Leasing out a Wash during Illness

[bigleo48]

All,

A car wash owner acquaintance has been diagnosed with cancer. Over the next year or two, he will be undergoing surgery, chemo, radiation, etc. Yeah I know...really sucks.

He doubts he can deal (or want to) with the wash during this time and does not want to sell it just yet/ever. So he has asked my advice on leasing the business for a period of a couple of years. I think he was kinda offering it to me, but my plate is full (I work full time and my wash, family, etc).

Not sure if I even know where to start with how he would go about it. Have any of you done this? It sounds hard to do (from a legal and business standpoint). If it was my wash, I would have visions of poor maintenance, customer service, etc. that would effectively run it down and kill an established business.

What he thinks he wants is a set amount of cash paid every month to him regardless of level business (as opposed to a percentage).

I'm at a loss as to what to tell him and so I defer to your expertise.

Big

 

[Sequoia]

Leasing a wash

I went through the identical thing and it is very, very rough on the person, the family, and a business.

The treatments *will* render him incapable of servicing the wash-- there is no doubt about that. So planning in advance, as he is trying to do, is wise.

My first question is to ask whether he can pay you enough to make it highly attractive and very worthwhile to somehow squeeze this into everything else you do. An average deal might not tempt you like that-- could a super deal be struck? I am not advocating that you be greedy; rather, I recognize that his situation might be less monetary and more focused on continuing quality during his absence. He might need to tempt you, or someone else, accordingly. He obviously is looking to you already.

Next, although a fixed amount per month might best benefit him financially, it would seem that a percentage of gross receipts might be better given the circumstances. (Percent of gross, Not a percentage of net.) It should be fairly easy to allocate who is responsible for paying for which repairs when the repairs are small, such as hose breakage, etc. If a substantial repair and expense occurred then that might require a discussion to sort out. If you keep the lease term fairly short and allow for mutually-agreed renewals then neither party will get trapped and if one party or the other feels the need to renegotiate then that could be done leading up to the renewal period.

The acquaintance is about to go through an absolutely horrible period. My final thought is to pass along that, having experienced such a thing, I would look for any way possible that I could personally help this person out. I got very lucky, and with the help of similar generous folks I made it through the treatments back to where I can handle the wash. (Kevin Reilly, George Miller, Pete at Fluid Mfg., Hector, Jimmie, and more.)

 

[pitzerwm]

Duane is right of course, one thing that I would consider also is an option to buy it if it goes to that eventuality. When I sold mine, I made him buy insurance so if something happened, I didn't want to be dealing with his wife/lawyer or kids.

More than likely, you are going to make a big commitment in time and energy.

 

[Earl Weiss]

He can check out other operators in the area who have a good reputation. That is about the only way to eliminate concerns about running the place into the ground. They will aalso have an idea of a realistic rent factor. They can arrive at a fair price or if he approaches more than one, lease it for the best offer. I basicaly was bale to get 2 people who had locations that were negelcted hand me the keys without a piece of paper or any money based upon the reps of my partner and I . Paperwork and money followed the handshake.

 

[Greg Pack]

Problem with a fixed rent is their is inherent risk in the system for the lessee and perhaps not enough income to justify the risk of a fixed rent payment.

Assuming the wash is a decent revenue producer (120K+) I would propose paying about 20-25% of gross. It would be helpful if a income monitoring system were in place.

Repair costs in first thirty days to be paid by lessor. After that Ordinary repair costs and normal wear and tear to be paid by lessee.

All major repair costs in excess of X to be paid by lessor-If an IBA motor goes out after the lessee takes over it's probably not from his actions.

Contract can be canceled by either party with submission of thirty day written notice. Lessee to provide lessor with with insurance policy and list lessor as an additional insured.

There needs to be a way out of this contract , A bad operator can do almost irreparable damage to goodwill in a single year.

 

[bigleo48]

All good ideas and info (once again)...thanks

First he is the only real operator in his small town, so nobody else in the biz to help. I work full-time in that town and it's a bit of a drive for me so I can't really do it for a period of 2 years...perhaps a few months and when he needs an extra hand, but I cannot commit to the help he really needs.

I will present all your comments to him. I think you guys have answered his question...percentage of gross, he pays major damage not caused by lessee, short contract and termination clause, option to buy.

I'm sure this is being done with many other type of businesses, so I'll likely look there for him (like in cancer forums). He's not much of a internet/computer user.

I watched a friend of my wife go through it and not survive...he's in for a long battle and needs to concentrate on what's important, not the wash. Thankfully we have free health care here and the process with the hospital, doctors & ecologists has been remarkably fast (not always the case up here).

Big

 

[pitzerwm]

I guess, I'd recommend to him to be realistic of survival, If its less than 75%-85_ I think its time to sell it and work on the cards that you have been dealt. I doubt if this is the time for wishing and hope.

 

[bigleo48]

I guess, I'd recommend to him to be realistic of survival, If its less than 75%-85_ I think its time to sell it and work on the cards that you have been dealt. I doubt if this is the time for wishing and hope.

Level 2 skin cancer...so I believe he said over 70% survival.