Pros and Cons of Investing in Car Washes

Why should anyone invest in car washes? What are the pros and cons? What are some ways to add value in car washes? Whitney Elkins-Hutten, Director of Investor Education at passiveinvesting.com shares her knowledge.

You can read this entire interview here: bit.ly/3zV7qvF

What are some of the pros and cons of car washes that you have invested in so far?

A pro would be that we are looking to buy properties from Mom and Pop owners that are already stabilized and performing, ideally they already may have several properties under management. However, because they are the operator, they haven't figured out how to scale themselves out of the business. That scaling problem is what we are looking to solve. That is also the next pro, because we are looking to build one of the only third party management companies for carwashes. We take advantage of not only operational expenses, sharing full time employees between different properties and keeping our labor expenses low. But we can also keep our chemicals and supply expenses low because we can buy in bulk. We also have a great Training Management Program. Anyone that has run a business knows that one of the hardest things to scale is your people so with this, we can actually achieve that type of scaling. Then, the ability to layer on a strong brand and duplicate that model over several other properties is of benefit. 

As for cons, this is a different type of investment. Investors that get into the space can be starry-eyed, they may look at the returns and think that this is easy money. They may think they can make passively 10 to 15% cash on cash 20 30% IRR on this type of investment, but it does come with its different types of risks. It has seasonality type risks, business competition and competition between competitors. There is also intra competition, which is between the assets you already currently own. You have to be partnered with an operator that knows what they are doing as far as being able to acquire the right facilities that have the right metrics layer on this type of strong marketing brand. When buying a carwash, you can't just pick a piece of land and build a carwash, it doesn't just work anywhere, you have to have eyeballs on the property. More importantly, you have to have the traffic count coming by, similar to self storage, you need the traffic count coming by, but it also needs to be able to turn in the correct direction and lead to the correct direction. Whenever you get the traffic on the property, you now need to be able to manage the traffic on the property and get a correct flow to be able to service your customers because at the end of the day, it's your customers that's going to drive your business.

What are some ways to add value in car washes?

One, make sure you are in a great metropolitan service area that has the demographics to be able to support a carwash. Start the due diligence while you're under contract, what is the current operator doing well? What are they not doing well? What we are seeing, especially picking up from mom and pop owners, is that their employee count is very high. Their employees are not trained, there is no strong branding on the property, they haven't moved to subscription model. Look for ways to increase your income, look for ways to decrease your expenses. Can you renegotiate vendor contracts to bring down some of your chemicals that you purchase? Can you optimize the tunnel speeds so you are not spending as much in water and electricity? Can you add an express lane to the property to add an additional tier to your subscription model and move those people that pay a higher tier through faster?

Whitney Elkins-Hutten

whitney@passiveinvesting.com

www.passiveinvesting.com/whitney

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