Opportunity Is Knocking - How to Capitalize on a Self-Serve Wash Purchase

Published in AutoLaundry News May 2016

Opportunities to purchase existing self-service car washes seem to be everywhere. There may be several reasons sites are available, and the ability to capitalize on these washes has never been better. This article will explore some of these reasons and counsel buyers on ways to capitalize on these investments. 

There are several reasons to consider buying an existing car wash, and a low sale price is not the only one. Buyers should exercise extreme caution; potential purchases should be evaluated on an individual basis to fit the buyer’s business model. A so-called “good deal” may prove less appealing once all factors are considered. The reality of daily operations, the location’s future potential, as well as long-term municipal plans for the area should also be deciding factors. 

Locating Available Car Washes

Taking the first step to seek out available properties is an important decision. The next step is just as crucial: locating the right property. As simple as this may sound, locating the right property may prove to be difficult.

The obvious source to find available car washes is a commercial real estate agency. Commercial real estate agencies should have a short list of available car washes or at least properties potentially available for purchase.

Networking with business associates may be one of the best ways to find business opportunities. These associates will have knowledge and familiarity of existing business owners with a desire to sell. Directly contacting car wash owners in your market area is a method to determine area owners desire to sell or their possible competition. Car wash owners may be contacted in a variety of ways. Finding owners at their car wash site may prove to be difficult, since the majority of self-service car washes are unattended. However, most facilities will have contact information posted for customers, or potential buyers may leave a note at the car wash. The Secretary of State’s office and area Chamber of Commerce will also have a list of car wash business locations with contact information.

Additional sources of information include financial institutions or county tax offices. Financial institutions may list available properties and/or car wash owners with a desire to sell. Most “bank-owned properties” have a backlog of delinquent payments or are foreclosed properties. Many times these financial institutions are highly motivated sellers, having no desire to operate a car wash. Some of these car washes may be closed, while others are operated with bank personnel. Additional properties may be located by reviewing county delinquent tax registries.

Motivation of the Seller

Once a facility is located for purchase, it is worthwhile to determine the motivation of the seller. Personal contact helps determine a location’s true value as an ongoing business. Finding an available property does not always translate into a car wash with an agreeable selling price. As the old axiom states, almost all property is for sale…if the buyer is willing to pay the price. Finding an agreeable seller means the price and situation are right for both parties.

Some of the best car washes available to purchase are already operating “as is” with a profit. Properties that prove to be most valuable have a proven track record of income and are for sale due to circumstances unrelated to the car wash’s income. It may simply be that the owner is looking to retire or cash-out. Then again, the car wash may be for sale due to an unexpected death or illness in the owner’s family where there was no time to develop a clear exit strategy. The remaining owner or spouse may have no desire to continue in business. Elderly car wash owners may be unable or no longer willing to operate the car wash.

Other properties may be for sale because the owner has become tired of the business or is bored with the daily operation. Many times these sites have outdated, unreliable equipment and the current owners are unwilling to make the necessary upgrades to remain competitive. These sites need major aesthetic renovation to promote new ownership and showcase upgrades to the equipment.

Properties available because there is too much competition or the market is depressed require the closest scrutiny. In these situations there are too few customers to make the property profitable regardless of management or upgrades. These car washes may go through several sale cycles before the business income will support the payment.

Foreclosed sites require individual analysis to determine if the car wash property is a viable site. Opportunities may be missed assuming the car wash was solely the determining factor in a foreclosure. The source of financial distress may be unrelated to the car wash’s income. Excessive debt of an unrelated property, an owner’s divorce, excessive personal debt, or involvement in a lawsuit has led to foreclosures and even bankruptcies.

Advantages of Buying an Existing Car Wash

There are a variety of advantages to purchasing an existing car wash with a proven income stream. Financing is typically easier to obtain when purchasing an operating business with a proven income history. Planning and permitting directives are many times bypassed, allowing faster initiation of business operation. The purchased property immediately generates income and the purchaser is able to focus on improving the income. Existing customers already mentally identify the site as a car wash and will be more likely to recognize improvements to its operation. Remedial regulations are occasionally avoided as the car wash may be “grandfathered” with older, more appealing policies.

Still other advantages may present themselves and more rewards may become evident later in the operation of the car wash. Area improvements, municipal growth, or the addition of local housing may enhance the car wash property or income. These area enhancements may improve traffic count, access, or the value of the property for other uses. Eminent domain (street widening, or utility access) may also serve as a means to sell all or part of the property to municipalities. 

Upgrading the Car Wash

The buyer’s initial inspection of the car wash should reveal potential improvements to increase income or reduce maintenance and expenses. These enhancements should be implemented as soon as possible once the car wash has been secured. Original financing should include the purchase price with additional capital for necessary upgrades. Operating the existing car wash as is, lulls new owners into a false sense that upgrades may be made once the car wash creates its own additional capital. This delay in improvements also delays increased income.

Necessary upgrades may be obvious for a facility that is inoperable or partially closed; conversely, operating sites require a bit more discernment. It may be apparent these car washes need aesthetic improvement, but it is also vital that the equipment is reliable with all selections functioning properly. Most upgrades will be incremental with each having a cumulative effect on business income.

Improvements should be viewed from the perspective of the retail customer. To attract customers, buyers should survey existing customers or seek out potential customers to determine requested improvements. The age demographic most likely to use self-service car washes are 18 to 35 years old. In addition, many of the objects washed in a self-service wash bay are not only cars, but also lawnmowers, all-terrain vehicles (ATVs), recreational vehicles (RVs), boats, portable grills, and patio furniture. Survey questions should include security measures, additional features, supplemental offerings, or the addition of bays to reduce customers’ wait time.

Security measures include brighter lighting, security cameras, and car wash staff. Features related to security include barrier fencing or the reduction of clutter to improve visibility. To intensify lighting, incorporate light emitting diodes (LEDs). Several U.S. public utilities offer LED lighting rebates to offset initial installation costs. LEDs provide brighter light, are maintenance free, and are more efficient, reducing lighting costs up to 80 percent. Adding white wall covering or paints reflecting more light will make the most of the lighting offered. Security cameras and staff not only benefit the site by reducing potential vandalism, but also increase the customer’s sense of security. Fencing can reduce unwanted foot traffic and serve to block out unsightly adjacent properties. The reduction of clutter decreases shadows and unnecessary obstacles. Pleasant aesthetics act to draw new customers, retain existing customers, and add to the income of the car wash.

Additional bay features may include in-bay vacuums, tire inflation, hand-held air dryers, rug beaters, in-bay bill acceptance, and/or credit card acceptance. Also, supplemental site offerings should be considered as added revenue centers. Depending on the clientele, site location, and size of the property, these opportunities may include ice vending, pet washes, or self-storage units. Consider the return on costs of improvements to prioritize upgrades and expansion.

Reducing Maintenance and Expenses

Long-term savings may be achieved by reducing maintenance and utility expenses. LED lighting may be the initial consideration. However, car wash equipment with higher efficiencies and solid components also provide lower long-term costs. Super E electric motors, pumps with proven reliability, no-slip drive systems, and variable frequencies drive (VFD) inverters serve to reduce consumption and operate longer without replacement.

Further reliability may be realized by using equipment with fewer parts (e.g., single delivery hose to the bay and fewer check valves). Also, choosing equipment with non-proprietary components with a simple design allows the owner to perform self-maintenance and provides higher profit margins.

Solid Investment

Self-service car washes provide a reliable income. This style of car washing is relatively low tech, simple to maintain, and can be very desirable long-term income properties. There are few investments that present a more reliable income with the comparatively minimal investment.