How much is too much for land?

I have what I feel is a great area for a car wash. The area is growing very quickly and there is an affluent demographic within 5 miles. There are approximately 40k people within 5 miles that make approximately 150k per year. This street has 30k car passes each day. There is a major grocery store less than a block away and a theater and retail pad sites are coming in within the next year.
My question is this...The land I want is $1.4 million. Is that just way too much?
Again, I feel this site could generate close to 1% within a year. I'm working on a full service model. Your help is appreciated. I know that many people are not fans of the full service model, but this demographic demands it.
Also, there is no competition within 10 miles.
Thanks!

In my opinion, 1.4 mil is way too much money to spend on land, well unless its a huge piece of land (several acres) with major road frontage. The demographics seem great but you'll probably end up at 3-4 million once you're open. Not all land is created equally. Street visibility, traffic speed, traffic easements are all additional factors. Many areas don't allow decent signage. You sound like a similar clientele as Miles Auto Spa in Nashville, Tn. It might be good to visit other high-end full services. Is this your first wash?

By looking at your profile it looks like your in the Bay area... If so and thats where your looking to build that is about right for property! I know the cheapest you can get a good acre for in Sacramento is a little over a million! I know some people in the area that can look at the site and see if its a good location, and worth it.

Hi Guys,
Thanks for your input. I'm actually out in Austin, TX now and this would be my first car wash.
The lot is 3 acres. However, there are many restrictions on parcels in this area - the primary one being that you can only build on 25% of the lot. There are also many overlay covenants that restrict car washes in the area. This is one of the few that would make a good option. All of these factors should restrict future competition.
I'd like to keep the total cost to under 2.5 mil, ideally around 2 mil. Anybody think that woudl be possible, 2 mil?

You could probably keep it around $2 million if you bought your land for $500,000. I agree with Speedy that you will probably be more around the $3 to $3.5 million range. I have never done a full serve but my guess is with the type of customer you pull in and in the kind of area where your site is, you need to spend the money to do a nice project. $1.4 is a big chunk of change for dirt, especially if you can only build on 25% of the lot. That comes out to 3/4 of an acre you can actually build on. That doesn't seem right really. Typically in FL you can build on 70% of the site and the other 30% must be landscaped area. Are you positive that the 25% is not referring to the landscape area you must have?

I know nothing about FS carwashing. However, 1.4M for land for any carwash seems plain crazy.

Are you referring to a full-serve or flex-serve tunnel, or a self-serve with automacic bay(s)? People in Austin won't spend enough at a self-serve to pay for a $2.5 million project. The more affluent the area, the more it calls for a tunnel.

Thanks everyone.
I am referring to a full serve in an affluent area. And yes, there are many restrictions in this area b/c it is a watershed area.
This is kind of funny. I called the current owners today and the guy was very helpful.
They are a group that currently owns 7 carwashes from the houston area to austin. They bought this land for a car wash (same idea as me). But after going through site approval (and getting approved for a flex serve) they decided a car wash might not be the best use of land. Now they are just sitting on the land.
I live in the area and truly beleive there is a need for a carwash here. My wife drove about 30 miles to a full serve car wash b/c she didn't even realize there was one 8 miles up the road (most people don't drive this way - they head towards town which is where the lot i'm looking at is).
Anyway, I know i should listen to the experts but I'd really love to do this project.

With my basic proforma's i have 3 scenarios. One has a 1% capture rate, a .05% capture rate and a .75% capture rate. They look pretty good from my standpoint.
I'd be willing to share the info if you all are interested. Not sure how to put them on this board though. I'd love feedback. Thx!

$1,400,000 for land
$700,000 for hard construction costs
$400,000 for equipment
$100,000 for soft costs

$2,600,000 total

I have no idea what impact fees your city may charge; water, sewer, storm water, and traffic. These can be killers.

If its the right site and market, it doesn't seem all that crazy to me.

Thanks Axxlrod, Those numbers are right about what i was figuring.

A similar post was on the bulletin board. Maybe it was you, seeking validation of your idea... under a different alias.

Regardless, it sounds like a potentially good site. Done right, it should do very well.

But your logic about the full-service operation is, (how can I put it?)... WRONG! VERY, VERY WRONG!

"I'm working on a full service model. Your help is appreciated. I know that many people are not fans of the full service model, but this demographic demands it."

Not fans of the full-service model??? Did it ever occur to you that there is good reason that supports that feeling?

Besides, who told you the demographic DEMANDS a full-service? DEMANDS??? You need to find other touchstones, because the advice you're being fed is outdated... and inaccurate.

Maybe that logic was correct 15-years ago, but today that outmoded business model will severely limit the return on your investment. Traditional full-service operations are inefficient, too restrictive, cumbersome to manage, and quite frankly belong back in the 20th century.

If your marketplace will support a tunnel carwash, it makes much more sense to build a flex-serve operation and enjoy the best of both worlds: express exterior and hands-on express aftercare. Customers prefer it by a wide margin... and you will avoid most of the labor headaches associated with full-service. And, your carwash revenues will not be restricted by weather-related shortfalls.

Bottom-line: a flex-serve operation will absolutely generate more volume, and because you can also offer hands-on supplemental services, you can essentially take your customers off-the-market from other competition.

And a flex-serve requires no more space than a full-service operation. It merely configures things more efficiently.... and enables you to do more... with less!

Quite frankly, building a limited capacity full-service carwash in 2008 no longer makes good business sense. You will wash less cars, have a larger overhead, and will be labor-dependent. The full-service facility will probably cost more to build and operate, and never generate the NET profit that a flex-serve can provide.

My advice: Stay with the more sensible (profitable) operating platform. FLEX-SERVE. It's a far better fit for the upscale market you mistakenly feel will support a full-service. Consumers overwhelmingly prefer the fast, high quality convenient service that offers a choice of express washing that only takes a few minutes... or the option of selecting from an array of rapid-delivery hands-on services. Consumers really do not like having to surrender and vacate their vehicle... just to get a carwash. Not only do they not like their private space invaded, but the preparation of straightening up of the interior and securing valuables... and the hassle of getting children out of infant or child seats and managing the family dog, makes the entire visit to a full-service operation a very planned event. Ask a busy, multi-tasking young parent who endures the juggling, and they'll probably admit that they'd rather skip the carwash and its time-loss aggravation.

Just a few well-intentioned thoughts...

-Steve

Steve,

Thank you for your input. I have not posted here before. Its only been the past few months that i have seriously been considering this.
The car washes that I have seen do well have been full service. Again, I am new to the industry so I do not doubt flex serve is an excellent option. So, I am not eliminating flex serve at all. I haven't experienced one personally and over the next week or so, I will seek one out.
But for me and most of my yuppie peers, we typically do not do drive through washes. Plus in the other yuppie neighborhood in Austin, there is a full service that does amazingly well. Anyways, I do appreciate the advice.

I just talked to a broker today and it looks like some new land may be opening up. Per square foot it is cheaper but not by as much as I'd like.
Steve, are you a distributor by chance?

Steve,

I asked the same question on another bulletin board and you replied there as well. It is not a different alias though. That is probably what you are thinking of.

Dan

Dan, just curious if you have talked to anyone at WET before? Our home office is in Austin.

When you say "there is a full service that does amazingly well," on what do you base this? Are these people showing you their numbers, or are you among the many I've talked to who see lots of cars and assume it makes lots of money? Seeing a busy location means nothing about the profitability or the potential return on investment for what you're considering building.

Honestly, and this isn't directed specifically toward you, but I'm sick of people coming up to me on a busy Saturday and saying something oblique like "This place must make a lot of money!" I usually say "It does ok, but it takes a lot of work." That very quickly dries up the drool in the corner of their mouth. I sense the same misconception in some of your comments.

Oh, and if you consider WET for building, just talk to some of the people who've let them build their wash.

Dan,
MEP speaks alot of sense. There have been alot of days where my line is out to the street blocking traffic and my self serve has 75 cars in the lot and people are arguing for position in front of the bays. A customer or two will come up and say "Wow, you're making money today". I say to myself - if he only knew. You don't see these people on rainy days or when you have other issues with the business. Everyone wants to buy a soft serve ice cream stand when people are line up, but not when there's snow on the ground and you're still making the payments. Be careful with your investment. We have a $5m wash in Pittsburgh called "clean town". No expense was spared. Double tunnel, conveyor belt, AVW equipment, immaculate and elaborate building, excellent management and service, high traffic count. They have been in business two or three years. I heard they just went over 100K cars this past year. A good and prosperous full serve requires alot of handson, good employees and "very good managers" who pay attention to details, and a good marketing program. A good full serve can make money - but it doesn't just appear on your doorstep every morning.

Good luck

Joe

Thanks for the advice MEP and Joe. I agree, you are both correct. I'm going to do my due diligence and definitely consider a flex serve option. I personally just haven't had much experience with one and that is probably why I lean to the full serve.
I'll take it slow and hope someone else doesn't beat me to the punch.

I agree with Mep and Crown. We have all experienced new owners with high hopes because of what that location or surrounding locations "appear" to be doing. I have experienced multimillion dollar, 600+ cars a day locations that can't pay their bills. I have also experienced 100+ car a day locations that are great and carry huge numbers. All types of car washes can be successful it is a matter of truely knowing what your market needs and your capabilities. If you don't know...find someone who does. This business looks easy from the outside, it is not. The most knowledgable have decades of experience and even they have to ask for help.

1.4M for land depends on two major points. 1)What is the market value for the land? 2)Can you make satisfactory margins with the overhead that price creates? If you don't know...find some who does. 2-2.5M is a too painful of a mistake to be wrong.

www.WASHWAYUSA.com

If an experienced company in a growth stage passed on the project and decided the land was too expensive for a carwash that would send up a huge red flag.