Hoping to build first tunnel July '17

[Hurricane350]

Hello all,

First off, I am so happy to have found this site, it has already proven to be a wonderful resource! I have been to the Library section and have read almost 100 forum threads.

My name is Eric and I plan on building my first wash in July of next year. I am brand-new to the industry, but have always loved car washes. I picked July of next year as this will be the time I will have 220k for a down payment for a 1.1 mil loan. I got that number from a ProForma provided to me by Sonnys. (actually it was 1.65m but that included 550K for land which I now intend to lease) I went to their "New Investor Seminar" and while I learned a lot, how much money I need is the biggest take-away.

I have a site picked out in the Greater Boston area, but have not contacted the real estate agent, as I don't have money and don't want to sign lease a full year away.. The site is a vacant lot and has been so for at least the past 8 years. (according to Google Earth) Its owned by a trustee so I don't think they are pushing for a sale anytime soon. It is on a state highway with a traffic count of 25K daily. My competition is a full serve tunnel built in the 80s set behind a gas station and a 3bay LaserWash 4k with horrible signage. I drive for Uber/Lyft and whenever I ask people in this area, they don't even know they exist! Both are 1.5 miles from my site.

So in preparation, what do you suggest, or what can I do without down payment money? I attended the New England Car Wash Assoc show in May and took a tour of 5 local washes. I went to the Sonnys seminar in FL. I plan on attending a Planning board meeting for the town to see how the process works and hopefully find "that lawyer that gets it done" I have talked to 2 local car wash builders but have explained to them I am at least a year away so they aren't pushing me. So what can I do in preparation? Any suggestions appreciated!

Thanks in advance,
Eric

 

[parsonii]

i would put an offer for a the full service car wash that's a 1.5 miles away -- fix it up and rebrand it and don't compete on price but compete on design and service.

 

[robert roman]

“I went to their "New Investor Seminar" and while I learned a lot, how much money I need is the biggest take-away.”

If this is the case, then I believe you didn’t learn enough.

Fundamental is to match development cost with market potential. Instead, you match development cost with available equity.

Consider you haven’t really started yet and it has already become necessary to compromise the project by leasing rather than buying real estate in order to lower the down payment.

Without real estate, how are you going to collateralize the loan for site work, building construction, equipment and furniture and fixtures, etc.?

There is build-to-suit but landowners prefer franchises not mom and pop.

“So in preparation, what do you suggest, or what can I do without down payment money?”

Without money, most people aren’t going to take you very seriously.

How much money do I need?

That depends on how big of a carwash is required to satisfy the unmet demand.

You haven't discussed this at all.

 

[rph9168]

Hate to rain on your parade but Robert is right. Leasing land is a bad idea. Without the land, wash experience and not a large down payment very few lenders would even talk to you. Your dream could turn into a real nightmare.

 

[Hurricane350]

i would put an offer for a the full service car wash that's a 1.5 miles away -- fix it up and rebrand it and don't compete on price but compete on design and service.

Unfortunately the car wash is behind a gas station and they are a package deal way above my budget!

 

[Hurricane350]

Without money, most people aren’t going to take you very seriously.

So my take-away from this is to come back in a year when I have my down payment money. My question was if there is anything I can do before this...

That depends on how big of a carwash is required to satisfy the unmet demand.

unmet demand? How would I determine that? All I have is AADT and demographics.

Eric

 

[Hurricane350]

Hate to rain on your parade but Robert is right. Leasing land is a bad idea. Without the land, wash experience and not a large down payment very few lenders would even talk to you. Your dream could turn into a real nightmare.

Great. So then I will need a 1.65m loan which means my down payment goes to 330K so my year-long sacrifice just turned into a 2 year-long sacrifice

 

[robert roman]

“unmet demand….How would I determine that….All I have is AADT and demographics.”

That’s one problem with the pro forma you mentioned, you can’t.

Pro forma is only an estimate of what you may expect to earn and it is not a diagnostic tool.

For example, some carwash developers will begin with need analysis.

Is there sufficient unmet demand for a new wash as determined by standard research methods (i.e. analysis of demand/supply balance)?

Will the new wash be reasonably convenient and useful to public?

Do area households represent a strong segment in the trade area?

Will there be a high propensity for consumers to combine shopping trips with a stop at the carwash?

Will consumers find advantage sufficient to merit a trip to the wash?

If there is sufficient evidence of public need, developers will then look for the most suitable site in the defined trade area.

There reason is the most suitable site often provides the greatest chance for success.

Once the location problem is solved, it becomes a lot easier to raise and borrow money.

 

[mac]

Hello hurricane and welcome to the site where you get real advice from professionals in the business. Listen vey closely here, the country is littered with closed washes that were started by people with no experience in the business, and clutching a proforma from someone trying to sell you something. Gosh, you mean that sometimes people don't tell you everything you need to know to make a wise financial decision? This is not a hit on Sonny's. You just gotta be real careful when you sign a piece of paper committing you to a loan in the seven figure range. I have talked a LOT of people into not getting into the business because of this. If you are driving a cab for a living, and don't take that as a hit, my guess is that you have never been involved in deals that involve a lot of money. Let me offer a suggestion. First running a tunnel wash operation can be challenging even for people who have been doing it for a while. Find a local operation and apply for a job there. You will get great hands on experience on how to do it, and as a bonus, they pay you for this. Start anywhere in the operation. Do as many things as you can, and keep your eyes wide open. Good managers at these places can make pretty decent money. Much more than cab drivers. Also when putting together a budget for a project like this, get good numbers on everything, then sock away about 20% more for surprises. One of my customers was into his project when the DOT came to him and said that he needed to put in a bus drop off place on the street in front of the wash. He did great due diligence, but nobody saw that coming. Oh, and it was only $70,000 for that. Good luck with your plans.

 

[robert roman]

“First….Find a local operation….apply for a job there….get great hands on experience on how to do it…”

Perhaps, the wisest advice so far and often it is the path least followed.

 

[rph9168]

“First….Find a local operation….apply for a job there….get great hands on experience on how to do it…”

Perhaps, the wisest advice so far and often it is the path least followed.

I totally agree but maybe before doing any of this take a real good look in the mirror to see how committed to this you really are. It is one thing to really want to do this but it is another to be willing to make a serious commitment to make it happen. I have heard so many people say they wished they had thought things through before they got involved in the car wash business and many more that would gladly get out if they had the chance to do it without taking a financial beating.

 

[Hurricane350]

Ok, I guess I should probably give the whole story.. I was really just looking for advice on what to research over the next year, but it seems everyone thinks im just a driver with pie in the sky dreams...

I work full time as a Network Engineer in Boston for a large bank. I make six figures doing this, but as of next July, my whole dept is moving to a diff part of the country. I am getting a sizable severance package and after my all my savings, vacation buy back, 401k and driving for Uber/Lyft over the next 12 months, I plan to have at least 200k for a down payment.

How committed am I? When I first found out about the layoff, I traded in my Infiniti Q50S AWD Hybrid (55K car) for a Hyundai Sonata, gave up my privacy and got 2 roommates for an extra 1500/month, and started driving for rideshare services every night after work and on weekends.

I would love to work for a car wash, even at the lowest level, but unfortunately I get home around 6 and the closest wash that stays open till 8 is an hour drive! Unless I can find a wash that lets me leave at will on weekends (I'm on call for network outages 24/7) I don't see that happening.

So I understand the risk, I've always loved cars and this is my one opportunity to take a chance and do something I love, car care... so please, enough of the warnings and on with the insight!

Oh, and thanks for the welcome Mac!

 

[Hurricane350]

See my responses in red.

“unmet demand….How would I determine that….All I have is AADT and demographics.”

That’s one problem with the pro forma you mentioned, you can’t.

Pro forma is only an estimate of what you may expect to earn and it is not a diagnostic tool.

For example, some carwash developers will begin with need analysis.

Is there sufficient unmet demand for a new wash as determined by standard research methods (i.e. analysis of demand/supply balance)?

This I do not know, but I will research.

Will the new wash be reasonably convenient and useful to public?

Yes. It is on a state route (45mph limit) that everyone has to take to access the main interstate to Boston

Do area households represent a strong segment in the trade area?

I will research this as well. I think I have the answer, but want to be sure

Will there be a high propensity for consumers to combine shopping trips with a stop at the carwash?

This stretch of state route has a mixture of gas stations, restaurants, package stores (beer/liquor), and fast food

Will consumers find advantage sufficient to merit a trip to the wash?

I'm planning on running some promotions, but like I said I'm planning on the daily commuters. This isn't a destination car wash site.

If there is sufficient evidence of public need, developers will then look for the most suitable site in the defined trade area.

The whole route is bought up, I don't believe there is anywhere left to develop. There is a 5 acre lot for sale across from a McDs where they are trying to put in more shopping, but this will only help traffic

There reason is the most suitable site often provides the greatest chance for success.

Once the location problem is solved, it becomes a lot easier to raise and borrow money.

 

[rph9168]

Just a thought for you. You do not need 5 acres for a wash. Back in the 80's and 90's there was a group of guys in California that would buy up large parcels of land, divided it up and sold out-parcels while keeping the corner for their wash. Often they could get enough to own the land they wanted for the car wash and have a sizable down for their wash. In some cases I think they may have even been able to pay cash for the wash but I am not sure about that. Not sure if that applies here but it is a thought.

However, I still stand by my previous statement and those of others. If you read through the Forum you will get some sound advice but also words of warning. I think you definitely need to find a way to set aside time when you can work at a wash to get a real taste of the business. If you can't, I have no idea how you could devote the time and effort to put together all the information you need for such a big project.

 

[Hurricane350]

Just a thought for you. You do not need 5 acres for a wash. Back in the 80's and 90's there was a group of guys in California that would buy up large parcels of land, divided it up and sold out-parcels while keeping the corner for their wash.

I'm not sure if its my writing style or maybe I cannot convey tone correctly but there is no way I was thinking about buying 5 acres! Jesus in my area that would cost 3+mil in the worst of demographics... My location I have picked out is a little over a 1/2 acre and can fit a 80' tunnel but I will probably start with a mini-tunnel for my first wash.

I would love to hear everybodys first wash story, I don't know if it again is the tone I'm not picking up on or what but it seems like everyone here is a multi-millionare and had no trouble starting out. These were the stories I was expecting to hear but I guess you have money to make money? As the saying goes...

 

[rph9168]

Sorry you took my post the wrong way. Since you seem to be scrambling a bit on the financing I was only offering a suggestion. Don't know where you got the millionaire opinion but contributors on this site are mostly veterans in the car wash industry willing to share their experiences and knowledge. As far as start up stories the formula for success is relatively simple. Do your due diligence with an open mind and decide if you can make it happen. If everything sounds good and you can get the financing work your ass off and produce the best wash results you can. Even after all this there is certainly no guarantee for success in this business. All the successful people I know in this business worked hard to get where they are and essentially earned what they have achieved and continue working to keep it going.

I do have a success story to share though. Many years ago my uncle lost his job due to a company takeover. He was an executive with the company and decided corporate life wasn't for him. He mortgaged his house and scratched together a loan to buy an old tunnel wash. He got screwed because he jumped into it without carefully examining the books. The wash was a loser. Since he had everything invested in it he did not take the advice of many to walk away. He and his wife worked 10-12 hours a day 7 days a week at the wash and eventually turned the loser into winner. It wasn't easy and there were times that it didn't look like it would make it. I worked several summers there when I was a teenager and I guess because of that I developed a passion for the industry and the work ethic of many in it When my uncle decide to retire I bought his detail and chemical supply business and left the field of education behind. Eventually I ended up in heavily involved in the manufacturing and sales end of it traveling all over the country working with distributors and operators to make things better for them. I am basically retired and do some articles for industry magazines, a little consulting on the side sometime for just the feeling of helping someone out and I still have that passion and desire to help anyone I can succeed in this business.

 

[Hurricane350]

Now thats what I am talking about! I love to hear stories like that! It almost sounds like mine as my job is going away and I'm taking a leap.. I plan on doing whatever it takes to make it work.

I mean the state road is the only way to the Interstate so I'll always have the volume, I just need to deliver the product and I plan on doing just that!

Oh, and I'm definitely not scrambling to get financing.. can you call it scrambling if its done over a years time? lol Am I looking at every possible way to raise money, yes absolutely but not scrambling.

If I can get to 200K on my own without outside help (friends/family) then I think I might get to 300k and be able to purchase the land but I still don't understand why I need to.. Yes, a bank will want you to own the land but I can't see all these commercial lease signs for what big corps only? Also, if you have a lease that is longer than the bank note, why would the bank care as much? I wanted to do a Lease to Own type deal for 15 years and only wanted the SBA loan be only 10 years...

I know, I know I can't lease I need to buy

 

[MEP001]

You can lease, I've seen success of a car wash on leased property, but the lease agreement needs to be iron-clad. The arrangement needs to be that all equipment comes with you if the lease isn't renewed. It's very risky.

 

[rph9168]

Unfortunately I have seen quite a few operators have problems with leases even those that are thought to be iron clad. In this day anyone can hire a lawyer and cause problems. I would say the most common problems occurred when the land owner died or ownership was transferred in some form. Like almost any contract nowadays a lease can be broken. Depends on who has the best lawyer. I am sure Earl knows about that.

 

[Hurricane350]

You can lease, I've seen success of a car wash on leased property, but the lease agreement needs to be iron-clad. The arrangement needs to be that all equipment comes with you if the lease isn't renewed. It's very risky.

Finally! I was hoping to hear a lease arrangement success story
Yes, I was planning on hiring a top real estate attorney who deals in commercial real estate to handle the contract.

Eric