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Car washes are necessary accessories to some of people's most expensive purchases. Maintaining a clean car decreases owners' cost of repairs in the long run. Car washes offer an inexpensive and convenient solution to these customers. The car wash model can vary in complexity and allows owners freedom in size and operation complexity, making it an excellent business model. Opening a car wash is not an easy task however, in this article we explore the mechanics that go into such a decision.
Is a Car Wash a Good Investment?
Anything that generates an acceptable return on investment can be considered a good investment. Anecdotally, car washes are typically seen as great investments. From stand along self service washes, to full service detailing and tinting, there are a variety of models that range from low to high investment, making the idea an attractive one.
Pros and Cons of Car Wash Investment
Like any investment, there will be pros and cons in placing your money in a car wash business. We outline a few of those below.
Pros of Car Wash Investment
- Variety of business models, from complex and expensive, to unattended self service options
- Minimal process changes over time, washing a car has remained a simple and effective process
- Low SKU or inventory needed, once an operation knows the supplies it will need to operate, they may not change often
Cons of Car Wash Investment
- Impacted by weather, if you live somewhere rainy for example, you may see less business, which cannot be controlled
- Risk associated with operating customer vehicles, when there's damage at your business you may be on the hook
- Subject to regulation, how much water are you using and will those laws change not in your favor?
Things to Consider Before Making a Car Wash Investment
Growth of the Car Wash Industry
- Car washes are expected to grow by roughly 21% through 2027. With demand for cars increasing there is a great opportunity to be a part of the industry and cleaning one of people's most expensive purchases.
Car Wash Consumer Trends
- Consumers, or customers of car wash services are also evolving. With the rise of ride share and gig economy, cars are being used more frequently requiring more tax deductible washing
- In the last 10 years, 70% of consumers switched from self washing to utilizing a car wash service. This trend indicates the cheap alternative is sticking with consumers who now prefer the service.
Types of Car Wash Systems
- Mobile Car Washing - consisting of driving to customers homes and washing their car on their property
- Self Service - allow customers to clean their cars themselves at a facility the owner owns and maintains
- Full service - multiple services including cleaning, vacuuming, detailing, window tinting, among other items
Technology in the Car Wash
- Having the latest technology can increase efficiencies but could potentially cost more upfront. They may also decrease waste and lower overhead expenses.
- Advances in cashless payments have also allowed car washes to become more accessible to cashless customers, demonstrating the opportunities for improving technology at car washes but not always requiring high investment
Car Wash Equipment
- When investing in a car wash there are a few key items you may need depending on the type of car wash you’re thinking about starting
- Mobile Service - you may need items like a van, chemicals and cleaning supplies, vacuums, and tools
- Self Service - You may need equipment like hoses, payment machines, spray guns, and soaps to keep your equipment functioning
- Full service - the most complex car washes may need items like chemicals and cleaning supplies, tunnels to drive through, caponpies for vacuum servicing, rags, and any other equipment needed to fulfill the services provided.
Car Wash Operating Costs
- According to Car Wash Advisory car washes can range in investment from $2 million to possibly over $5 million. This cost may decrease if looking at self service or mobile services.
|Cost Component||Lower End||Base Costs||Higher End|
|Building & Fixed Site Improvements||$1,000,000||$1,250,000||$1,500,000|
|Primary Tunnel & Support Equipment||$500,000||$650,000||$800,000|
|Primary Electronic Components||$150,000||$275,000||$400,000|
|Site & Landscaping||$100,000||$200,000||$300,000|
|HVAC & Plumbing||$40,000||$80,000||$120,000|
|Signage & Marketing||$50,000||$150,000||$250,000|
|Planning & Permitting||$75,000||$175,000||$275,000|
|TOTAL - KNOWN QUANTITIES||$2,045,000||$3,110,000||$4,175,000|
Car Wash Location
- Finding property where customers can easily access your facility is critical to a successful business. Other considerations like water access, drainage, and trash are among other factors which may be considered in the choice
- When dealing in commercial real estate you may also have to understand and create attractive investing and financing opportunities to secure a location that will ensure the business is profitable.
Insurance and Legal Considerations
- There are a variety of variables at play when operating a car wash. Things like harsh chemicals, customers walking on the property, water at high pressure; these attributes of the business create risk that an owner may want to mitigate.
Choosing the Ideal Car Wash Investment
- Location is everything when it comes to investing in a car wash and could be considered the deciding factor that measures success.
- Accessibility - customers should be able to find and park in your facility
- Traffic - should be in a high-traffic area to attract new business
- Competition - should have few competitors nearby making it the best option for your customers
- Climate - should you have diverse climate be sure to understand average days with rain and snow
Franchising vs. Starting a Car Wash Business from Scratch
Car washes can be started from scratch by owners who have a plan and execute. This may be a great option if owners have experience in the field and know exactly what they are looking to build. It also is not associated with any fees to owners unlike a franchise. Owners however may lose out on brand recognition and reputation when starting off from scratch.
On the other side, owners can also look to franchise, which will cost franchise fees for the owner, but may provide support on things like marketing, scouting locations, procurement, among other tasks. This however comes with the quality level and operational expectations from the franchisor which must be maintained to remain in good standing.
For some owners, building models to reflect both options, or creating a list of strengths and weaknesses of the owner may help drive this decision. While you may lose out on ROI with a franchise, there is potential for a support system to make running the business easier.
How to Invest in a Car Wash
- There are many options for investing in car washes, from starting from scratch, buying an existing business, or franchising; owners will need to weigh options and determine the best path forward.
- When starting from scratch owners may face two stages; building the model and paying for it
- When building the model the owner will need to consider things like legal structure, permits, access to utilities, location, model type, supplies needed. The list doesn’t stop there; forecasting expected weather, investment, income and whether the business will generate money need to also be considered.
- When paying for the model owners will need to seek investment, whether through shareholders or investors, or get a loan for the business. To get a car wash loan, owners will need to work with a lender to prove out the model, submit documentation, go through underwriting, and be approved for the loan.
Scaling Your Car Wash Investment: Expansion and Growth
Once established you may want to begin considering opportunities for your new business. Typically optimizing operations could be seen as a great first step, maximizing the margins of what you built. From there some owners may look to add services, offer mobile options, or add subscriptions like annual unlimited passes.