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After searching all the available Car Wash locations and finally deciding on a location, the buyer should create a punch list of competing washes in the chosen area of purchase. There are many unique variables a buyer should be aware of in purchasing a car wash location; an inexperienced buyer would be wise to consult with an industry consultant to help in analyzing and investigating the results from the following list.
1) Check the demographics of this chosen area.
2) Check the competition in a three mile radius.
3) Check the physical layout of each of the competing locations.
4) Check the type of competing competition, Full Service, Exterior, Etc.
5) Check the offerings, (menu pricing) for all services.
6) Check the appearance of each location.
7) Check the customer handling and quality produced at the competing washes.
8) Check the type of on site discounting offered at competing washes.
9) Check how customer friendly each competitor is.
10) Check with the city planning, if new car washes were recently approved in the area.
Compare all of the above to the location you are about to purchaser Before getting involved with the seller on the chosen location, it would be wise for the buyer to inconspicuously perform an extensive review of all the aspects of this chosen location, he should wash his car at this location a few times during a slow period and also during peak periods. Record detailed notes on the presentation of the seller, (point of sale employee) how efficient and pleasant was his sales pitch to upgrade you each time. The vacuuming your car received, if offered, the quality of the windows if offered, the overall experience you received from all the employees and management. Finally the quality of the final end product; The level of quality is the only reason the majority of customers patronize a particular car wash location.
In evaluating all of the above a buyer should compare the results to the ten point punch list accumulated from the competing locations. In short, know your competition and the situations you will be competing against. In the evaluation process a buyer looking for a turn key operation should expect that all of the above results should average between (8.5 to 10) on a scale of 1 to 10. This being the case the location would be doing well in all aspects and asking a premium price for the business. In the event your results are below the scale, in most cases this should be reflected in the amount of business at this location, therefore also reflected in the price. The good news is that if you recognize the deficiencies of a location, in most instances they can be corrected, the corrections will increase that business.
Through the years I have inspected numerous car wash locations observing many different management/ownership scenarios. It has been my experience that many of the same locations were top locations, producing huge volumes and great dollar averages per car. The same locations at other times were in total regression think about this, in 99% of the locations the only difference was that the management/ownership had changed and the present management lost focus on the one important ingredient, Consistently producing an exceptionally clean car, in a friendly environment. Customers will go out of their way for this level of service.
Once a buyer completes the detailed punch list, performs an initial site analysis and chooses to advance to the purchase stage and the buyer is new to the car wash industry, it is recommended that he consult with an industry car wash consultant. The consultant will help him determine what additional services could be added to increase the total prospective gross sales. Car washes are adding complete C stores, oil change & light mechanics, state inspection, windshield repair, dent repair and express detailing, just to name a few. The buyer should also review with the consultant any initial deficiencies encountered in his ten step punch list of the competitive area, and any deficiencies he encountered during the inspection of the intended site.
Critical areas that affect the asking price for the location and are potential negotiating points are as follows.The amount of lease offered if the property is not included. The years remaining on the lease, the rent and the amount of rent increases. Is the buyer accepting structural responsibility? If so, the seller is obligated to assign the lease structurally sound. Building inspection is recommended.
Equipment, on line and offline should be inspected by a qualified car wash equipment mechanic or appraiser; all equipment must be in operational order on passing of ownership. Inventory, Soap, Waxes, Chemicals and Retail items, what is included and what is not. Discount yearly pre paid wash plans, club plans and gift certificates that continue in circulation. Usually an amicable formula will be worked out.
The buyer should review all wholesale accounts if any to determine what percentage of income is derived from it, review all income and expense statements, this is most critical, expenses are for the most part easily determined, the income verification is best completed under the guide of an industry consultant. This consultant will be valuable in arriving at a fair evaluation of the business income (the due diligence process). The car wash industry is a unique business in that there are many variables that could dictate the value, high or low of a particular car wash location.
The next step assuming the buyer chooses to make an offer to purchase; the consultant would assist the buyer with negotiations for the final selling price. Assuming all goes well the buyer should stipulate that he be introduced to all the sellers wholesale accounts, employees (their individual functions) and a period of familiarization (one to two weeks) of all the location requirements. The purchaser will need permission from the seller to retain the telephone numbers dedicated to the location.The purchaser should also have the site inspected with a phase one environmental. The buyer should also obtain a good lawyer, I would strongly recommend seeking an attorney that is very familiar with the contractual requirements in the sale of a car wash location, it is also to the buyers advantage to use a broker that specializes exclusively in car washes.
Joseph Biello
Senior Consultant
Joseph Biello Company LLC.
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