3 million express tunnel

[Earl Weiss]

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?

There are too many variables to give a definitive answer. Water costs vary greatly. Cold climates require a lot more fuel for heating.

Here is a basic and not unrealistic calculation. . Figure the incremental cost of putting a basic wash thru the Tunnel is $1.00. This includes Utilities, (Water, Natural gas, and electricity.), Solutions including pre soak / soap, wheel cleaner and drying agent. , and an allocation for equipment maintenance. For the sake of argument allocate 33.33 cents to each of these 3 elements, utilities, solutions and maintenance.
If you don't like my $1.00 figure or allocation, adjust however you like.

Now figure 200,000 cars at $3.00 base wash with $2.00 gross profit or $400,000.00 a year to cover fixed costs including labor, debt service, scavenger, insurance, legal, accounting real estate taxes etc. Is that enough? Depends on many variables.

Now figure extra revenue from tunnel sales upgrades. what is the cost of providing the upgrades? Solutions? Extra Utilities/ Maintenance factor?
What is the gross profit on the extra sales? Depeds on many variables. In the example given perhaps on the extra $2.25 that makes up the average the extra cost is 50 cents. perhaps more. Lets say the gross is $1.50 on the 200,000 cars. Thats another $300,000.

Is there any other income source like vending?

 

[rph9168]

As I originally stated it depends alot on the site and the wash layout. The only way to compensate for a cramped site or bad layout is to have employees to facilitate the process either by directing customers or assisting them through the process. In addition many build with relatively short tunnels - 80 footers - and need to prep because it is almost impossible to cram enough equipment in the tunnel to get a consistently clean vehicle. As I say in the postscript on my posts "All car washes are the same - they are different".

I am not out to defend or dispute anyone's numbers or operation other than to state what I have found to be the norm for operating an EE in my area. I am simply trying to offer a differing opinion on operating an EE than some have expressed here. I congratulate those than can do better than most but that is not the norm. The wash in the beginning of this thread is an exception, far from the norm of an EE operation. There is a danger in not pointing that out for those seeking more information on that format. EE's are being built as the answer to employee issues and the nirvana of tunnel washing. It is not. While it may be a viable option for some it can be a disaster for others. If it wasn't why are so many in financial trouble or change hands so frequently?

 

[Washmee]

Earl,
I have seen you use the word "scavenger" several times in posts as an expense of some type. What exactly is "scavenger"?

 

[Earl Weiss]

Earl,
I have seen you use the word "scavenger" several times in posts as an expense of some type. What exactly is "scavenger"?

Garbage removal.

Sometimes I think I am in the garbage disposal business more than I think I am in the car wash business. Although stuffed garbage cans are typicaly a sign of good business.

 

[norton]

I am watching this thread with great interest as I have a new EE set to open soon close to me. It is a 3 million dollar investment that sits on a pie shaped piece of ground about 1 acre. The exit end of the tunnel is at the narrow end of the property and will require a 180 degree turn as soon as you exit the tunnel. The turn will be tight for anything longer than a car. Then you will drive back through the vac area to exit. The one ingress and egress of the property is behind 2 existing businesses and it will not have access off of any of the streets that you can see it from. The street traffic that does go by it is all commuter traffic. House tops within a 2 mile radius of it are less than 1000. The tunnel is over 200 feet long with a IBA on the side.
It seems to me that several cardinal rules of car wash building have been ignored. 1. Easy access 2. Commuter traffic 3. Local population 4. Money investment. It looks like it needs about 300 cars per day to break even. Town population of 50,000 with 3 other tunnels already serving the market and at least 15 IBA already in place. It will be interesting to see how it does.

 

[tobaccofarmer]

Earl there is not anything else that generates revenue except for a mat/rug beater. So on 200,000 cars 700,000/12 =58,333 month. And what needs to be paid out of this monthly? debt $22000 what else?

 

[robert roman]

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

EBTD = earnings before taxes and depreciation
192,000 = 16,000 washes a month times 12 months
5.25 = average revenue per wash
0.5 = operating expenses as percentage of gross sales
195,400 = annual loan payment

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

A $3 mil carwash with loan-to-value of 70% would have initial cash injection of about $900,000. Thus, you would need 3-years worth of EBTD to cover the initial cash injection, a payback period.

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

This is shorthand for computing the total return on cash investment after selling the wash at the end of the 3rd year in operation.

Sale price $5.0 mil
Less loan balance $2.0 mil
Proceed from sale $3.0 mil
Plus 3 years of cash flow $900K
Total proceed $3.9 mil
Less investment $900K
Net gain $3.0 mil
Total ROC = gain – investment / investment
Total ROC = 3.0 mil – 900K / 900K
Total ROC = 233%
Average ROC = 233 / 3
Average ROC = 78%

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

Is this “good”? I guess it depends on who you are.

If you would be the owner, the return might be acceptable for the risk involved. Of course, there would be the undeniable pressure to wash an average of about 600 cars a day, hell or high water, to garner this return.

If you would be a competitor in this market, an express producing 192,000 washes a day at an average of $5.00 would certainly cause significant downward pressure on market prices.

If you were a developer, you might want to consider building smartly in shadow of the 192,000 wash. For example, unless the high-volume wash is part of a chain, it would basically have the same economies of scale in production as an express mini-tunnel and therefore, no competitive advantage except for location. Of course, the big wash could drop price but this would cut into ROC.

And so forth.

So, is it good?

 

[mac]

Robert, there's a lot of "ifs" in there. This seems like the type of deal Barry Boyd (may God rest his soul) would have done, and indeed he did do these on a smaller scale. To me, a small pea in the pod as some have described me, this isn't a long term retirement plan, but a build it and get out while the getting's good type of deal. Would love to see what the manager looked like after three years of doing 600 cars per day, and what, if any, personal life he had.

 

[tobaccofarmer]

There is no manager just owner and 2 employees, per shift 2 shifts a day. I still never see owner there just 2 employees. The place can wash 60 cars /hour times 14 hours and it can look slow. I have watched this place on random hours of random days and everytime I am counting its a car per minute over 1 hour counts. Funny thing is it can seem not busy as there is no waiting other than at auto cashier for less than 30 secs. These things are completely different than anything else out there. Its setup to do 120/hour so 1 car a minute is half throttle. Distributor tells me that he doesnt have 1 that hes built so far that hasnt cash flowed after 3 months. I know distributor what else is he going to say?

 

[Earl Weiss]

Earl there is not anything else that generates revenue except for a mat/rug beater. So on 200,000 cars 700,000/12 =58,333 month. And what needs to be paid out of this monthly? debt $22000 what else?

I am not sure I understand the question. are you figuring 200k cars x $3.50 = $700,000.00 a year or $58,333 / month? Figure $1.00 a car or $17,000 a month for cleaning solutions, utilities and wear and tear / maintenance. Plus labor, Insurance, legal, telephone, postage, printing, advertising, credit card and bank fees, accounting. I am sure i left stuff out.

 

[robert roman]

In wrapping this up, Mr. Moran brings up a good point.

The asserted volume is 16,000 washes a month or 192,000 washes a year.

There are carwash sites producing this level of sales volumes but they are most certainly the exception and not the rule.

Since the industry benchmark is about 75,000 washes annually, 192,000 washes would place this wash in the high end of the upper quartile of the population.

In many cases, sites that produce over 125,000 washes are usually associated with a high-volume gasoline station and convenience store operation or they have little or no competition.

In order to produce 192,000 washes annually, you would probably face peak demand of about 200 cars an hour and would need a conveyor of approximately 200' in length, between three and four pay stations and about 50 vacuum spaces. Otherwise, I don't see how this wash could keep up.

 

[tobaccofarmer]

How would one begin to start a 3 million dollar project if the industry benchmark is 75000 cars? There must be another benchmark for these 3 dollar places because obviously 75000 cars at $5.25 for a property that cost 3 million is not going to cut it? Most around here are doing 20,000 or more a month and should be with a 3 million dollar price tag.

 

[mac]

I gotta giveRobert credit. It's not every day you can work "upper quartile" into a sentence. He does bring up a good point though. If this wash has found a dynamite location doing those numbers, it won't be long before you see a sign nearby saying "New wash coming soon".

 

[Earl Weiss]

In order to produce 192,000 washes annually, you would probably face peak demand of about 200 cars an hour and would need a conveyor of approximately 200' in length, between three and four pay stations and about 50 vacuum spaces. Otherwise, I don't see how this wash could keep up.

IMNSHO these approximations are on the high end.

To wash 192,000 cars a year you do not need to be able to produce 200CPH at peak demand. Since EE's by their nature are open long hours 150CPH should be plenty.

The old rule of thumb of 1 foot of conveyor per car per hour is outdated.

Sonny's Catalog even shows 160+ CPH for a 140 foot Conveyor and 150 CPH for a 130 foot conveyor.

You can fit a mitter wrap combo in 21 feet. Throw in 2 of these with lower details or wheel brushes underneath. That's 42 feet plus another mitter with high side wheels for another 9 feet. Ad 30 feet at the entrance for rear wheel loading and soap / pre soak application. 25 feet for rinse drip and tire shine and 12 feet for blowers (4 arches) and that's 118 feet with triple coverage on most surfaces. Add a couple of feet for some high pressure in front of one of the mitters if you feel the need.
With this 120 foot setup you can clean 150CPH easily.

 

[rph9168]

This wash is by far the exception to the rule as far as volume is concerned. 75,000 is even on the high side. When you realize that, you can see why so many of these washes are in trouble. Over inflated projections for volume and revenue on a project this size creates the reason for failure.

 

[Greg Pack]

Most experienced people I know in the south get nervous when the price approaches 2 million. If it gets much beyond that, they walk.

IIRC correctly there were a couple of high volume washes sold for far in excess of development costs in Atlanta. I don't think those stories are going to end well. RPH could probably fill in the voids.

As already mentioned, a site doing those numbers won't be doing that for long. Somebody(s) will take a piece of that soon. I give it three years max. In five years there will be several built in the area. Just like the Taj Mahal SS/IBA that did 30K/month, within a few years they are often doing 30% less than when new.

My guess is that if this place is for sale by a developer the owner might realize that right now they have a chance to sell it and "knock one out of the park" on a newcomer to the business, pocketing 1-1.5 million and walk away with a pocket full of money before revenue gets siphoned away by future competitors. It beats running the thing for five years, even if you are netting 200K/yr.

 

[robert roman]

"How would one begin to start a 3 million dollar project if the industry benchmark is 75000 cars?"

The benchmark for average volume is about 75K, the upper bound is in the 100,000 wash range.

"Most around here are doing 20,000 or more a month and should be with a 3 million dollar price tag."

20,000 = 240,000 washes a year!

You must be located in carwash heaven.

Where is this occuring so I can get in on the fun?

 

[tobaccofarmer]

Am I missing something here? With a total project build cost of 3 million, how can the benchmark be 75000/year? that wouldnt even begin to make sense?
The distributor tells me anywhere from 2.3 to 3 million is the norm around here for build cost. So far all I know is that according to everyone on the forum 16000 cars a month is way above "NORM" but at 3 million I still can't seem to figure out how many he actually needs to just cash flow? And if 16000 is way above normal than what about 20,000? like most are supposedly doing which is only 666 per day/ per month /which isnt even half of what these 240 feet operations can do? I still am where I began at the start of this. They are built to accomodate 120-150 hour but in actuality they are going to benchmark 75000/ 12months= 6250/ 30 days= 208 /14 hours of operation = 14.8 cars per hour. So They are going to build a 3 million dollar operation setup to handle 120-150 hour but only benchmark on 14.8 hour? Something is seriously missing here? Just to be clear we are talking about 3 million dollars? Do these differ from state to state or is a 3 dollar express with free vacs about the same everywhere? I would say where this is but I don't want to see those new wash coming soon signs out there yet, Im still trying to deal with the first one's impact. Thanks for the interest

 

[rph9168]

$3 million is on the high side unless the land is expensive or they get carried away with the design. Most of those around here are more in the $1.7 to $2 million dollar range and almost all are struggling to get to 75,000 annually. In our area there is a lot of competition and some very poor site selections. This is probably why most are for sale or would consider any serious offer. I have noticed that several have gone to $4 or $5 dollars.

 

[Earl Weiss]

They are built to accomodate 120-150 hour but in actuality they are going to benchmark 75000/ 12months= 6250/ 30 days= 208 /14 hours of operation = 14.8 cars per hour. So They are going to build a 3 million dollar operation setup to handle 120-150 hour but only benchmark on 14.8 hour?

while the math is correct, the idea is not. Sadly, I would venture that in this business most locations will experience that 4 letter word - "RAIN".

somewhere ther may be a study as to % of hours lost completely to this.

In Chicago in April it seemed like 110%! May was not much better. These zero hours neccessitate that we are able to make hay while the sun shines.