How To Open a Car Wash
In the United States, the car wash industry totals about $10 billion annually and is growing at about 3% per year. It can be an excellent business to get into, but it can also be costly to start and require a lot of work.
Opening a car wash, like opening any new business, has equal measures of excitement and risk. In this business, you can choose what level of expense you want to (or can) get into before opening, as there are many different kinds of car washes. Opening expenses may also be affected by location.
Some car wash businesses can be pretty simple to open and operate. Some can be a very complex undertaking with a significant initial investment. What you want in this business is entirely up to you. Here are tips on how to get a car wash business open.
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Start: Do Your Research
Before you look for financing or write your business plan, you will want to begin your journey to opening a car wash with some basic research into the local car wash business scene.
Start by taking a look at the International Car Wash Association. Their website is an excellent resource for information on the car wash industry. They also run an annual convention that may be an ideal place to visit before you decide to open your own business.
Next, get the lay of the land—the potential geographical locations of your new business. When you drive around the neighborhood looking at open lots, you will be accomplishing two things: checking out the competition and seeing what land is available to purchase or rent.
Talk to car wash owners, equipment manufacturers, and equipment suppliers to understand how the business operates.
Also, research the correct techniques for car washing—especially at scale. Whether you have a mobile unit or a land-based store, doing it wrong can be costly and can cost you your business.
Environmental Regulations and Environmentally Friendly Car Washes
Both the US Environmental Protection Agency (EPA) and OSHA have regulations that affect car washes. In addition, state and local environmental laws and regulations may affect a car wash business. You should consult your lawyer about any relevant environmental laws for your locations.
Beyond that, modern car wash technology can allow for more environmentally friendly designs. Your architect/designer will have the details.
Look at the Competition
When considering getting into the car wash business, the first thing to do is to go to every car wash in a five-mile area as a customer. Figure out your potential customers.
Once you are finished with the survey, determine the land area where you want to locate your business. Like any real estate-based business—the business's location may determine how successful you are.
Your Business Name
Create a name that will make you stand out. And after that, make sure that nobody else can use your business name online or in any other way. Check with your state Secretary of State to ensure it is your alone, and then register it there.
Taxation and Employment
You will need to acquire a Federal Tax Identification Number (FEIN).
You will be subject to both business taxes and employment taxes. Employee taxation is a complex topic that needs to be handled by your accountant.
Your lawyer will help you with all of the various federal and state employment laws. You should also develop an employee handbook.
Website and Social Media
Make sure that your business name is available for internet purposes and that you can snag your internet domain name. Otherwise, you will need a different name or create a longer IRL.
Every business has to have a website, but most people nowadays communicate through social media. You also need a Facebook page, Instagram, and Twitter if someone can run those pages.
Car Wash Business Plan
If you want to finance, you need to write a business plan. If you want a successful business, you need to write a business plan.
The first step in your business plan is to decide what sort of business structure you want.
There are several kinds of legal structures available for small businesses. These include:
- Sole Proprietorship. These are for the smallest of businesses and probably not for car wash ownership.
- Limited Liability Corporation (LLC). This is the most popular choice for starting a small business.
- Partnership. If you have a partner. There are several different kinds of partnerships.
- Corporation. Probably not the best choice for a new company, but your lawyer may think otherwise.
You should choose the right one for you in consultation with your lawyer. If you are a franchisee, you may not have a choice of the kind of business structure.
Next, decide what kind of car wash you want to open
Types of Car Washes
The cost of starting your new car wash will depend on several things, including location and the kind of car wash you want to run. There are several different kinds of car washes, and each will have a different amount of start-up expenses.
You may want to take the most straightforward way into owning a car wash, and that may be by buying a franchise location from a car wash chain. There are several national and local car wash franchises that you could buy into for your business. The largest ones will cost upwards of $2 million and more to start, but franchising can be the way to go if you have the money.
In franchising, you (the owner of the car wash) are called the franchisee, and the chain you are becoming a part of is the franchisor. You will operate your business under a contract called a franchise agreement.
While every franchise agreement will be different, and you may negotiate some terms, you will probably be responsible for the many steps in this overview.
You should retain a lawyer to help you through the franchise agreement negotiations.
Mobile Car Washes
The simplest and cheapest kind of car wash to invest in (other than dragging a bucket and towels around the neighborhood) is a mobile car wash. The target customer in a mobile car wash is other businesses, particularly those who have large fleets of cars or trucks.
You will have the same or similar business and environmental rules and regulations as a storefront car wash, as well as the different laws on vehicles. You may also be limited in where to wash cars and discharge waste.
It is probably not a great idea to buy a couple of trucks and look for business. Before you start with a business plan or look for financing, ask around a few companies you think could use such a service and see if they would be interested before you launch.
There is at least one national chain of mobile car washes that sells franchises.
Auto Detailing Business
An automobile detailing business can be in a small storefront, a mobile operation, or part of a larger storefront car wash business. It will take the least amount of investment capital to start (industry estimates are $5000- 25,000) but will be the most labor-intensive to run.
You can get a leg up on the competition by becoming certified in detailing. You will need business permits, insurance, etc., but you probably won't run into environmental law problems if you keep it small.
Large Storefront Car Washes
There are several kinds of neighborhood-based, large car washes that require a large area of land, including:
- Hand washes
- Self-service car wash
- In-bay automatic car washes
- Tunnel/conveyor automatic car washes
- Chemical/waterless car washes
- Touchless car washes
Each one has variations in physical structure and different equipment, startup costs, and labor requirements. But they all have similar legal requirements. Industry estimates put the start-up costs of opening one of these from $500,000 to six million dollars.
It is beyond the scope of this article to get into the mechanical details of each kind of car wash. Decide which you want and include that in your business plan.
Marketing, Public Relations, and Publicity
A new car wash will require a solid marketing plan initially and a lot more on virtually a daily basis as the business continues. The business plan should have a substantial and detailed marketing section. The marketing plan needs as much follow-through as the building plans.
It is beyond the scope of this article to discuss all of the different financing options available to you to start your car wash. Your accountant, banker, and lawyer can help you with this. The Small Business Administration is a good resource.
Acquiring Land and Building Your Car Wash
Land cost can be the first thing to derail a startup in this business. First, of course, the land has to be available for sale. The more urban the environment, the more expensive land is likely to be.
The land has to be appropriately zoned. In some jurisdictions, car washes can be a "single-use" facility, where, once the car wash is built, that land can never be used for any other purpose.
You have to obtain the correct construction licenses, business licenses, and permits before you begin construction, both for the construction and for the business itself. It is good advice to find local government agents. They will be in charge of granting permits, running your business's regulations, and making personal relationships with them, starting with the city planner. Seek them out before you begin the construction permit process, tell them that they are always welcome to come by, ask them for advice, tell them you want to cooperate and make sure they are apprised of every step in your business process.
A personal relationship here will go a long way in opening and operating your car wash.
We cannot emphasize enough that you will need to hire a lawyer to get you through this maze of government paperwork.
As for construction, you will have to install sufficient water and electricity—typically much costlier than building a standard office building facility. It is at this point that agencies like the EPA may get involved.
Operating Expenses: Once open, it takes about 38-50 gallons of water, or more, to wash one car. Your electricity will run between 50 cents and $1.00 per car. It will cost about 12 cents to heat the water per car using natural gas.
Business Insurance Requirements
You will have some insurance requirements. Do not slack in this area. If you do, it will come back to haunt you. You will need the following kinds of insurance policies (which you can get from any local insurance agent), and maybe more depending on the location:
- Business Liability Insurance
- Workers Compensation Insurance
- You may want Commercial Umbrella Insurance
- If you are leasing the property, the lease may require certain insurance limits
Common Mistakes of New Car Wash Owners
Being a new business owner can be a very heady experience. But you have to pay close attention to details in this business. Here is a brief list of some common mistakes new owners of car washes have made in the past:
- Not working the marketing. Don't expect people just to show up all excited about the newest car wash in town. Work as hard on marketing before open as you do on anything.
- Expanding to a second location too quickly. Other than the large chains, most car washes are in single locations. It is challenging to replicate a successful customer experience in different locations perfectly.
- Thinking you can be an absentee owner. A car wash is one business where the owner has to be in-house and on top of things at virtually all times.
- Underestimating your costs. Opening and maintaining a new car wash is not cheap. If you are not prepared to spend some money to open and operate your car wash, you are in the wrong business.
- Thinking it will be easy to get permits to open. Car washes are not necessarily the most popular businesses with permitting bodies, neighborhood organizations, or environmental groups. Getting permits to open may be a task, and you may need to change a number of things to get your store open.
- Underestimating staffing needs. Most car wash employees are young people. Many are students. Turnover rates are high, and work discipline may be spotty. You have to put those facts into consideration in the hiring, training, and employee budgeting process.
- Not having the proper skill set. You will be doing a lot more mechanical work than you think. You need to have great concentration and people skills. And you have to want to get out into the community and promote yourself.
- Not continually monitoring the end product. Car wash water, chemicals, soap, etc., are affected by the weather and other factors, and making a consistently superior wash is a matter of constant adjustments. The equipment alone won't do it consistently.
Ready to Open Your Car Wash?
Opening a car wash is a serious undertaking that can cost several million dollars in startup costs. It can involve banks, governmental permits, environmental laws, labor laws, large equipment purchases, business understanding, mechanical knowledge, and much more.
Consult with a business lawyer as early as possible into this process to create a successful car wash. Then, use our simple DIY business formation process to ensure you meet all the legal requirements in your state.
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