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Should I Buy This Full Service Wash? What Might I Be Missing?

davidoforlando

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Thanks in advance for your insights. I am completely new to this industry but experienced in running business and investing in others. I was approached to be the capital side of a purchase of a Full service wash that shut it's doors in 2019 due to owner health conditions and him running it into the ground after buying it for $1.2M in early 2018. Nearest express or full serve competitor is top dawg car wash which opened a few years ago 2.2mi from this location. It's a 35,000 car street, but with slightly odd ingress and egress. It is surrounded by thriving commercial as it's the primary through fair to a large affluent rural community that is growing in wealthy people as orlando expands. Top Dawg has 8 locations in central fl and appears to be well run. There also appears to be another express wash going up (in site planning) almost across the street from top dawg.

Now that you have the competitive background this location used to be "The" car wash for this area. It's at 70ft tunnel with a 3 year old PECO system that looks to be in pretty good shape on a test run with a good deferred maintenance upgrade of all pneumatic hoses, cloth, one dryer, new chain and several other needed updates. It shut down due to poor management after being purchased for 1.2Mil in 2018. The site also has two detailing bays.

I have zero experience in the wash industry but did my deep dive over the last few days. I can see that the obvious trend is 100ft+ express washes cores with some flex service added in and free vacs. We can't do Vacs at this location due to city restrictions. Which leaves us with either a full service or flex model. The site doesn't currently have a paygate system setup which would be a major upgrade right out of the gate. The partner that brought me this deal hase experience owning a former full service and likes the full service model.

My main concern is actually vetting my potential partner as well as his estimates on initial investments to get his was making money again. Keep in mind I am coming at this from a more passive investment mindframe. I am also comparing this opportunity to not getting in the wash game. While I see the allure of a new build, I'm not currently ready to jump into the $1,200,000 in liquid capital and 3 year wait to build my first brand new express wash. It essentially boils down to this in my mind.

Full serve = Requires a really good manager to turn a profit with good labor management skills. Express Flex = Easier. If he isn't the manager I hope he is, I would be stuck removing him and hiring a new manager or running this thing myself (not my objective although I could do temporarily in a pinch). He gave me a conservative est. of 3000cars/month within 2 months but would be targeting 6500 cars/month minimum within 1 year of opening and labor costs of 13% of revenue.

For those in the forum that are passive investors or active but have hired full time managers, what questions should I be asking. Does anything sound like B.S. to you. I've done this enough times in other industries I don't know what I don't know. This was a thriving car wash a few years ago before someone ran it into the ground. Im sure that the new Express down the street didn't help matters and they likely didn't attempt to having new competition. Would I start from scratch with a full service? No. Is getting into the industry with 75ft tunnel and that needs about $120K in upgrades for full service and $350K for full automation express with pay gates a bad idea? The place did poorly in the last few years before shutting down.

Feels like 25-28000 cars annually is terrible for a full service on a 39K road with a 45MPH speed limit. I felt like a comfortable target with some competition would be 250cpd with 400 if running on all cylinders.

Also, for those that are investors working with operating partners that don't have the capital to put in how have you structured your deals?
 

jfmoran

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Hey David- I come from 20+ years of running car wash sites, full-service, flex and express. Turning around a closed full serve site that was run into the ground is no easy task, and with one express in the same market and another one coming (and likely more are looming) I wouldn't even attempt it. If that site is not convertible to an express exterior, I would walk away from the deal. 13% labor costs is possible, for a high volume express exterior, but for a full serve or even a flex, it is not even close. 3K volume within 2 months, I would cut that estimate in half. You would be doing well, if you were at 3K/month by the end of year 2, growing it to 6500 would be possible in a market with little, to no competition. My guess is this site would top out in the 30's annually as a full or flex.
 
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