We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of car wash businesses. Below is a brief synopsis of the industry.
Description of Business
Companies that own and operate carwash facilities.
General Industry Information
According to an industry profile by Businesswire, the carwash industry in the United States is highly fragmented, with the 50 largest chains holding just 15 percent of the market. The carwash industry in the United States includes 14,000 full-service carwashes with combined annual revenue of about $5 billion.
Large chains include Wash Depot (70 locations), Oasis Car Wash, Car Wash Partners and Auto Bell Car Wash. The industry is highly fragmented: the 50 largest chains hold just 15 percent of the market. Chains are local or regional. A typical firm has one location. A large location has 35 employees and $1.5 million of annual revenue.
Demand is driven by favorable weather, new car sales and growth in consumer income. The profitability of individual firms depends on favorable location and efficient operations. There are few economies of scale. Chains have advantages in advertising and customer recognition. Small firms can compete successfully by good location. The industry is highly labor-intensive; annual revenue per employee is just $40,000.
Major services are exterior wash, exterior and interior cleaning, waxing, underside cleaning, vacuuming and premium detailing. Ancillary products and services such as pick-up/drop-off services, fast food, greeting cards and automotive products are also offered at some locations. Detailing services consist of intensive interior and exterior cleaning, and waxing and polishing by hand.
Full-service car washes require the most extensive and expensive facilities of all types of car washes, with a need for at least 20-30,000 sq ft (land) and the largest number of employees. The majority of the lot is used for the tunnel.
Exterior car washes combine some of the features of the rollover and the full-service car wash. Like the rollover, the customer stays in the vehicle. He drives the car onto a conveyor that takes the car through a tunnel similar to that in a full-service car wash. As the car travels through the tunnel, it goes through a rinse, suds, another rinse and a wax cycle. Some exterior car washes also offer a drying cycle. Many gas stations have exterior car washes as well as conveyor automatics (or rollovers). The exterior facility takes up more space than a rollover facility – conveyors average about 100 feet in length – but it also offers higher profit potential than rollovers.
The rollover car wash is housed in a single bay. Customers can accomplish two tasks in one trip by filling up their tanks and having their cars washed.
The self-service car wash is slightly different from the other three types of car washes. This car wash has a trigger gun and a foaming brush for customers to use to clean their cars themselves. Customers insert coins into a time-regulated machine and then rinse their cars, apply soap and rinse again. The wash-cycle times are 4 minutes, 4 minutes and 5 minutes. The longer the wash lasts, the more it costs. (Source: Entrepreneur Magazine’s “How to start a Carwash)”
Red Flags and Risks
Labor is a large portion of overall costs. Buyers should beware of employee payments made “under the table.” Multiples have risen to unbelievable heights as many operators think that they can skim money from the facility. The IRS typically audits these businesses based upon an audit of the utility bills. Fraud is rampant in this industry, so make sure that you double check the financial numbers which are represented.
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