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The Car Wash Appraisal Process

Modern appraisal theory typically employs the following three widely accepted methods to develop an opinion of market value. Unless special circumstances exist, all three approaches to value are generally utilized in the appraisal of a car wash facility. More or less weight can be placed on each approach depending on the strength of the data and/or based on the investment motivations and criteria of typical buyers and sellers in the marketplace.

Cost Approach

The Cost Approach is based on the principle that market participants relate cost to value. In the Cost Approach, the value of a property is derived by adding the estimated value of the underlying land to the current cost of constructing a similar facility, and then subtracting the amount of accrued depreciation in the structures and equipment.

We have appraised over 50 proposed car wash facilities located throughout the nation, and have the luxury of having the actual construction cost information for each individual facility. This data allows us to provide realistic estimates of current replacement costs and equipment costs for various types of facilities. In addition, our data serves as an excellent "test of reasonableness" in comparison with the construction costs quotes for currently proposed facilities.

Sales Comparison Approach

The Sales Comparison Approach to value is based upon comparison of the subject car wash with known sales of similar facilities. Recent car wash facility sales are analyzed and compared based upon an overall price basis, price per bay (typically self-service), or by price per square foot. Appropriate adjustments are then made for dissimilarities between the subject property and the comparable sales to derive a market value indication. It is important to note that typical buyers/sellers of car wash facilities place only limited reliance on these physical aspects of the property (i.e. price per square foot).

If financial and operating data of the comparables sales is known, Gross Income (GIM) and EBITDA multipliers can be extracted and used to estimate the market value of the subject. GIM and EBITDA multipliers are generally more reliable when valuing a car wash due to the fact that they represent the actual income of the subject property.

Car washes are income producing properties that are generally not sold if operating at market levels. Therefore, locating viable comparable sales can be difficult. In order to determine market values via the Sales Comparison Approach, Car Wash Valuation Advisors has back searched and verified over 2,000 carwash facilities to locate recent sales.

Income Approach

The Income Capitalization Approach is the method most commonly employed by car wash operators and investors, as it estimates market value based on the actual earnings capacity of the facility.

In the Income Approach, we typically analyze both historic and projected gross incomes, including the effects of wash package pricing, local market competition, roadway traffic counts (AADT), penetration/capture rates, property access and visibility, along with local demographic statistics. Following the income analysis is an investigation of both historic and projected expenses, which develops an estimate of stabilized EBITDA/NOI. Income and expense information is generally measured against comparable car wash facilities as an additional test of reasonableness.

Once a stabilized estimate of EBITDA/NOI is developed, a value indication can be obtained by using an appropriate capitalization rate. Capitalization rates are typically extracted from comparable car wash facility sales, and can be measured against information provided by secondary sources as an additional test of reliability.

Car Wash Appraisal Terminology

GIM (Gross Income Multiplier)

Gross Income ÷ Sales Price = GIM

The GIM is calculated by dividing the sales price of a comparable facility by it's yearly gross Income. For example, assume that "ABC Car Wash" recently sold for $1,500,000 and that the facility's annual gross income equates to $500,000 per year. Based upon the above assumptions, the facility's GIM is calculated at 3.0 ($1,500,000 ÷ $500,000)

The car wash industry typically sees gross income multipliers (GIMs) vary widely depending on the type of facility.


(Revenue Less Expenses)

Earnings before interest, tax, depreciation, and amortization (Cash to seller before debt). EBITDA is typically used to analyze and compare the profitability between income producing properties because it eliminates the effects of financing and accounting decisions made by the current owner/operator.

EBITDA Multiplier

EBITDA ÷ Sales Price = EBITDA Multiplier

The EBITDA Multiplier is calculated by dividing the sales price of a comparable facility by it's yearly EBITDA. For example, assume once again that "ABC Car Wash" recently sold for $1,500,000. Assume that the facility's annual gross income equates to $500,000 per year, and that yearly expenses (not including interest, tax, depreciation, and amortization) equate to $300,000 per year. Based upon the above assumptions, the facility's EBITDA is calculated at $200,000 ($500,000 - $300,000). The EBITDA multiplier is then calculated at 7.5 ($1,500,000 ÷ $200,000).

The car wash industry typically sees EBITDA multipliers vary widely depending on the type of facility.

AADT (Traffic Count)

Annual Average Daily Traffic

AADT figures are commonly conducted and reported by various local and state agencies, and can be very useful in predicting and analyzing car wash demand and penetration.

Capture/Penetration Rate

AADT X Capture Rate = Expected Washes

The capture/penetration rate is a very intuitive tool for predicting and analyzing car wash demand. Carwash volume can be estimated by multiplying the AADT by the percentage of traffic that the site is expected to capture. Capture/penetration rates can vary widely based on the type of wash facility, number of bays, pricing, management, and a multitude of other factors.