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What to consider when buying a carwash

So, you’ve decided to buy a carwash. Whether it is your first venture into this exciting industry or your tenth, there are certain factors that should be considered. After searching all the available carwashes and finally deciding on a site, a buyer should create a punch list of competing washes in the chosen area of purchase. This list should include the following:

1. Demographics of the chosen area
2. Competition within a three-mile radius
3. Physical layout of each competing location
4. Type of competing location—full service, exterior-only, self-serve, etc.
5. Offerings at each location and menu pricing for all services
6. Appearance of each location
7. Customer handling and quality of service
8.Type of on-site discounting offered
9. Level of customer service
10. City planning—to determine if other new carwashes have been approved in the area.

Compare all of the items on the list. Before getting involved with the seller on a location, a buyer should inconspicuously perform an extensive review of all the aspects of the location by washing his vehicle at the facility a few times during slow periods and peak times. He should make detailed notes on the presentation of the service writer and how efficient and pleasant his sales pitch was each time.

Check out the quality of the vacuum the car received and the quality of care taken when the windows were cleaned. Make a note of the overall experience with employees and management and the quality of the final end product—a clean car. This is the only reason the majority of customers patronize a particular carwash.

In the evaluation process, a buyer looking for a turnkey operation should expect that all of the above results average between 8.5 and 10 on a scale of 1 to 10. This being the case, the location would be doing well in all aspects and in most situations would be asking a premium price for the business.

In evaluating all of the points on the list, the buyer should compare the results with the total of the 10-point punch list. In short, know the competition.

In the event these results are below the scale, in most cases, this would be reflected in the amount of business the wash is doing and also affect the selling price. The good news is that if the buyer recognizes the deficiencies, in most instances they can be corrected.

Through the years, I have inspected numerous carwash locations and have observed many different management/ownership scenarios. It has been my experience that many of the same locations were top locations, producing huge volumes and great dollar averages per car. But these same locations at different times were in the gutter. Think about this: In 99 percent of the properties, the only difference was that the management/ownership had changed.

Once a buyer completes the detailed punch list, performs an initial site analysis and chooses to advance to the purchase stage, he should consult with an industry carwash broker/consultant, especially if he is new to the carwash industry. The consultant/broker will help him determine what additional services could be added to increase the total prospective gross sales. Carwashes are adding complete convenience stores, oil changes, state emissions inspection, windshield repair, dent repair and express-detailing services just to name a few.

The buyer should also review any initial deficiencies encountered in his 10-step punch list of the competitive area and any deficiencies he encountered during the inspection of the intended facility.

The carwash industry is unique in that there are many variables that could dictate the value of a particular carwash location. Critical areas that affect the asking price for the location and are potential negotiating points are:

• The amount of lease offered if the property is not included. The years remaining on the lease, the rent and the amount of rent increases. Is the buyer accepting structural responsibility? If so, the seller is obligated to assign the lease structurally sound. Building inspection is recommended.
• All online and offline equipment should be inspected by a qualified carwash-equipment mechanic. All equipment must be in operational order upon transfer of ownership.
• Inventory including soap, waxes, chemicals and retail items.
• Discount yearly plans, club plans and gift certificates that will continue in circulation. Usually, an amicable formula will be worked out.
• All wholesale accounts to determine what percentage of income is derived from them.

The buyer should review all income and expense statements. This is most critical. Expenses can usually be easily determined. Income verification is best completed under the guidance of an industry broker/consultant. The consultant will also be valuable in arriving at a fair evaluation of the business.

The broker/consultant will assist the buyer with negotiations for the final selling price and guide the buyer in the due diligence process. Assuming all goes well, the buyer should stipulate a Phase I environmental site assessment of the site. The buyer should also obtain permission to retain telephone numbers dedicated to the facility.

Finally, retain the services of an experienced attorney who is familiar with contractual requirements in the sale of a carwash. It is also to the buyer’s advantage to use a broker who specializes in carwashes.

Joseph Biello is the President and Senior Consultant for Joseph Biello Co. LLC. He has 42 years experience in all segments of the carwash industry including designing and building carwashes. He can be emailed at jobco857@msn.com

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