November 6, 2006

4 Min Read
Car-Wash Financing Continued

This installment of Fred Grauer's "At the Car Wash" column discusses the nuts and bolts of car wash financing. To calculate the profitability of a proposed car wash project in your area, use the financial models below for in-bay/rollover and self-serve. Questions? E-mail Mr. Grauer at [email protected].      

In-Bay/Rollover Financial Model

Automatic car washes in comparison to self-serve washes are traffic-dependent. They require expensive "A" sites. It isn't abnormal to pay $15 to $35 or more per square foot for property.

Commercial property is generally quoted on a square-foot basis. To build several automatics/rollovers on a site would require a minimum usable half-acre. Building costs will vary from a low of $75 per square foot to $250. A typical in-bay/rollover requires a 15-by-42 bay. A tunnel car wash is anywhere from 60-by-20 and more depending on the opportunity and volume of the site.

Part 1: Site and Development Cost Estimates:

1. Land: _____SF X $_____  = $___________

2. Building Cost: _____SF X $_____/SF = $___________

3. Fees (architect, engineer, contractor, etc.): $___________

4. Government fees (impact, permits): $___________ 

5. Equipment:
      a. Automatic: $_____ X _____Bays = $___________(Typically $150K per bay)
      b. Self-Serve: $_____ X _____Bays = $___________ (Typically $30K per bay)
      c. Tunnel: $___________ (Typically $250K-$500K)

Estimated Project Cost: $___________ 

Part 2: Revenue Estimation

Automatics have a fairly predictable capture rate, from which we can estimate annual volume of a site.

  • Capture rate (1% of 24-hour traffic) = ___________To calculate, get the traffic count local transportation agencies. For example, if your count is 30,000 cars per day (cpd), your capture rate is 300 cpd.

  • Number of washing days per year (wdy) = ___________This varies from 200 to 325; info is available from weather websites.

  • Estimated cars per year (cpy): ______cpd X _______wdy = ___________

  • Local market price for wash (average per car) = $___________ ($8 exterior; $15 full-service)

  • Estimated revenue per year (revenue/car X cpy) = $___________

  • Estimated variable cost per year (gross X _____) = $___________ (about 30% for exterior; 55% full-service)

  • Estimated fixed costs per car = $___________ (about %15) (taxes, insurance, advertising, legal)

  • Estimated debt = estimated project cost X 80% $__________° Minimum 20% required = $___________cash° Financing 80% @_____% over_____years = $___________   

  • Net income = Gross less variable expense, less fixed costs $___________

  • Return on cash = Net income divided by cash outlay = %

Self-Serve Financial Model

Self-serve car washes are population dependent. The rule of thumb is it requires 1,500 in population to support one bay. Therefore in a community of 30,000 there should be an opportunity for 20 wash bays.

Self-serve washes are local retail businesses and as such draw 90 percent of their customers from a 3-mile radius. There are many organizations that provide population and other demographic data from which you may draw. If you obtain the population within a 3-mile radius of your site, you can estimate the number of bays your location could support by dividing that number by 1,500.

The average revenue per bay varies by regions and local conditions. A good national average is $1,500 per bay per month. Typical self-serve locations cost $80,000 to $100,000 per bay (land, building, equipment). Investments higher than this can provide a good return if the net income can support the debt. Land cost less than $10 per square foot is recommended.

Part 1: Site and Development Cost Estimates

1. Land: _____ SF X $_____/SF = $___________ 

2. Building Cost:
      _____Bays @ _____SF/bay X $_____/SF = $___________
      Equipment Room @ _____SF/bay X $_____/SF = $___________ 

3. Equipment:
      Self-serve equipment per bay = $___________ 
      Vacuums _____ X _____ = $___________
      Other = $___________

Estimated project cost =  $_____________

Part 2: Revenue Estimation

  • 1,500 population necessary to support one bay, so population divided by 1,500 = _____ bays in the community

  • Market draw: approximately 90% within 3 miles = _____ population/1,500 = estimated _____bays at the site

  • Average revenue/bay in market: $_____ X _____bays = $ _____ gross per month

Annual Projections:

  • _____ month X 12 = $_____ annual gross

  • Less cost of goods sold (annual gross X _____%) = $___________ (typically averages 30%)

  • Less fixed expenses (annual gross X _____%) = $___________ (Real estate taxes and insurance are typically 10%)

  • Subtotal before debt (gross-variable-fixed) = $___________

  • Estimated debt, total project cost (land, building, equipment) $___________ 

    • Minimum 20% cash required (20% of project cost) =  $___________

    • Financing 80% @_____% over _____years =  $___________monthly debt X 12 = annual $___________

    • Net income = gross (variable, fixed, debt) = $___________

    • Return on cash = net income/cash ___________%

All models provided by Fred Grauer, president of Grauer Associates and executive vice president, investor market and conveyors, for Ryko Manufacturing Co., a car-wash equipment manufacturer in Grimes, Iowa. Mr. Grauer has made a lifelong career of designing, selling, building and operating car washes. He can be reached at [email protected].

Subscribe to Our Weekly Newsletter
ISS is the most comprehensive source for self-storage news, feature stories, videos and more.

You May Also Like