the industry due to the economic and financial crisis.

Since 2007, industry sales of self-service equipment have dropped by roughly 45 percent.

However, it may help that you are from Texas; one of the states in recovery having growth in certain markets.

As for a mentor, I would visit with the good folks at the Southwest Car Wash Association.

www.swcarwash.org

SWCA is a regional and member-driven association of individual car wash operators.

Hope this helps.

reply by PanamaJim over 6 years ago

Excellent advice from RR...
SWCW is a great group that you want to start and continue to be involved with.
The ICA will compliment the SWCW with greater exposure to national equipment companies and non-regional contacts/info/networking.

Then load up the bus, travel and talk to every operator you can. When you get out of town...you will be surprised how open and helpful owners in this industry will be. Every word from an operator you can bet $2 on...every word from equipment distributors and salespeople you can bet $1 on. There aren't many liars or thieves in this industry but most everyone has an agenda.

Every dollar you spend doing your due diligence and research will pay off 10 fold later.

Texas is dominated by the self serve industry. The NE is dominated by conveyors. The SE and Central is pretty even.

reply by crown over 6 years ago

LM
Owning and operating a car wash that makes a profit are two different worlds.
Some people will want a car wash since it is a "cash" business, somehow thinking that the cash aspect will make up for any headaches, employee or customer issues. However, as in any business whether cash or not, you still
want to see your investment begin to seem to be worth it after the luster of owning a car wash wears off. Making a profit entails knowing how to manage repairs, employees (if you have any), customers and a successful marketing program. Too often a new operator will become engulfed by an car wash equipment company that promises his equipment is the best. He will show you great numbers from car wash magazines indicated how well car washes do and how much profit is to be had. My friend, the successful washes are very much in the minority. There are alot of factors in choosing a location, equipment, and a consultant to guide you. This is not a business that you pick a spot quickly, set up shop and watch the loads of money come in. You best bet is to your homework on choosing the best consultant and xperienced car wash builder you can find. You will need honest answers - no hype just to sell equipment and poor advising.
Start with someone like Robert Roman who responded as above.

A poorly located and poorly operating car wash will make you want to get out as fast as you wanted in.

I have been in the business for 25 years.

Good luck

reply by Levim3 over 6 years ago

All,

Thanks for the great initial advice. I will stay in touch with this forums / organizations listed above. I will take the time and do the due diligence. RR I will start with your guide for sure. The Texas area has a lot of SS but optically appear to be utilized well (at least from my general observations). I am an executive in a high tech company today but as the story goes as you approach the 50ish year mark you need to start thinking of phase (2) and with current economy retirement is becoming very elusive. Again, thanks to each of you for the advice. I'll be back for more I am sure. Crown, I do appreciate the up front insights.

reply by Levim3 over 6 years ago

Hi All,

I am being presented with what appears to be an incredible opportunity. A couple of months ago I started deep diving into this industry and two days ago I was presented with this offer that is not yet being publicly marketed. The Family has some major disagreements and the courts are forcing them to liquidate assets. The following is offer for $2MM. Is a 5 package deal. I will get all of the financials next week. My commercial lenders "gut" reaction was positive and says he has seen things like this before and can sometimes be a GEM unfortunately at the price of a families emotional drama.

"79" - 6 Bay Self Serve Wash w/Drying Area & Vacuums (12 Vacs total)

"79 Auto" - 2 Bay Automatic Laser-Wash w/Detailing Area (shares vacs with property above its shared landing, very spacious area). One Auto is touch free while the other has brushes, the center bay is Setup as a detailing area.

These are sit on a VERY buys street, parallel location and in full working order. I was there yesterday and observed. Property needs new paint and more "eye candy" but appeared to be a great property. Vac areas need covering from the Texas sun for sure.

"North" - 6 Bay Self Serve Wash w/Covered Drying Area & Vacuums (8 Vac areas) All working order, needs painting, very good traffic. Located next to several retail shops, 7 eleven, near traffic light as well.

"South" - 6 Bay Self Serve Wash w/Covered Drying Area & Vacuums- Older site but in solid working order.. needs painting and a more inviting look. Solid traffic, next to a Baseball park and near residential area.

"Logan" - 2 Bay Self Serve Wash w/4 Vacuums - This is smallest of the 5 package. Very residential but in full working order.

Initial thoughts ?


reply by MEP1 over 6 years ago

My "initial thoughts" are: who's going to maintain these properties? If there's already reliable, well-trained employees then your payroll will be very high. If you plan on operating them yourself, I can assure you that the locations you listed together will require full-time, 7-day a week attention.

reply by GregPack over 6 years ago

Let us know gross revenues. Gross income rules of thumb are frowned upon by some, but still allows for a very quick "deal or no deal" line in the sand on price. A price at or below 4x gross is worth further consideration. A price of more than 4X gross and the deal becomes questionable very quickly. Beyond 5X gross and the deal probably won't cash flow reliably every month.

reply by Mr. Carwash over 6 years ago

As a long operator in the southeast, I have witnessed a staggering decline in
the self serv business. Many SS car washes have seen declines in excess of fifty percent. As for the cause, it is a combination of economic factors and the proliferation of the express model. Personally, I feel that economic factors play a lessor role and the real decline is due to express washes. To drive this point home, on what historically should be busy days at the SS, nearly all SS washes appear slow while express washes appear to be busy. From my perspective, SS washes are outdated business models. How can you compete with an express wash that can clean and dry your car for around $4 and then offer the customer unlimited free vacs? As an owner/operator I could literally wash my cars for free, however, I opted to spend $4 at the local express. I admire the fact you want to get into the SS business; I was once there myself. But times and technology have changed; in my humble opinion I would focus on the future of car washing not the past.

reply by GregPack over 6 years ago

Mr. Carwash authored an excellent post. I have told some people I feel like it's the year 1973 and I own a couple of drive-in movie theaters.

I know some people disagree. But I think SSs are definitely on the decline in metro areas. They might can still make it in small towns. I have a few friends still doing quite well with them. In my metro area there is just a small handful doing OK.

reply by Mr. Carwash over 6 years ago

Since you mentioned that you are working with a bank, I am assuming that you will at least partially finance this deal. One thing I always consider is the long term cost of money. Interest rates are at historic lows, however, I would suggest that you run the numbers utilizing at a minimum the average cost of money (interest rates) over the previous 25 years. If memory serves me correct that number is around 10 or 11 percent. Moreover, I consider today's interest rates teaser rates which in practical terms can only go higher. The other thing to consider is appraised value. Lets assume that you go for an 80 percent loan based on today's appraisal, what happens when your initial term is up? The point I am trying to drive home is that in the event that the appraised value drops, will the bank require you to pull cash out of your pocket to maintain 20 percent equity?

reply by Mr. Carwash over 6 years ago

Perspective,

One of my first businesses was a communications company which included payphones.....
This was during the 1990s when, for the most part, cell phones were considered a luxury for the well to do. One day I decided to graph the cost of cell phone ownership and realized that before long they would be available to the masses.
I made the decision to sell and stood by my convictions. Many people in the business said I was crazy to think that the masses will someday be able to afford cell phones. Against the advice of so called "professionals", I sold the company to a competitor. Within four months of that sale the payphone market collapsed and many operators went out of business. By this time I was knee deep in the SS business. One day I heard of a new type of car wash called an express. Out of curiosity, I made a road trip to see what all the hubbub was about. After observing this "new" concept I realized that the days of SS were numbered. Again, everybody around me said that express washes will not affect the SS business. Regardless, I made the decision to sell. The point is that a person/entity needs to understand when to buy and when to sell. Buy into the assent and sell at the plateau.

reply by br549 over 6 years ago

Good stuff.....huh? I only buy cars by the pound. Why? The market is going to rice burners. Big cars are cheap and plentiful. The only way your going to make it work is if you can buy at dirt prices. Express will come in on top of you. The bank is only going to loan for the dirt. You fail, the bank is covered plus they get your down payment. Did the mafia show the IRS info on these car washes? It could work if you could sell off the bad ones and make an express out of the best one. Do I keep my money in a CD? Or do I follow P&G into washing cars? Got a RONCE statement? Uncle Sam took over a brothel in Nevada in 1990. They sold whores and liquor and had no taxes...they failed and shut it down.

reply by Levim3 over 6 years ago

Thanks for all the continued advice. I met with the owwners today to get additional perspective. The properties are actually in a city outside of the Austin and all are in positive cash flow. I'll get specifics this week. On site is actually convertable to a express as the space is very large. I'll give more data soon

reply by Levim3 over 6 years ago

BR59, not sure I followed your comments but it feels like you are suggesting that these are doomed businesses? I will certainly look at the financials closely and get advice from those on this site willing to help. I fully agree that Express and full services are a threat and will (has impacted)the SS business. 3 of the sites are on extremely heavy traffic streets and appear to be very utilized. The other two are hard to gauge with basic observation. Is it your general feel that SS car washes are a thing of the past ?

reply by MEP1 over 6 years ago

SS car washes aren't completely a thing of the past YET, but given the economy, what you can charge vs. what people can get at an express, property values/taxes, etc. it's not lucrative like it was even ten years ago.

I know these properties to which you're referring; if he's claiming a positive cash flow and not lying, it's likely not much at all. I'm sure he doesn't owe money on them.

reply by Levim3 over 6 years ago

Thanks, All the input does force deeper consideration overall. I have not signed the dotted line so these discussions are very helpful. I should get much more details this week. I will be sure to go thru the numbers in detail and complete due diligence.

reply by Jon S over 6 years ago

Levim3,
Mr. Carwash is dead on with his assesment. Those washes are worth the price of the dirt they sit on. Anybody need a used payphone?

reply by Robert Roman over 6 years ago

There will always be a certain number of motorists that need to use a wand-bay because their vehicle will not fit in an in-bay or conveyor or just because they want to.

So the segment is not dead. However, consider the opportunity cost to use self-service.

Express has average total guest visit of 8-minutes on property to wash and vacuum, cost is $3.00 or $4.00, less work

Self-service has average total guest visit of 20-minutes on property to wash and vacuum, cost is about $6.00, more work.

Unfortunately, this is something that most appraisers will not take account of in developing their opinion of value.

Most people new-to-the-industry usually wade-in with a single site then branch out slowly after developing management and technical skills.

If you don’t already have these skills, starting off with a network of sites will be a considerable task.

If this is the road you want to follow, I would suggest looking for a partner with car wash experience to help lower your investment risk.

Even in your region, it is a buyer’s not a seller’s market.

reply by GregPack over 6 years ago

What I consider my best piece of advice is avoid longer term financing. If you can't make the deal work with a 15 yr note, walk.

I have seen multiple operators get longer term notes (20 yrs or more)for purposes of cash flowing. Everything goes along for a few years swimmingly. Then the building equipment starts to get worn out and the place becomes in need of a overhaul. Ten years into the loan you revamp the place, only to find after the re-fi for updates that you have not managed to pay off any significant principle amount. Then competition moves in, perhaps not directly, but maybe a new express is built 3-5 miles away where Wal-Mart just relocated to(out of your area) . As a result revenues get cut by 10-20%. Finally, the neighborhood changes. What was once a desirable area becomes littered with pawn shops and liquor stores and property values decrease and the death spiral of even lower revenues begins.

In the end, some operators ten years in that were focused on the strategy of long term amortization and good cash flow end up owing 75% of what they did when they signed the loan docs on day one, and the principle balance exceeds the market value of the wash. My metro area has quite a few washes with that story line. Of all the washes built here in the SS boom of the eighties, none of them gross what they did two decades ago. NONE of them.......

reply by johnny hicks over 6 years ago

I agree with all these comments, but then this is a cast of professionals, many whom I have known many years... Anyway @levim3 I agree, the self serve business has been hit quite hard in high populated areas. ( high traffic counts are a calling card for an express tunnel )but in the rural areas I have friends in the business that are doing ok... Do your homework ,and if you are going to buy yourself a job ,make sure it is one you like...

reply by Levim3 over 6 years ago

I got the initial financials today and clearly the units are under preforming even by todays standards. I won't be going down this route unless there is a counter that is "too good to be true". Thanks again for everyones adivice and direct input. This is a great site!

reply by SS Guy over 6 years ago

As a new member to this forum and this industry, but not to investing, I want to encourage you to continue to look. When I first started investing in Residential Real Estate, I thought I had to go after the first good deal that came along...not true...there was always another down the road. With the SS Car Wash business, I have found the same to be true. However, I have only gone after smaller / rural areas to keep the price down. Of the 3 purchased this year, all have been through seller financing. The 1st at the same rate as if I had gone to a bank (10 year term), the 2nd at 2% less than bank rate (5 yr term), and the 3rd interest free (7 month term). All are 3 to 5 bay SS washes. 2 fully functional and the 0% interest - closed / needing work. Why seller financing? Less $ down (but enough to keep payment to where business covers itself) and more $ kept in my pocket to invest right into the business. What I am saying is...I am not sorry I started this business, but I do most of my own work to keep costs down. If you have to hire everything, I can see where this could be a struggling business. Keep looking down the road...there is another out there.

Man_+__
reply by Levim3 over 6 years ago

Thanks SS Guy, I will continue looking. The wife and I recently started a Franchise (geared for children learning) and it is doing very well. So I am encourage and motivated to continue looking for good opportunities. I am sure with the right SS it can be a good business for a few years..

reply by wsnell over 5 years ago

I am looking at getting into the SS business. I am in a small community and there are no exp washes here and this is the only up to date SS in town. Present owner is asking about 3.5 to 4x the annual gross sales for the business and property. I have seen financials for the last 4 years and they have stayed pretty steady over that time. Would this be a good investment? It is a 4 bay self serve with 1 auto bay. It was built about 6 years ago.

reply by allen over 5 years ago

I agree with all that has been said but would like to add a couple notes :

In my experience with the ss car wash I would advise the value of a ss car wash is nothing more that the dirt it sits on Minus the cost of removing the carwash.
Another item to show up at the act of sale with is a full disclosure form for the seller, banks, equipment provider, tax asessor, Highway department, City codes inforcement and any other persons that are even remotely connected to the car wash to sign.
I have found more fraud connected to this business than any other I have ever been in.
Buyer beware:)

reply by goodmans 2 months ago

I want to start a full auto car wash . anything important to do so?

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