JF1482: How To Quickly & Effectively Solve Various Problems That Arise In Your Biz #SkillSetSunday with David Begin

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As investors and entrepreneurs, we must be able to adapt and overcome various situations that come up. Being comfortable with being uncomfortable is kind of a necessity. Today, David has some tips and strategies to overcome problems, regardless of the business and reasons. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

 

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David Begin Real Estate Background:

  • David is the Managing Partner of Wild Blue Car Wash
  • has 3 exterior express car washes in Colorado
  • has also applied his extensive sales and marketing experience to deliver sales training throughout the world
  • Say hi to him at wildbluecarwash.com  (www.thehowofcarwashing.com)
  • Based in Colorado Springs, CO

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TRANSCRIPTION

Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.

First off, I hope you’re having a best ever weekend. Because today is Sunday, we’ve got a special segment called Skillset Sunday. The purpose of this episode is to help you hone in or acquire a skill that you will need in order to be a successful real estate investor/entrepreneur. We’re gonna be talking today about as our business grows, what are some challenges that we’ll come across, and how have others effectively solved those challenges.

We’re gonna be talking to a real estate investor, but then also someone who has not only commercial property, but someone who operates those properties, as well as actually car washes. So there’s gonna be a slightly different slant to this, but the interview guest who is on the show now – he is also a commercial real estate investor… How are you doing, David Begin?

David Begin: Good, Joe. How are you doing? Thanks for having to be on, I’m excited to be on.

Joe Fairless: Yeah, nice to have you on the show, and I’m glad you’re excited. A little bit more about David – he is the managing partner of Wild Blue Car Wash. He has three exterior express car washes in Colorado, and he owns the property for each of those three. He’s in Colorado Springs, Colorado. With that being said, David, will you give the Best Ever listeners a little bit of background on how you got to this point and what you’re focused on now? Then we’ll talk about the evolution and challenges of your business.

David Begin: Yeah, that’d be great. I started off in the corporate world; I got a degree in Public Administration, thinking I wanna work for the government. I did that for two or three years and decided I didn’t like that very much… But I did get interested in technology, and was application to join an application software company back in the late 1980’s, and worked in the software industry probably for 10-15 years.

Then I transitioned to sales training, so I was able to get involved in sales training and teach people sales skills at the enterprise software level, which is a much more complicated type of sale that you would get into. It’s a group of people selling to a group of people, so there’s a lot of political dynamics that go into play. So I got involved in that and I really enjoyed it, and as I was kind of getting a little older, my kids were getting a little older, I wanted to kind of own a small business, so I was making the transition from the corporate world to being a small business owner, and for some reason I fell into car washing, and about 15 years ago started looking at the process, and it really took us about three years to find a site… So I certainly appreciate the real estate aspect of it, but it took us a long time to find a good site, and then we were able to come up on two of them pretty quickly.

We opened two car washes, ran them for about ten years, and then recently just opened up my third car wash… So I’ve been in that process, I’ve been involved in it; I’ve had to go from a corporate world to being a small business owner, to being an entrepreneur and learning all the challenges and excitement that goes along with it.

Joe Fairless: And I’m sure everything has been absolutely perfect, with no issues whatsoever since you’ve purchased these properties, as well as the businesses and ran them… Is that correct?

David Begin: Absolutely, yeah. It’s been a dream come true, it’s been heaven on earth. [laughter] The people that do entrepreneurism does it, the people who really like it, love it. And although there’s a lot of issues that go along with it, most people who are their own boss, and entrepreneurs, and small business owners, they wouldn’t trade it for anything, and I think I’m in that position.

I always tell my friends, if I had to go back to the corporate world, I would, but I would do everything I could possibly not to do that.

Joe Fairless: So let’s understand where we’re at with your business, and then we’ll talk about the challenges that you’ve come across as you’ve grown it… Because you own the properties where these car washes are at, and you mentioned it took you three years to find the site for a car wash… What were you looking for?

David Begin: You know, car washing has kind of changed in the last 15-20 years. A lot of car washes early on were what I call self-served car washes; that particular model is where you drive into a bay, and it used to be a coin-operated process. It still is in some cases, but now it’s kind of credit card… But you kind of wash the car yourself. So you might have a brush, a high-Fpressure hose, you’re provided with soaps and waxes and different things that you can do that.

Those investments that those people made – a lot of times they had a piece of land; it didn’t have to be an A property, it could have been a B or C property, but they put a car wash on it because they were gonna hold it and it was more of a real estate play for those people. “I’m gonna hang on to this for 3-5 years, or 10 years, and I’m gonna flip it and make money as the property appreciates, as maybe things build around it.”

That’s changed quite a bit now. The car washes nowadays that are popping up — the market is exploding in terms of car washes. We’re seeing more and more car washes being built now than ever before.

Joe Fairless: Really?

David Begin: Yeah, very much so. A lot of money is coming into the market, a lot of people realizing it’s a good business to get in if you’ve got the right location… And location, obviously, as it is in many cases for retail, is very important. If you pick a bad location, it’s hard to recover from that location… So nowadays the real estate component is just part of it; so you’re not making money necessarily on the real estate investment, you’re making money on the car wash operational investment.

So you’re competing with everybody else that’s looking for those corner sites – you’re competing with the banks, you’re competing with 7-Elevens, with the other convenience store chains that are out there, to try to find something that’s got great visibility, it’s good egress/ingress, the traffic count is relatively high, the traffic speeds are not too fast… So you’re looking for those things like a retail investor would be looking at; you’re looking at the same things, but… Unfortunately, you’re competing with them, so you’re paying a pretty good premium for real estate if it’s a good site.

Joe Fairless: The traffic count and traffic speed – what is an ideal count and what is an ideal speed?

David Begin: Anything about 25,000 cars per day, you typically can make the numbers work if you’re looking at an exterior express type car wash… And speeds, you wanna be close to an intersection as you can, depending on where you are. Here in Colorado Springs we’ve got long stretches of roads where there’s no access, so they expect you to access the sites from going to an intersection and going to the next street over and the driving up… So if you’re in Texas, for example, it’s amazing how the roads in Texas – you’ve got your turn lanes anywhere you wanna put them, so it’s very easy to get in and out of those types of sites, so you’re not gonna be in a situation… If you put them in the middle of one of those long stretches, it’s very difficult for people to get access to it, and they drive by it and they say “Oh, I’ve gotta go there one of these days and get my car washed”, but it never really happens because it’s not a convenient in or out.

So like anything else, you wanna be close to an intersection, and if you’re close to an intersection, you have Stop signs, you’ve got stop lights, which slows down the traffic, which then people can look at… Car washing is very much an impulse purchase. It took me a long time to believe that, but it is very much an impulse purchase, so you wanna make it easy for your customer to see it and then drive in and come wash their car.

Joe Fairless: Is there an ideal speed that the road is at? I mean, I guess 5 miles an hour would be the ideal speed, right? But realistically speaking, what is too fast? (I’ll ask it that way)

David Begin: You know, if it’s above 30 miles an hour, then people are more concentrating on driving than they are looking around. But if it’s slower than 30 miles an hour, then people have a chance to kind of look around and see what’s around them.

Joe Fairless: Okay, got it. So it took you three years to find your first site, and you’ve just described exactly what you’re looking for. Did you get all those things?

David Begin: We did. We lucked out. We actually thought the site we were purchasing was more of a B property, but it actually turned out to be an A property, and then the other site we bought was an A property and turned out to be an A property… So we were very fortunate in the sites that we purchased upfront. We sort of knew what we were doing, but we didn’t really know what we were doing, so we felt fortunate and lucky that the two sites that we picked here in Colorado Springs were great sites.

Joe Fairless: And you mentioned you have three sites. You have two in Colorado Springs; is the other one somewhere else?

David Begin: Yeah, it is. It’s in the East side of Denver; it’s close to the city of Aurora. It’s an unincorporated Arapahoe County, which is close to Aurora, so it’s on the East side of town. There was an opportunity up there, so we took that opportunity.

Joe Fairless: When you purchased all three of them, are you buying the actual land and a car wash, or are you just buying the land and then you have to build the car wash?

David Begin: For us, they were a ground-up project; we bought the land, and then we had to develop the car wash. We built a building, and then we bought th equipment to put in there, so it was a big overall large project, large package. There are some people that lease land, and there’s disadvantages sometimes with leasing land; some banks are kind nervous about leasing land for car washes, because a car wash is considered by a bank to be a single use entity, so when they make that investment in that project, you can’t turn that into something else.

If you buy an office building, for example, and for whatever reason it doesn’t work out, the bank can take over the office complex and then probably sell it to someone else and still get their money. They’ll eventually get to the point where the last guy who gets in it for 30 to 50 cents on the dollar will be able to make money at it. Car washing is a lot different, because it’s a single use entity, and once you make that commitment of building the building and putting in the equipment, if it doesn’t work you might be able to sell it to someone else, but it’s never gonna be anything else unless you scrape the project; you can re-use the land for something else, but… It’s considered a single use, so it’s a little bit more of a risk, and when you’re in a lease situation, you’re fighting with that lease holder who’s gonna take over the project if that particular owner goes under.

Joe Fairless: You described earlier in terms of the location you’re looking for, corner side, good ingress/egress, nice traffic count of 25k cars a day or more, traffic speeds lower than 30 miles an hour… You’ve got a really good location, and my skeptical brain is asking “Is a car wash truly the highest and best use for that corner lot?” What are your thoughts?

David Begin: Well, from an income perspective if it’s a good site and a good car wash, the answer is yes, because car washing, if it’s done correctly, can be extremely profitable; so it could be the best use. You’re competing with banks or competing with convenience stores, you’re competing with the Walgreens that are out there, but yeah, if you’ve got a great site and you’ve got a good project in place, and you’ve got good operations and you know how to operate these things, it could be the best and highest use for that particular piece of property.

Joe Fairless: How do you do it correctly?

David Begin: These are operationally intensive business. The problem with people that wanna get in the car wash business is it looks easy, so they just their car through and think “Oh, I’ve gotta get me one of these car washes”, and they don’t realize there’s a lot behind the scenes to make it work, and they’re operationally-intensive, because there’s so much equipment that you’re dealing with, and then you’re dealing with the customers, and you’re dealing with the customer’s asset, which is their car, and the customer is involved in the process, which they actually stay in their car and go through the tunnel… So there’s lots of things that have to take place, but I’ve been to a lot of car washes in the last ten years and you can tell the ones that are run well and the ones that are not by really focusing on making sure you’ve got operational processes in place, that you’re running them well and you’re taking care of your equipment, you’re taking care of the location, that it looks good…

People wanna come to a clean place to wash their car, and if you let it go for six hours, it’s not a clean place anymore… So making sure you keep those standards high, making sure it has that retail look to it. That’s another thing we’ve seen in the last 5-10 years’ transition in the car wash industry –  it’s kind of gone from an industrial look to more of a retail look, and you’re seeing properties that are being built, and you’re seeing buildings that are being built that are inviting, attractive, very well-lighted, different colors in the tunnel… It’s becoming more of a retail experience for people.

So if you’re doing those things right, then yes, you can do well at it.

Joe Fairless: What are some other nuances that would make it retail look versus industrial?

David Begin: Well, the building is a big one, so you’re seeing a big shift in the way people are building car washes. Ours are ten years old, so we still have kind of the old cinder block look to our building. We have windows to kind of let light in, but we’re still kind of cinder block. Nowadays a lot of people are building car washes that have a lot of glass in it, a lot of steel, so you’re seeing steel structure with glass involved; it’s really an inviting-looking building. There’s three or four good car wash building providers out there that do a good job of designing it, so it looks inviting, it looks interesting.

The way the equipment lays out, so what’s the experience that the customer goes through when they go through the car wash… The old days’ car washes was a pretty violent process. You got on this conveyor, and then the cloth came at you from all different directions, and back in the ’80s it wasn’t cloth, it was brushes… Guys liked it, but women didn’t like it, because it wasn’t a friendly experience.

Nowadays you’re seeing the retail experience, which is now appealing to everybody, and I think it’s making a big difference. People are washing their car more often, it’s becoming more convenient to wash our car. The exterior express model, for example, which I consider more of a fast, casual model to car washing… So you stay in your car, and then if you wanna vacuum your car yourself, you can do so, or you can just drive off. But you’re talking about waiting five or ten minutes, instead of in the old days – they’re still full-service car washes, but the prevailing model 10 or 15 years ago was full-service car washes, and it took you 30-45 minutes to wash your car, and people just don’t have that time anymore to wait.

So you’re able to get in quickly, get out quickly, you get a really good quality car wash, you get it for a good price point… So all those factors come into play, for people now are washing their cars much more frequently than they ever have before.

Joe Fairless: When you look at a potential new site, and the ground-up development that’s required, and the business that you’ll implement, what type of returns do you look for?

David Begin: You’re looking for returns on your investment — you can get your return back I think in probably a minimum of three years. It could be quicker, depending on the site and the investment… But 3-5 years is a pretty good window to look at your cash-on-cash return on that. Then from there the car wash does very well.

It’s like any other business. There’s a sub-section of owners that do very well, a sub-section of owners that do pretty well, and then a sub-section of owners that struggle through that. But there’s a lot of private equity money right now coming into play, because they’re seeing the opportunity in car washing. It’s still very much a fragmented industry, so it’s very much a mom-and-pop industry; probably 3%-5% of the car washes are owned by what I would call “corporate entities”, and you’re starting to see chains roll up car washes, but it’s still a very small percentage of the business.

But private equity sees the opportunity here. In the last three years we’ve seen a tremendous influx of money coming into the industry, and a tremendous influx of building car washes.

Joe Fairless: Does the 3-5 year get your money back return factor in the cost of the land, as well?

David Begin: Yeah, because you’re rolling all that up into a basic loan. Again, it’s land that’s working for you, so it’s part of the investment, just like the building would be, just like the equipment would be… So all that gets rolled in from that standpoint. It’s a working piece of land, it’s not necessarily the real estate as more of an investment anymore. It works for you, and you’re making money off the land as a result of the business you’re putting on it.

Joe Fairless: Oh, that’s great. And were you able to achieve that in any of your three deals?

David Begin: Yeah, our new car wash has only been open 4-5 months, so we’re still getting that thing up and running, and we’re getting close to a breakeven point where we’re able to pay our expenses at that point, so we were able to kind of jump on that pretty quick… But our first two car washes – yes, we were able to accomplish that and even probably more.

Joe Fairless: Any environmental issues that you have to be aware of with a car wash?

David Begin: No, professional car washing is extremely environmentally-friendly, when you think about what we do versus the old days where you washed your car in the driveway. Most people don’t do this, but if you just turned on the hose and let it run, you’re burning 200-300 gallons of water at that point. That water goes across the car, so you’re rinsing the car, all the garbage on the car, and then it ends up in the wastewater system and the storm sewers. It doesn’t go to water treatment, it goes to storm sewers, and then it ends up in the rivers and streams. So from an environmental standpoint, a  professional car wash captures all that dirty water.

Most of us have equipment to clean up that water and reuse that water, so probably 80%-90% of the water we use in washing a car is recycled, reclaimed water that we store on site, and then we add maybe 10% of fresh water. That typically gets put in when you’re creating foam and soap and you’re rinsing a car. Then any water we don’t use gets sent back to the wastewater treatment system. They clean it up, and then they either send it back to the streams or rivers, or it gets used as non-potable water. In some cases, large commercial office buildings might have non-potable sprinkler systems, for example, and they’ll use the water.

So it’s a very efficient process, it’s extremely environmentally-friendly. Cities like that, so if you partner with your utility company or your city and explain to them the environmental aspects of professional car washing, it really communicates that.

From a real estate standpoint, you just have to make sure that the environment that you’re buying, the real estate you’re buying – either do a phase 2 study or a phase 1 study as far as “Was there anything on that site that could have caused problems?” But environmentally, car washing [unintelligible [00:21:02].18]

Joe Fairless: What about insurance you have to carry in order to protect yourself from somebody’s Lamborghini getting smashed up or scraped?

David Begin: Yeah, insurance is always an issue. It’s a very specialized market when it comes to insurance, so we’re always shopping… And a lot of players get into the market and get out of the market, so we’ve gotta have an insurance agent that really understands car washing. There’s a lot of car wash associations, whether they’re regional associations or national associations, that have insurance agents they work with to help you find a good insurance policy. But yeah, if you’re a full-service car wash, you’re gonna have to have what’s called Garagekeepers insurance. If your employees are getting into the car and driving the car, that’s a very different insurance policy than if the customer maintains control of their vehicle.

In the exterior express model which we have, the customer maintains control of their vehicle, which helps us quite a bit. But yeah, you do have to have insurance when it comes to those types of issues, and insurance in general is becoming more expensive.

Joe Fairless: It’s been really interesting. I know our conversation went a direction that I didn’t set it up for it to go; we were gonna talk about challenges and stuff you’ve come across, but it was really interesting, because it’s a real estate opportunity that I didn’t ever pay attention to, nor did I think about, even if I got my car washed… I never thought, “Oh, it’d be interesting to buy some land and start a car wash.” I’m not, because I’m focused on other stuff, but it could be an opportunity for others… So you’ve opened up, I imagine, some minds on this show.

How can the Best Ever listeners learn more about what you’ve got going on and perhaps get in touch with you?

David Begin: We actually have a podcast as well, Joe. I’ve got a podcast that I do called TheHowOfCarWashing.com. We’ve got about 55 episodes online that people can listen to if they wanna learn more about the car washing industry. That’s done through a business I call Levante Business Group… So if you go out to TheHowOfCarWashing.com, you can find us out there. If you’d like, listen to some of our podcasts, and then you can contact us directly through that website if you’re interested in learning more, or if you’ve got any questions that we can answer, we’d be happy to help you.

Joe Fairless: I’m just curious, what’s your business model for having the podcast? Do you franchise your thing, or do you consult? What’s the reason why?

David Begin: We’re setting up as a platform to communicate, but my ultimate goal – and this kind of goes back to my sales training days – is I’d like to create some online coaching and training for car wash operators, because as we were gonna talk about, a lot of the challenges you run into when running a small business, you’re not prepared for those challenges, and you’re not prepared to run a car wash. Most of us didn’t have car wash experience before we got into the car wash business, obviously… But I wanted to kind of set up a place where people can go to send their employees to get some training in the car wash, how to run a car wash, how to manage people; I wanted to set up some training for owners for what they need to think about and how they need to set up their businesses.

It’s a platform right now that we’re creating that we’re gonna move in the future to more online coaching and training.

Joe Fairless: It makes sense. Well, thank you so much for being on the show. I really love learning about new commercial real estate opportunities; even it’s not something I’m gonna personally pursue, just learning the different types of ways that we can make money in this business, and you got very specific about what you look for in a good location for a car wash, the type of returns you can make… It is not only  a real estate investment, but we are operating a business. I think of it as senior living, where you buy the land, but you also develop and then you’re operating a very active business.

Thanks again for being on the show. I hope you have a best ever day, and we’ll talk to you soon.

David Begin: Thanks so much, Joe, for having me.

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