Renovation - A Rapidly Growing and Profitable Market
By Hershel Pierce
Renovating an existing car wash has become a growth industry because finding land to construct a new wash is becoming increasingly difficult. Also, securing a city permit to construct a car wash on your new site is time-consuming, and there is no assurance it will be approved. Renovation often proves to be a wise investment because it is typically more cost-effective than ground-up, and construction takes less time.
Investors enjoy success finding existing car washes to renovate because: • Car wash real estate agents will provide you with a list of inventory in your area and help you concentrate on car washes realistically priced • Many current owners are ready to retire and have not invested in new equipment to keep the wash competitive • Profits are marginal, at best, at many locations due to poor management frequently caused by absentee ownership • Due to lack of earnings, many existing car washes will not qualify for a loan providing opportunities for investors to purchase, renovate, and properly manage the wash to re-establish earnings and create long-term value • There is a large inventory of washes built in past years from which to choose
Advantages of renovating a car wash: • Cost-effective because you can utilize much, if not all, the existing structure • Will reduce construction time significantly so you can start washing cars sooner • A customized EBITDA spreadsheet will project profits and minimize risk • Excellent ROI if the renovation is properly structured and implemented
The following six actual car wash renovations include key strategies and recommendations you may choose to incorporate into your own renovation plans.
Renovation # 1
Cars washed increased from 5,050 to an unbelievable 11,800 per month after the current owner installed “Free Vacuums,” creating a superb ROI. Many car washes are available throughout the country that would likewise benefit from installing free vacuums.
Renovation # 2
A debt re-structuring plan replacing short-term debt with long-term financing freed up $1.5 million to renovate the owner’s car wash/lube center facilities and lowered monthly debt service over $20,000. The $1.5 million paid all the cost of updating equipment plus constructing like-new elevations. Public response to a television “New Re-Grand Opening” marketing campaign was overwhelming, and monthly revenue has increased dramatically.
An investor obtained a loan to purchase a closed wash, install new equipment, and construct an upscale elevation in four months, creating an attractive, profitable tunnel at significant cost savings compared to ground-up.
Renovation # 4
The current owner converted a 35-foot outdated in-bay automatic into a mini extreme express tunnel washing 65 cars per hour with premium upgrades. Monthly income from the renovated wash increased by over 200 percent, and gas sales from his c-store increased 5 percent due to the success of the wash. The renovated wash became a great moneymaker that was beyond the owner’s expectations.
Renovation # 5
An investor purchased and converted six outdated bays into a 90-foot express tunnel. He paid $650,000 to purchase the site, $600,000 for renovation, and $400,000 in equipment creating a “like-new express tunnel” for a total investment of $1,650,000. Advanced planning reduced construction time and cost.
The owner obtained 100 percent financing to convert his outdated struggling in-bay automatic into a 24/7 fully automated profit winner that included new equipment, digital menu board, plus new lighting and security, allowing the wash to operate essentially with no labor cost.
Hershel Pierce was a co-founder of Pavillion Bank in 1982 and is the founder of SBA-Capital, a car wash financing expert. He can be reached at (214) 726-9000 or firstname.lastname@example.org, or visit the website at www.sba-capital.com.