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How To Open a Car Wash

Man washing a car at a car wash

Like any new business, opening a car wash is equally exciting and risky. Americans keep their vehicles longer, and keeping those cars and trucks looking good is essential. In the United States, the car wash industry totals about $33 billion annually. It can be an excellent type of business to enter.

Starting your own car wash business is costly and requires work. There are many kinds of car washes, and you can choose what level of expense you want or can afford before opening. Location impacts your opening and operating expenses.

Some car wash businesses can be simple to open and operate. Others 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 open a car wash business.

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Start: Do Your Research

Before you look for financing or write your business plan, you will want to begin with basic research into the local car wash business scene.

Start by looking at the International Carwash 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 opening your own business.

Next, get the lay of the land. Examine your new business's potential geographic locations and demographics. When you drive around the neighborhood looking at open lots, you will accomplish two things: checking out the competition and seeing what land is available to buy or rent.

Talk to car wash owners, equipment manufacturers, and suppliers to understand how the local businesses operate. You need to know what your business needs are and get an idea of costs.

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 harm your business.

Environmental Regulations and Environmentally Friendly Car Washes

The US Environmental Protection Agency (EPA) and the Occupational Safety and Health Association (OSHA) have regulations affecting car washes. State and local environmental laws and regulations may also 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 or designer will have these details.

Look at the Competition

When considering getting into the car wash business, the first thing to do is go to every car wash in a five-mile area as a customer. This will also help with your market research and figuring out your potential customers.

Once you complete this survey, determine the land area where you want to locate your business. You'll want an area where there is a need for your car wash. Decide if it's best to open a full-service car wash, a self-serve wash, or a combination. This will determine what car wash equipment you need and the costs you will be facing.

Like any real estate-based business, your location may determine if you will have a profitable business.

Your Business Name

Create a name that will make you stand out. Then, ensure nobody else can use your business name online or in any other way. Check with your state secretary of state to ensure it's yours alone, and then register it there.

Next, trademark that name with the United States Trademark and Patent Office (USPTO). Register that trademark with your state.

Taxation and Employment

You will need to get 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 an accountant to manage appropriately.

Your lawyer will help you with all the various federal and state employment laws. You should also develop an employee handbook.

Open a Business Bank Account

You will need a business bank account to apply for loans. Most lenders require a business account before you can apply for financing. A business account will also keep your personal finances separate from your small business. You may also want to consider opening a business credit card.

Website and Social Media

Ensure that your business name is available for internet purposes and that you can secure your domain name. Otherwise, you will need a different name or to create a longer website name.

Every business needs a website, but most people also communicate through social media. You also need a Facebook page, Instagram, and Twitter.

Car Wash Business Plan

If you want to finance your business, you need to write a business plan. If you also want a successful business, you must write a business plan.

A business plan is your roadmap to success. It details your idea, your business goals, and what you need to make the business work. Investors and financial institutions will require a thorough business plan before deciding to lend to you.

The first step is deciding what business structure you want.

Business Structure

There are several kinds of legal structures available for your business entity. These include:

  • Sole proprietorship: These are for the smallest businesses and may not be suitable for car wash ownership.
  • Limited liability company (LLC): This is the most popular choice for small business owners.
  • Partnership: There are several different kinds of partnerships to choose from.
  • Corporation: It's usually not the first choice for a new car wash 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 on the business structure.

Types of Car Washes

Next, decide what kind of car wash you want to open.

The cost of starting your new car wash depends on several things, including the location and kind of car wash you want to run. There are several types of car washes, each with a different amount of start-up expenses.

Franchising

You may want to take the most straightforward way to own a car wash. This might be 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 if you have the money, franchising can be the way to go.

In franchising, you, as the car wash owner, are the franchisee. The chain you are becoming a part of is the franchisor. You will operate your business under a contract called a franchise agreement.

Every franchise agreement is different. You may negotiate some terms. You should hire a franchising lawyer to help you through the franchise agreement negotiations.

Mobile Car Washes

A mobile car wash is the simplest and cheapest car wash to invest in. Other businesses are the target customers for a mobile car wash, particularly those with large fleets of cars or trucks.

You will have the same or similar business and environmental rules and regulations as a storefront car wash and the different vehicle laws. Where to wash cars and discharge waste is a concern as well.

Buying a couple of trucks and looking for business is probably not a great idea. Before you start with a business plan or look for financing, ask around a few companies you think could use such a service. See if they would use your service before you launch.

Auto Detailing Business

An automobile detailing business can be in a small storefront, a mobile operation, or part of a more significant storefront car wash business. It will take the least amount of investment capital to start. Industry estimates are between $4,550 and $28,100. But this business will be the most labor-intensive.

You can get a leg up on the competition by becoming certified in detailing. You will need business permits, insurance, etc., but you likely won't face environmental law problems if you keep it small.

Large Storefront Car Washes

Several kinds of neighborhood-based, large car washes 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 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 a million dollars or more.

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 Strategy, Public Relations, and Publicity

As the business continues, a new car wash will need a solid marketing plan. It needs even more daily marketing. Get your business name and phone number out there.

Your business plan should have a detailed marketing section. The marketing plan needs as much follow-through as the building plans.

Financing

It's beyond the scope of this article to discuss all the different financing options available to start your car wash. Your accountant, banker, and lawyer can help you with this. The Small Business Administration (SBA) is also a good resource.

Acquiring Land and Building Your Car Wash

Land cost can be the first thing to derail a startup in this business. Of course, the land has to be available for sale. The more urban the environment, the more expensive land is likely to be.

Be aware of local zoning laws. The land has to be appropriately zoned. In some jurisdictions, car washes can be a single-use facility, where, once built, the land cannot be used for any other purpose.

You must obtain the correct construction licenses, business licenses, and permits before you begin construction. Do so for both the building and the business itself. It's good advice to find local government agents. They will be responsible for 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 they're always welcome to come by. Ask them for advice. Tell them you want to cooperate and ensure they know of every step in your business process.

We cannot emphasize enough that you must hire a lawyer to get you through this maze of government paperwork.

As for construction, you will have to install sufficient water and electricity. This is typically much costlier than building a standard office building facility. It's at this point that agencies like the EPA may get involved. You must manage your facilities' wastewater by regulations.

Operating expense example: 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. Don't slack in this area. If you do, it will come back to hurt your business. Accidents can happen and may be costly. 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:

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 on the marketing—Don't expect people to show up excited about the newest car wash in town. Work as hard on marketing before opening as you do on anything else. Get the word out. Offer special introductory pricing, and consider a customer loyalty program.
  • Expanding to a second location too quickly—Other than the large chains, most car washes are in single locations. It's challenging to perfectly replicate a successful customer experience in different locations.
  • 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're in the wrong business.
  • Thinking it will be easy to get the 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 several 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 must consider these facts in hiring, training, and employee budgeting.
  • 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. You have to want to get out into the community and promote yourself.
  • Not continually monitoring the end product—The weather and other factors can impact car wash wastewater, chemicals, soap, and staffing. 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 more.

Consult a business lawyer as early as possible 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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