From Ground-Breaking to Grand Opening
MCC follows one operator through the making of a $3-million carwash

In 1995 Lance Fischer, a young entrepreneur with experience in the detailing industry, opened his first carwash in Tucson, Ariz. The city, located within the expanses of the Sonoran Desert, is home to more than 800,000 residents, and counting. Recent reports state that the city grows by nearly 2,000 new residents each month. Another plus for those in the business of clean cars is the weather--Tucson has 360 sunny days a year on average. For Fischer, carwashing in this desert city was perfect.

It didn't take long before he heard the prospect of a second carwash calling. In 1999, he began looking for the perfect site for carwash number two--preferably something in a growing area with high traffic counts and little competition.

One of the first steps Fischer took was hiring a broker who could provide him with property information such as visibility, traffic counts, ingress and egress points and the number of new home permits in the area.

"Hiring a good commercial broker is very important," Fischer says. "This should be someone who is familiar with the town and familiar with commercial property."

Financing

The designer Fischer used brought a fresh perspective to carwash design.

The first question any operator will ask himself when considering a second location is, "How will I pay for it?" Fischer initially estimated the new carwash would cost $2 million.

After deciding that an SBA 504 loan was the best financing option available, he obtained the loan through the Business Development Finance Corporation (BDFC), a private non-profit corporation certified by the U.S. Small Business Administration (SBA) to offer the 504 loan program in Arizona. Fischer explains that because carwashes are defined as specialty buildings, or buildings designed for one specific use, acquiring a loan from the bank can be particularly challenging. Lenders see carwashes as risky because, if they go out of business, there are few other businesses that can take their place. Whereas banks will typically loan 70 to 80 percent of the loan to value, they are less likely to do so for specialty buildings.

Under the 504 loan, the financial institution, as first position lender, will finance up to 50 percent of project. The SBA, in second position, will pay 40 percent, up to $1 million. The borrower finances the remaining 10 percent. This is an ideal situation, Fischer says, because it is often difficult to find a second-position lender when building a carwash.

For small businesses, advantages of the 504 program include a low down payment, long-term financing and a below-market fixed interest rate. Fischer recommends that operators looking into financing a new site consider this option.

"The biggest hurdle for me and the scariest part going in was trying to obtain financing," Fischer says. "With the government deal, my financing is just one big payment when it is all done."

The SBA is also retaining $50,000 in working capital in an account for Fischer for post-opening expenses.

The plan

Fischer designed his business plan with SBA requirements in mind. The organization requires information on the business owner and his existing facility, as well as traffic counts, demographics and number of employees planned for the new facility. Fischer says having a pre-existing business helped in this area.

"Having my own facility, I was able to put real numbers into some of the blanks, where some people are just guessing," he says.

He was able to estimate daily car counts for the new facility based on his current capture rate. The most important thing financers are looking for are projections, he adds. They want to see past tax returns and want to know how you will cover the debt service of the new facility. They also look for information on the cost of the building, land and equipment.

"A lot of that is logical guessing," he says. "Until we had a contract with a contractor and determined what equipment vendor to use, a lot of that was a gray area," he said.

SBA representatives will also evaluate the service and employment opportunities the new business will provide to the community.

Fischer hired an advisor to help him develop his business plan. He says the investment in professional assistance, about $2,000, was well worth it. The individual was experienced in selling businesses and helped him to solidify his vision. The formal business plan took six to eight weeks to complete.

"The business plan was probably one of the most detailed things I did because I wanted to make sure we looked impressive," he says.

Fischer also hired a banking consultant to help him put the plan into the correct format.

"Hiring a professional to help me with the banking side of it cost me a few dollars, but that is probably the best money I have spent so far on everything," he says. "He helped me put [the business plan] in a format so the bank didn't have to do anything."

Fischer kept a daily journal of the planning process from day one. This helped him in designing the plan and putting the plan into action.

The people

So much of a site's success depends on the people involved in its creation. Fischer met his designer, Marc Soloway, five years ago when he was first considering a second carwash. At that time, a new location was beyond reach. When it became possible to begin exploring the idea more seriously, Fischer brought Soloway on board and began educating him about the carwash industry. He brought him to a trade show and spent time explaining the pros and cons of the existing facility. He also assisted him in designing the layout. The job was to be Soloway's first carwash, which Fischer says provided a fresh perspective to building design.

"He really built something so far beyond anything I had ever seen. It was not cookie cutter," Fischer says.

Every operator needs to find an architect who works well with him and his situation, he adds. This means finding someone who will take a personal interest in the project and not ask for a lot money initially.

"People who are asking you for all the money upfront are not the ones you want to do business with," he says. "You want to do business with the people who are trying to work with you and want to be part of the project."

One advantage to building a second site is the chance to revise operations and avoid mistakes that were made at the original location. At Fischer's original site, for example, traffic crosses in front of the tunnel exit, sometimes causing congestion. At the new facility, these flow issues have been worked out. He has also chosen to go with different equipment manufacturers to outfit much of the new location.

Fischer was able to hire an attorney to help him with business licensing and permitting. He says the price of some of the required permits was one of the biggest surprises he came across in the planning phase. He never expected, for example, to pay a $29,800 fee to have the carwash connected to the sewer.

"Some things came out of left field," he says.

The permitting process also took much longer than he anticipated.

"If they say it will be one week, it is going to be three weeks," he says. The best thing you can do to keep the process moving along is to let city officials know how good your business will be for the city, he says.

The planning process can be the most difficult part of building a new site and is often what keeps operators from making their move. Fischer, however, is enjoying the challenge.

"I could have continued having a decent living without taking on all of the additional stress. But we would have been stuck right there," he says. "It was time for us to either be happy with what we had or to grow in a positive direction."

For Fischer, the decision was obvious.

Look for Part 2 of this series in the November issue of Modern Car Care.

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