3 million express tunnel

[tobaccofarmer]

Is an express that cost 3 million that washes 16000 cars a month considered good? What kind of profit would this scenerio produce? What are the operating costs per car? the average ticket is $5.25. Wondering what kind of pro forma is used on these operations. All I know is it cost 3 million and washes 16000 cars at 5.25? please explain?

 

[DiamondWash]

Where is this???

 

[mac]

My gut feeling on this is that the place is cash flowing some nice numbers. However (and there's always an however) they may not be keeping much of that. The debt service is going to eat up a lot. And when you wash that many cars with that low of average revenue, you wear the bejeebers out of the equipment. The guy is supporting a lot of activity but probably not banking that much. To me it looks like he got the cash flow way up and is now wanting to unload it to some unsuspecting investor. Course, I could be all wrong, but that's my first impression.

 

[tobaccofarmer]

Its only 6 months old so I don't know if selling it would even be considered but Im wondering what the operating costs are for these things?

 

[jfmoran]

If those numbers are real (IF) then the wash is grossing about $84K/month. Figure 20% equity, you got a mortgage of $2.4M, 15 year loan gonna run about $20-22K/month. Labor on an express site of this volume should run about 10% of revenue or $8400/month, car wash chemicals are gonna run about $.45-$.50/car (depending on who you use, offerings, etc...) so about $7-$8K month. You still have to figure water, sewer, electric, insurance, trash, labor burden, credit card fees, phones, depreciation, maintenance, parts, etc...

At first blush, it's definitely cash flowing and making money, but unil you peak behind the curtain it's hard to be sure.

 

[robert roman]

Below is an example of the profit (i.e. earnings before taxes and depreciation) you would anticipated for a wash operating under the conditions you described.

EBTD = (192,000 * 5.25 * 0.5) – (195,400)
EBTD = $308,500

Is “this” considered good? I believe the answer depends on how you define “good.”

$300,000 is a nice number. You would need three of them to cover the initial cash investment.

A couple of years ago, a wash like this would probably list for about $5.0 million.

Pay off loan balance of about $2.0 million, add 3-year’s cash flow then subtract the cash investment.

This gives a 3-year average ROC of 78%.

Is this “good” when you consider this wash would have a break-even point of about 112,000 vehicles annually or 360 vehicles a day.

What about barriers to entry? What would the owner do if someone built an express wash nearby at a cost of 1.5 million?

What about the guy who built an express wash for $4.0 mil in Utah?

Think he is worried?

 

[Washmee]

Below is an example of the profit (i.e. earnings before taxes and depreciation) you would anticipated for a wash operating under the conditions you described.

EBTD = (192,000 * 5.25 * 0.5) – (195,400)
EBTD = $308,500

Is “this” considered good? I believe the answer depends on how you define “good.”

$300,000 is a nice number. You would need three of them to cover the initial cash investment.

A couple of years ago, a wash like this would probably list for about $5.0 million.

Pay off loan balance of about $2.0 million, add 3-year’s cash flow then subtract the cash investment.

This gives a 3-year average ROC of 78%.

Is this “good” when you consider this wash would have a break-even point of about 112,000 vehicles annually or 360 vehicles a day.

What about barriers to entry? What would the owner do if someone built an express wash nearby at a cost of 1.5 million?

What about the guy who built an express wash for $4.0 mil in Utah?

Think he is worried?

Robert, can you put that in plain english for us not in the financial industry?

 

[Earl Weiss]

. Labor on an express site of this volume should run about 10% of revenue or $8400/month,

For an EE why is labor a % of revenue?

The whole EE model is the same labor is needed whether you wash 5000 cars a month or 15,000 cars a month, irrespective of a $3.00 or $5.00 base price.

 

[tobaccofarmer]

Today I took exactly 1 hour from 3pm to 4pm to watch and count every car come out of there, and I counted 59 cars in exactly 1 hour, basically a car every minute was processed. Obviously 1 hour on 1 day isnt enough to calculate anything but its definetly running cars through. And yes Robert can you explain your previous post in plain english?

 

[DiamondWash]

What's the name of this wash you speak of?

 

[jfmoran]

For an EE why is labor a % of revenue?

The whole EE model is the same labor is needed whether you wash 5000 cars a month or 15,000 cars a month, irrespective of a $3.00 or $5.00 base price.

I'm just giving an example, but why wouldn't labor be expressed as a percentage of revenue? The only difference I see with the ee model is that labor % is on a sliding scale, diminishing significantly as volume rises. Using your example that the same labor is needed at 5K vs 15K vehicles wouldn't the actual labor percentage be alot lower at 15K cars vs 5k cars assuming equal staffing levels? Assuming equal staffing levels at two washes the percentage of revenue dedicated to labor will be far higher at a wash doing 60K cars a year vs. a wash doing 180K cars a year.

 

[tobaccofarmer]

There are 2 employees on hand per shift. Open 7-9pm so 2 7 hour shifts. Labour is going to be a constant no matter how many cars are washed! 1 person guiding people on conveyer and the other person doing everything else. No prep no hand drying that is it. So the labour debate is easily calculated its (2) people 14 hours/day. Now I dont know what that would cost with all additional labour expenses but trust me its (2) people (14) hours/day 7 days a week period.

 

[buda]

From my experience of having built and operated an exterior/express tunnel that we invested $1.5 million I would offer:

1. $1.5 million investment
2. $30,000 to $35,000 per month to breakeven @ $6.25 average
3. Can we assume that a $3 million dollar investment would require
double that to breakeven or $60,000 to $70,000 a month?
4. $5.25 average x 16,000 washes = $84,000 a month revenue

According to the industry statistics I used to work under when selling car washes to investors we figured a 20% pretax profit.

This wash is a bit under that if my calculations are correct.

One question however is that $5.25 per car average is low. Is there base price $3.00?

At $5.00; $7.00 and $10.00 we averaged $6.25 and I should have been at $5.00; $8.00 and $12.00 which would have raise my average substantially.

Just some well intentioned thoughts on the subject.

Regards
Bud Abraham

 

[tobaccofarmer]

Yes base is $3 as most around here are.

 

[Earl Weiss]

I'm just giving an example, but why wouldn't labor be expressed as a percentage of revenue? .

Because if something is a percentage of revenue it fluctuates with volume / revenue. To treat it as a percentage / variable throws off break even and profit projections. It's the same as property taxes, insurance, and similar items. A constant figure.

Now, that being said there is a limit to elasticity and at some point if the joint is gangbusters you may need an extra person for clean up, fix up, traffic control etc.

 

[rph9168]

I agree with Earl and several others. Hard to figure labor as a constant. A lot depends on your set up and the quality of employees you have. There are several EE's in my area and when they are busy they can have as many as 7 ot 8 employees on the clock but during slow times as few as two. If this wash has that type of volume they certainly have more employee cost.

Chemicals are also hard to estimate. Cost of chemicals for the top wash can be double or more than for a basic. Much depends on how many packages of each you sell. Their per car average sounds pretty low so they probably don't have a high chemical cost. Even for a friction wash a basic chemical cost average of .45 to 50 sound low. Most EE's tend to apply more product with fragrances and sometimes color to add to the show. This increases the cost by at least 50%.

I agree with most that this wash may be operating in the black but for that size investment I would think it would be a bit disappointing.

 

[jfmoran]

Earl, I agree my percentage was merely for this example not saying that's what it should be when figuring different scenarios in a proforma. If anything, in an ee labor is more a fixed cost than a variable cost as opposed to a traditional full-service car wash.

$.45-$.50/car is a real world example based on an EE with $3, $6, $9, $12 pricing and a an average ticket of about $6.50. Base wash of $3 cost in the range of $.25 while the top wash of $12 was in the neighborhood of $1.00. Average cost per wash came in on the low end of $.45 to the high end of $.55.

 

[tobaccofarmer]

RPH the volume can be 1200 cars a day and they still only have 2 employees. One guy guides each car on conveyor and the other empties trash helps customers at free vacs/ which he has 75 stations of. Thats it 2 guys so I still dont understand how volume affects labour? its 2x14hours x however much they get paid plus all additional labour/tax expense. After all this I still can't make out how much profit a month he could be doing there? Surely someone can explain in simple terms? Also I know of one that does 25000/month and trust me I have seen it 5-6 times all different weather days and its unreal 3 cashier machines constant, never seen anything like it! and they have 2 employees. Anyway I wish someone other than the distributor could really explain these 3 dollar express washes, as to the nuts and bolts of how much goes where?

 

[rph9168]

$.45-$.50/car is a real world example based on an EE with $3, $6, $9, $12 pricing and a an average ticket of about $6.50. Base wash of $3 cost in the range of $.25 while the top wash of $12 was in the neighborhood of $1.00. Average cost per wash came in on the low end of $.45 to the high end of $.55.

Sorry but I have to question some of the numbers here.

What are they putting on a basic wash? In a tunnel wash a decent application of a presoak, shampoo and drying agent should cost almost twice that. For the top wash an application of tire cleaner should be in the .05 - .08 range. RainX costs in the .25 to .30 range. A trifoam should be about .06 to .08 per color and a decent sealant should be in the .07 to .09 range. At the low end of those numbers we are talking around .50 to .55 range. Add that and you get to the .45 range for the base wash even with your number in the range of $1.00 for the top wash or else they are spending around .75 for those extra service products which is way too much if they are getting such a great deal on production products. Even with your numbers an average around .45 means they are not selling much above the basic.

They are flirting with danger using 2 employees at that volume. Who is watching the equipment and supervising the site? Who is supervising the vac area? What happens when one of them has to handle another problem or takes a break for lunch or gets called away to help a customer? I would think they would need a minimum of 4 employees during that time and that might be too few. The washes I was referring to are all on small sites with a tight turning radius and one enter and egress location. They need extra employees (2 to 3) just to direct traffic on the site and get people through the pay station. They have one prep person and one guide on. They have at least one person in the vac/vend areas and a floating supervisor. In addition they usually have one person who floats to handle breaks and wherever there may be a bottle neck.

 

[Earl Weiss]

FWIW, we operate 4 EEs. No prepping. No pay stations. We rarely need more than 2 people at a time.