Breaking Into the Car-Wash Business
|Copyright 2014 by Virgo Publishing.|
|By: Fred Grauer|
|Posted on: 10/01/2004|
Over the past few years, I have had several fortunate opportunities to speak to audiences about the exciting and rewarding car-wash business. But before I share my personal experiences and advice on breaking into the industry, I’d like to give you some history on how I became a “car washer” and why, after 40-plus years, I’m as excited and proud to tell people about my profession as I was when I earned my first dollar cleaning a customer’s vehicle.
At the end of World War II, many returning GIs faced an economic dilemma. War-time economy was slowing down, jobs were hard to come by, and there was a huge surge in the work force. My uncle Bill could have returned from overseas to the family cotton business, run by my dad. But like so many other companies, its products had been going into industrial war uses. With the armistice came a shift from a war- to a peace-time economy and, as a result, opportunities were slim. My uncle was at a crossroads: He could wait for the economy to improve and join the family or look for another opportunity.
It was 1948, and Bill wasn’t alone. He had friends returning from the war in exactly the same predicament. A group of them got together and bought a car wash in Camden, N.J. Shortly after, Bill bought out his partners. He had fallen in love with car-washing and looked for opportunities to expand.
By the late 1950s, Bill had grown his car-wash retail business to almost 10 locations and was known as a real pioneer. He saw there was real demand for new investor sites and an equipment opportunity. Sherman Supersonic Industries, the pre-eminent conveyor car-wash company, became available and Bill acquired it. Now he was in a position to meet the growing demand for car-wash apparatus.
About that time, my parents thought I should go to work, and were convinced the car-wash environment would be a good place for me to learn work ethics and a little humility. I’m sure they never expected the experience would become a lifelong career. Like my uncle, I was seduced, mesmerized and captured by the business. When treated well, car-washing is an incredibly generous mistress. So now that I’ve enticed you, how do you become part of the industry?
As in any enterprise, the first steps are deciding if the business is for you. I must tell you car-washing is not for the faint-hearted. It will engulf you. You will think about it every waking hour. You will even dream about it. When on vacation, you will take side trips to visit car washes, attend association meetings, and become known among your friends as “the car-wash guy (or gal).” You’ll even speak a new language only understood by other car washers. If the idea still appeals to you, read on.
Car washes generally fall into four categories:
The big question I always ask is, how much do you want to invest? The investment I speak of is not only money; it includes time, from start to finish, spent on planning, managing and other commitments. If you don’t want to manage a large staff, you can rule out “full-service” conveyors. If your comfort level is more conservative, in-bay automatics and self-serves may be more your cup of tea.
Bouncing Numbers Around
Each type of car wash will have different equipment and land requirements and, hence, a unique budget. With self-serve bays, depending on your local climate, equipment will cost approximately $15,000 to $25,000. Building costs vary, but the simplest structures will start at around $25,000. Land cost is always the wild card, but if you exceed $90,000 for your land, building and equipment, you may not get the return you seek.
Typical equipment for in-bay automatics, depending on speed and other features, will be around $135,000. Add to this approximately $25,000 for ancillary equipment. Building costs will be roughly $100,000. The average in-bay at a stand-alone car-wash business will generate about $125,000 a year gross, with an approximate 75 percent gross margin. This leaves $93,750 for debt and other fixed costs.
Tunnel car washes are a different investment altogether. I have found the typical conveyor car wash costs around $250 per square foot for the building and equipment. In terms of land, the average tunnel requires about 5,000 square feet. As there are many variables and exceptions, costs and profits for tunnels are the most difficult to estimate. The typical tunnel will wash approximately 75,000 cars at about $15 per wash.
Rules of Thumb
The car-wash business has a couple of rules of thumb. First and foremost, understand this is a real estate business. Therefore, you want to adhere to the first rule of real estate: Whatever you place on a site should be the “highest and best use.” Basically, the facility must support its investment, including land, building and equipment. If you capitalize your income stream, you should come up with a number that resembles the facility’s value.
For example, according to a published carwash income statement, the net income from a five-bay, self-serve car wash in 2003 was approximately $70,000. To back into the value, let’s assume the investment goal, based on the risk, is a return of 20 percent. By dividing the income by the rate, you get a value of $350,000. If the equipment is $125,000 and the building is another $125,000, the target land price would be $100,000 to break even.
If the cost of land is higher than what you identified in your formula, you have to decrease the cost of the building or equipment (or increase revenues) to maintain the desired return. At some point, land value will reach a point at which the car wash, in its current form, cannot support it. When this occurs, you either change the revenue stream or sell the property. Once a car wash is up and running, however, it is difficult to put a value on what is primarily a cash business.
Final Words of Wisdom
Although the car-wash business looks simple, it isn’t. There are a few other caveats and bits of strong advice I’d like to pass on:
1.Interview car-wash owners and visit as many facilities as you can. Study the business carefully. Understand the risk as well as the rewards.
2.Read car-wash publications, conduct online research, and join the International Car Wash Association (www.carcarecentral.com) to gather information.
3.Attend seminars and workshops. Several of the top manufacturers in the business offer seminar opportunities. Check with them and schedule your time.
4.Once you have decided the type of wash you want to build, investigate the various manufacturers as well as their local service teams. You will be connected at the hip, so choose wisely. This is a long-term deal.
5.Select the other members of your team (realtor, lawyer, banker, accountant, contractor and design team) with the same due diligence.
6.Use your equipment experts for all their expertise in construction and design. This is where the rubber meets the road.
7.Clue your family in on the commitment you are going to make. You will need their support.
In a short article, it is difficult to relay the fun, excitement and rewards of a career in car-washing, but let me assure you I have had a blast. Car-wash people rule!
Fred Grauer is the vice president, distributor network, for MarkVII Equipment LLC, a car-wash equipment manufacturer in Arvada, Colo. He has made a life-long career of designing, selling, building and operating car washes. He can be reached at firstname.lastname@example.org.