Many times new investors and seasoned car wash pros come to cross roads on whether to buy an existing car wash and renovate, or build a new one from the ground up. There is no right or wrong answer to this question. I work with this on a daily basis and have experience with both parties in these transactions. When renovating an existing wash or building a new one, you need to look at both the negative and the positive facts. With these facts you can make an informed decision on the best course of action for you and your business. New Construction Starting from scratch gives you the opportunity to choose the best location for your business which may not be that of an existing wash. Often an old wash is in a town where the business center moved to the other side of town. For example: If you notice how WalMart will build in one location, then years later move to a brand new Super Store location leaving the existing location for another retailer to buy or lease from WalMart. This move causes shifts in the markets of both locations. This is particularly noticeable in smaller communitites. Other retailers, such as restaurants and specialty shops show much lower income after WalMart has moved out. This happens to car wash locations, too. I’ve noticed with any type of construction an excitement happens in the area. People drive by and tell others the news. It becomes its own billboard. This creates interest for the curious to try at least once. Smaller towns have a tendency to welcome development and encourage change. They tend to be less restrictive to the construction process, such as zoning, economic impact, water retention, reclaiming and access taping fee. With a new location comes the opportunity to develop the size, type, and style of the wash. It gives you the flexibility to build exactly what you need, or preferably, what the customer needs according to demographics and building specifications. You can determine the location of the bays, k canopies and brand of equipment you want. On the negative side, the process can make your hair turn gray and fall out, just joking. Dealing with city officials, inspectors, zoning bureaucracy, planning departments and utility departments is a frustrating business. No one communicates in a timely manner and time is money to you. To say the least, you waste time waiting for inspectors, planning commissions and zoning boards. It often takes months to get plans approved, but you still have to expect more delays. This process deals with many different issues including economics, water control, flood control, endangered species and in one case, an Indian burial ground. The following are some things to keep in mind when making your plans: fences, rainwater, runoff, bays shouldn’t face residences, keep 200 ft from homes, hours of business only 8 am to 10 pm, retention ponds, demolition bonds, construction bonds, parking for customers, environmental surveys, landscaping and lighting equipment. Building a new car wash also leaves your future competitors in business. You’ll end up with a smaller share of the market which means less cash in your pocket. You also must consider, with a constrution note you will be making payments for a year or more from your own pocket (negative cash flow), before you begin to have any cash flow and build up any customer base. Purchase Existing When purchasing an existing wash, you are immediately a part of the marketplace, competing and creating cash flow. Your financing payments will come from your cash flow, not your personal pocket. You may even be able to start renovating and updating right away. Construction permits in some cities can be difficult to get because they may want to limit new construction in certain areas, which may force you to look at existing washes in those ares. Renovation permits are easier to get and less involved because the business site already has the required plumbing, electrical supplies and other code requirements in place. The code requirements that are in place may be grandfathered into permits such that a total building permit may not be required. Zoning and other issues may also be waived whereas with full construction permits there is no way to avoid these time consuming steps in the construction process. Most of the time, if the building is not changed by more than 25%, many code and zoning updates don’t apply. However, in some instances, a complete demolition and rebuild can be done with fewer headaches. In my opinion, generally speaking, buying existing washes saves time and money. The main negative factor to buying is the history of the wash. Many times owners who sell have not kept in good stead with the customers. Often, equipment is in need of repair and many customers have left with a bad taste in their mouths from things going wrong with the wash. Poor mangement is not always why the wash is for sale but you can be assured that the owners’ energy has been focused on other interests. Frequently, this history will linger on with the new owner unless he does something drastic. The wash may have problems such as lost income, dirty facility, equipment not maintained. Stop. Take notice of these problems, understand why the customers are not there. Then make changes, make a big difference. Put on a new roof first. Then a new sign, and wall panels in the bays. These changes need to be significant and highly visible to the whole public. People need to know there is a new and responsible owner. Equipment when run-down might be out date and/or poorly maintained. Look into upgrades or at least replace meter faces and put vacuums under a lighted canopy. Be sure to add new functions where ever possible. Be sure to learn what your competition is doing and do more. What ever it takes. The changes you make need to fit you personally. Replacing equipment sometimes is necessary to work on the building. You may want/need to knock out walls, add more wiring and plumbing. You may also add additional automatice bays or tunnels. Study extensively before doing. The cost of renovation can become as expensive as building if you aren’t careful. The choice of buying vs. building must be considered from several angles for you to know which is more advantageous. Know the following: Location, total price, zoning and building codes, competition, demographics, traffic pattern, projected income. Though these criteria are the same, they will ultimately differ between buying and building, and influence your final decision. Generally a new wash will make twice as much as renovated wash, however, cash flow is king. Do you need cash now or can you wait until later? For me I like it now. |