The carwash sector is a thriving market worth billions of dollars with plenty of room to run. Entrepreneurs eager to diversify their portfolio or break into a new segment should heavily consider carwash ownership.
The International Carwash Association commissioned a third-party research study in 2020 that estimated there to be approximately 17,500 conveyor carwashes, 29,000 in-bay automatic (or roll-over) carwashes, and 16,250 self-service carwashes in the United States. The majority of retail carwash locations in the United States are owned and operated by small- to medium-sized independent carwash companies, though consolidation has accelerated over the last 10 years. Today, the top 100 chains in the United States operate approximately 6,102 locations. This proves that it’s very feasible for entrepreneurs to be successful without owning a huge chain.
If you're thinking about entering the carwash industry, it's essential to determine the cost of building or opening your first location and identify the potential financing options. This article will provide valuable insights into these topics and equip you with the knowledge required to start in this dynamic industry.
Is Owning a Carwash a Good Investment?
As measured by revenue, the United States carwash market size exceeds $15 billion and is projected to grow at a rate of 5.7% through 2030.
Entrepreneurs choose to invest in carwashes for many reasons, including the fact that there’s stable recurring revenue from memberships, low overhead and labor costs in daily operations, and favorable tax treatment and financing options. Memberships lower the impacts of seasonality by creating a stable base of cash flow throughout the year.
What Are the Startup Costs for a New Carwash Business?
The costs of opening a carwash vary by region for planning, permitting, site acquisition, construction, and working capital expenses. Below you’ll find rough estimates of the various costs involved in building a carwash.
Planning and Permitting | $100,000 - $400,000
You'll need to hire architects and engineers to design your carwash and ensure it meets local building codes and regulations.
Once your plans are complete, you'll need to go through an entitlement and permitting process. This will involve obtaining the necessary permits and licenses from local government agencies, such as conditional or special use permits, grading permits, building permits, environmental permits, and business licenses. The costs associated with these permits and licenses can vary depending on the jurisdiction, and the process can be time-consuming, so it's essential to factor these costs into your budget when planning your carwash.
Depending on the site, you may even need to apply for zoning variances, which allow you to deviate from local zoning regulations to accommodate your carwash project. It can be a complex process, as it often requires presenting evidence to local zoning boards and obtaining approval from the community. Again, the costs and likelihood of success associated with this process can vary widely depending on your location and the specific requirements of your project.
Site Acquisition | $0 - $4,000,000
When it comes to acquiring a property for a carwash, there are typically two parts to consider: the land and the facility. If you opt to own the land outright, you will likely have to pay a significant sum upfront, which can be a considerable expense for some entrepreneurs. However, owning the land can also provide a sense of security and stability for the long-term success of your carwash business.
In contrast, leasing the property may require a lower upfront cost, but you have less control over the real estate after investing millions of dollars in a property that you don’t own.
If your goal is to purchase a piece of land with a run-down carwash that you want to rebuild, the cost can vary widely depending on location and other factors. You will also need to consider the cost of building or renovating the carwash facility. Find out more about construction costs in the next section.
Facility Construction | $2,500,000 - $6,000,000
There are a variety of factors that influence the cost of construction, including the size of the carwash, the tunnel length, and the amenities and services provided. Will it be an express carwash or a flex?
Given the specialty nature of carwash construction, it is critical to choose a general contractor who is experienced in carwash construction, even if it costs a little more upfront. Choosing an inexperienced contractor can be much more expensive in the long term as mistakes in construction could lead to major issues down the road that are much more costly to address.
Equipment | $1,000,000 - $2,000,000
Depending on the services your carwash will offer, the range for the equipment budget can be broad. Just as there are for cars, there are various manufacturers that sell carwash equipment and the price difference between those at one end of the spectrum versus the other end is significant.
Most newly built carwashes are comprised of a tunnel system that allows vehicles to pass through on a conveyor while being washed and dried automatically. Operators typically also offer free vacuums with a carwash and the cost of the vacuum systems alone typically exceeds $100,000. Many operators install pay stations or kiosks to save on labor, but each pay station can cost $50,000.
Using a belt conveyor instead of a chain conveyor will increase the cost but allow you to service a broader range of vehicles. The decision of which features to offer in the tunnel can greatly impact the overall equipment budget.
Working Capital | $150,000 - $400,000
When starting a carwash, allocating a significant amount for opening working capital for day-to-day operations is essential. Plan to set aside between $150,000 to $400,000 for pre-opening expenses such as hiring, uniforms, marketing, payroll, and inventory. This will provide a cushion for the first 90-120 days of operational expenses as the business begins to ramp up.
The total cost of starting a carwash can vary widely depending on factors such as equipment and real estate prices. The cost may range from $3.75 million to well over $10 million. However, there are several financing options available that can help make starting a carwash more accessible, even for those with limited financial resources.
What Loans Are Available for a New Carwash?
Building a new carwash can cost over $10 million based on the above estimates. The majority of operators do not have that sum on hand, so financing will make your carwash goals more attainable.
There are a few loan structures that potential carwash owners can take advantage of, including conventional commercial financing or a Small Business Administration (SBA) guaranteed loan such as an SBA 7(a) or 504 loan. The inherent differences between SBA 7(a) and 504 loans might make one more suitable to your specific scenario.
The experts at PetroCal can arrange a tailored loan that meets your short-term and long-term needs. Contact us for a consultation so we can understand your goals and requirements.
Before applying for a loan, you can save yourself time and headaches by preparing your carwash station financing paperwork well in advance! Download our helpful loan document checklist to ensure you have all the necessary paperwork to get started.
