Case Study · Texas · Express Car Wash · SBA 504
Express Car Wash Feasibility Study, Texas — An SBA 504 Worked Case
This is how our independent feasibility study company and consultant team analyzed a new-build express-tunnel car wash underwritten to an SBA 504 credit, from trade-area demand and the unlimited-membership base through the debt-service coverage a lender must document across the ramp. It is a representative, anonymized worked example of the methodology — not a specific client deal — set on a fast-growing suburban commuter corridor in a major Texas metro.
A hard-corner tunnel on a Texas commuter arterial.
A sponsor came to our feasibility study company with a ground-up express-exterior car wash and an SBA 504 lender that needed the projected cash flow independently tested before it would commit. The subject is a hard corner of roughly 1.3 acres on a commuter arterial carrying about 35,000 vehicles per day, in a fast-growing outer-ring submarket of a major Texas metro. The build program is a single express tunnel of roughly 130 feet, a conveyorized wash line, a covered vacuum plaza, and pay stations sized for an unlimited-membership model rather than a labor-heavy full-service format — the format that now captures more than half the North American market and dominates new construction.5
Because an express car wash is a going-concern operating business rather than a passive real-estate play, the lender's question is not “what is the dirt worth” but “can this specific site build and hold the membership base, volume, and margin to service this specific loan.”10 Car washes are also named special-purpose properties under SBA rules, which is precisely the condition that turns a discretionary feasibility study into an expected one on a ground-up deal.10 Our scope was the independent demand, membership-ramp, competition, and debt-service analysis that supports that credit.
Representative and anonymized. Every figure below is illustrative of a typical engagement of this type; the site, corridor, and parties are composited, not a real named borrower, address, or completed transaction.
Trade-area demand and the membership annuity.
The demand read starts with the recurring-revenue base, not a capture rate applied to a traffic count. The three-mile ring holds roughly 60,000 residents growing about 3 percent a year, layered over strong peak-directional commuter flow on the arterial.
For an express tunnel the primary value driver is the unlimited-membership base, not the raw car count, in an industry where roughly 80 percent of drivers now most frequently use a professional wash.4 The subscription plan, typically priced $20–$40 a month, converts an episodic, weather-dependent retail business into a card-on-file annuity, and at scaled operators membership runs 70–80 percent of wash sales.6 A mature express site carries a median near 2,875 members, best-in-class exceeds 5,000, and a stabilized projection below roughly 2,000 members should be treated as weak and below median.8 On this corridor — ~35,000 vehicles a day and a growing residential base — the model supports a stabilized base near 2,900 members at a blended ~$33 a month, about $1.15 million of recurring membership revenue, plus a retail (pay-per-wash) line near $0.80 million, for stabilized revenue around $1.95 million. A mature express tunnel generates roughly $0.7 million to more than $2 million a year, so this sits mid-range rather than at the optimistic edge.7 Critically, that base is built over 24 to 36 months; it is not present on day one, which is why the coverage analysis is a ramp, not a single stabilized snapshot.7
| Demand driver | Basis | Supported figure |
|---|---|---|
| Trade-area population (3-mi ring) | ~60,000 residents, growing ~3%/yr | Rising captive base |
| Corridor traffic | ~35,000 vehicles/day, peak-directional AM/PM | Primary wash-trip capture |
| Membership base (stabilized) | ~2,900 members near the ~2,875 mature median8 | ≈ $1.15M recurring/yr |
| Retail (pay-per-wash) | ~$15 blended ticket; weather-exposed | ≈ $0.80M/yr |
| Stabilized throughput | ~400 cars/day, above the 120–180/day leveraged breakeven7 | ≈ 145,000 washes/yr |
Membership and volume logic grounded in Rinsed member-revenue data, DRB usage analysis, and industry member-count benchmarks; see sources 6, 7, and 8. Figures are illustrative of the engagement type.
An under-tunneled corridor as rooftops outrun capacity.
Six competing wash sites sit within roughly three miles, but only one is a modern express tunnel inside the primary trade area. The corridor is adding households more quickly than it is adding tunnel capacity — but saturation is a corridor phenomenon, so the standing and announced set both matter.
| Competitor | Format | Distance | Read |
|---|---|---|---|
| Competitor A | Express tunnel, regional chain | 1.1 mi | Nearest true rival; ~100-ft tunnel, established members |
| Competitor B | Express tunnel, national brand | 2.3 mi | Cross-corridor, off-peak side of flow |
| Competitor C | Flex-serve / full-service | 1.8 mi | Aging, labor-heavy; conversion candidate |
| Competitor D | In-bay automatic at C-store | 0.9 mi | Single-bay, low throughput, weak overlap |
| Competitor E | Self-service wand bays | 2.7 mi | Different customer; minimal membership overlap |
| Competitor F | Express tunnel, independent | 3.4 mi | Outside the primary trade area |
Competitive set surveyed for the engagement; anonymized. Announced and permitted tunnel supply was scanned, not just the standing set, consistent with institutional site-selection practice and the cannibalization “treadmill” that penalizes a saturated corner.
Only one modern express tunnel (Competitor A) sits inside the primary trade area, with an in-bay automatic and a labor-heavy full-service site rounding out the near set — both weak defenders against a new 130-foot tunnel priced for membership. The cannibalization math is nonlinear and unforgiving: holding roughly 2,000 members needs about 5 percent capture of the trade area, 3,000 needs about 7.5 percent, and 4,000 needs about 14 percent, so a leveraged new build breaking even at 120 to 180 cars per day leaves no room for a fourth tunnel at the same interchange.7 A rigorous study therefore does not stop at the standing set: it scans announced and permitted tunnels so the capture forecast is not quietly overstated by supply the trailing data cannot yet see. Here the read is a genuinely under-tunneled corner — rooftop growth is outpacing new tunnel construction, and Texas holds the most remaining saturation runway of any state on population inflow — so the subject fills a gap rather than splitting a saturated trade area.8
Texas macro: favorable, but cost-sensitive.
The state backdrop is a tailwind for a commuter-corridor tunnel, tempered by construction cost. Texas is the nation's second-largest economy at roughly $2.9 trillion of GDP, and more than 90 percent of Texans live in metropolitan counties.
Texas held about 31.3 million residents as of July 2024 and continues to lead the country in in-migration; the Houston metro alone added more than 198,000 residents in a single year, and exurban cities on the metro edges are among the fastest-growing in the nation.12 That rooftop growth on the outer ring is exactly the demand engine a new express tunnel needs. The state also carries no personal income tax and, decisively for retail supply, no general Certificate of Need regime, so car-wash supply is set by the market rather than a permit gate.2 Investor appetite confirms the read: Texas leads all states in listed net-lease car-wash inventory, and DRB's saturation model places Texas with the most remaining runway on population inflow.9
The offsetting reality is cost. A ground-up express tunnel now runs near $7 million today versus about $5 million historically, driven by land, tunnel equipment, and site work, so the feasibility test turns on whether stabilized cash flow covers a highly leveraged cost basis — not on optimistic top-line growth.12 Two recent changes cut in the sponsor's favor: the Texas business personal property tax exemption rose to $125,000 per location effective January 1, 2026, and the SBA's combined 7(a)-plus-504 ceiling doubled to $10 million in mid-2026, enlarging bankable deal size.3 Texas also ranks second nationally in SBA volume and is served by six SBA district offices, so the 504 channel here is deep.3
Why the corner captures the corridor.
Household income, daytime population, and growth all point the same direction, and the intersection geometry converts that demand into wash trips and, more importantly, into members.
The three-mile trade area carries a median household income near $82,000 — comfortably above the level at which unlimited-membership attach rates strengthen, since a member paying about $33 a month generates far more lifetime value than a repeat retail customer — and a daytime population inflated by the outbound morning commute and the inbound evening return. The growth rate near 3 percent a year means trailing Census counts understate the captive base, a common exurban distortion a careful study corrects for rather than extrapolates.1
Geometry does the rest. The subject occupies the hard corner on the going-home side of a signalized intersection, where peak-directional evening traffic decelerates and turns — the highest-conversion position on the corridor for the impulse first wash that seeds a membership sign-up. A 130-foot tunnel clears the throughput that would queue and balk at a shorter wash, the covered vacuum plaza lengthens dwell and lifts perceived value, and the nearest rival's shorter, older tunnel cannot match that capture. That is why the model credits the subject with a base near the mature median rather than a below-median 2,000-member outcome, while still grading the climb to get there.8
The SBA 504 structure.
Total project cost lands at $6.40 million. The 504 program is purpose-built for owner-occupied fixed assets — land, building, and the heavy tunnel equipment — which is why a ground-up, special-purpose wash routes here through a bank first mortgage, a CDC debenture, and borrower equity rather than a single 7(a) facility.
| Cost component | Amount |
|---|---|
| Land (~1.3-acre hard corner) | $1.30M |
| Site work, utilities & detention | $0.95M |
| Building & ~130-ft tunnel shell | $1.60M |
| Conveyor & wash equipment | $1.15M |
| Canopy, vacuum plaza & pay stations | $0.55M |
| Soft costs & contingency | $0.55M |
| Working capital, reserves & fees | $0.30M |
| Total project cost | $6.40M |
| Item | Figure |
|---|---|
| Bank first mortgage (50%) | $3.20M · ~9.5% / 25-yr |
| CDC / SBA 504 debenture (35%) | $2.24M · ~6.5% / 25-yr |
| Borrower equity injection (15%) | $0.96M |
| Total project cost | $6.40M |
| Blended annual debt service | ≈ $525k |
Structure per SBA 504 conventions under SOP 50 10 8: bank first mortgage in first position, CDC/SBA debenture in second, borrower equity; owner-occupancy 60% for new construction. See sources 10 and 11.
The equity injection sits at 15 percent, not the baseline 10 percent, and that is deliberate: SBA policy escalates the required injection for projects that are both special-purpose and, as a ground-up build, effectively a start-up, commonly to 15 percent or more on 504, with the 10 percent minimum reserved for stronger, seasoned profiles.11 The two-part debt splits a lower-rate CDC debenture behind a conventional bank first mortgage, and on 25-year amortizations at illustrative rates of ~9.5 percent (bank) and ~6.5 percent (debenture), blended annual debt service is about $525,000 — the number the projected coverage has to clear. One environmental note distinguishes this asset from a fuel site: a car-wash-only facility may often begin its environmental review with a Transaction Screen rather than a full Phase I, a lighter path than a gas station carries, though the lender still governs scope.11 The study exists to support exactly the debt-service coverage the lender must document, tested against an independent read of the membership ramp rather than the sponsor's own projection.
Feasible and bankable, on coverage the credit can document.
The stabilized model builds revenue from two engines — the unlimited-membership annuity and retail washes — nets operating expense to an express-tunnel EBITDA margin, and carries the coverage to the SBA floor and beyond once the base is built.
| Line | Basis | Amount |
|---|---|---|
| Unlimited membership revenue | ~2,900 members × ~$33/mo × 126 | ≈ $1.15M |
| Retail (pay-per-wash) revenue | ~$15 blended ticket; weather-exposed7 | ≈ $0.80M |
| Total revenue | Membership + retail | ≈ $1.95M |
| Operating expenses | Labor, chemicals, utilities, card fees, R&M, insurance, property tax, G&A | ≈ ($1.13M) |
| EBITDA / net operating income | ~42% express-tunnel margin12 | ≈ $0.82M |
A ~42% EBITDA margin sits below the ~30% corporate margin of the largest scaled operator only in framing; single-site owner-operated tunnels commonly run higher pre-overhead. See sources 6, 7, and 12. Figures are illustrative.
| Year | Stage | NOI | Debt-service basis | DSCR |
|---|---|---|---|---|
| Year 1 | Ramp (interest-only bridge) | ~$428k | Interest-only ~$450k | 0.95 |
| Year 2 | Building | ~$672k | Full amortizing ~$525k | 1.28 |
| Year 3 | Stabilized | ~$820k | Full amortizing ~$525k | 1.56 |
DSCR computed as NOI divided by the period debt-service obligation. See source 11 for the ~1.15x coverage convention.
The stabilized 1.56x coverage is the figure the lender documents, and it clears the SBA's roughly 1.15x floor with real headroom.11 By Year 2 the project already covers fully amortizing debt service at 1.28x. The Year 1 figure of 0.95x is intentionally below the floor — it is the ramp year, when the membership base is still being built from roughly 60 percent of stabilized toward 100 percent — which is exactly why the structure carries an interest-only bridge through stabilization: the bridge covers the ramp, and permanent, fully amortizing coverage is measured once the base reaches its supportable level. Modeling a mature 2,900-member base in Year 1, or best-in-class sub-5-percent churn on day one, is the single most common way these pro formas fail review; the ramp here is deliberately graded and re-underwritten at industry-stabilized churn of 7–8 percent a month.7
On the equity side, the $0.96 million injection earns growing levered free cash flow — roughly breakeven in the interest-only ramp year, building to about $255,000 a year once stabilized and net of a conveyor-and-equipment capital reserve for the wash line, motors, and controls. The exit is valued on a going-concern basis, not a leased-fee cap rate: an express wash is an owner-operated business, and capitalizing a Year-10 stabilized EBITDA near $0.90 million at a going-concern multiple around 8.5x — within the 8-to-10x range the market applies to operating car-wash businesses — implies a gross sale near $7.6 million, and roughly $3.0 million of net equity after selling costs and the outstanding SBA balance.9 Keeping the leased-fee cap rate (a car-wash net-lease average of 6.26 percent in December 2025) strictly separate from that going-concern multiple, as the credit file must,9 the blended result is an illustrative levered equity IRR of about 21 percent over a 10-year hold.
Verdict: financially feasible and bankable. On an independently derived membership base, a stabilized 1.56x DSCR, and a ~21% levered equity IRR, the projections support the SBA 504 credit — provided the interest-only bridge carries the graded ramp.
Independent demand, membership ramp, competition, and DSCR stress.
The engagement was scoped the way a credit committee reads it. As an independent feasibility consultant, our role is to test the sponsor's projection against the market, not to restate it — the value of the deliverable is precisely that it carries no stake in the outcome. We derived the stabilized membership base from trade-area population, income, corridor traffic, and the competitive set, then placed it near the mature median rather than assuming a best-in-class 5,000-member outcome on a new corner. Retail volume was modeled on a graded ramp, and revenue was re-underwritten at industry-stabilized churn of 7–8 percent a month rather than an aspirational sub-5-percent figure.
The coverage analysis was then stress-tested. We ran the debt-service coverage against member count, churn, and average-ticket downside — the three variables an express wash is most exposed to — to confirm the credit still holds when the base builds slower or churns faster. One scope boundary is worth stating plainly: as the feasibility consultant, we reference, but do not perform, the environmental site assessment; a car-wash-only site may begin with a Transaction Screen, but the environmental engagement runs in parallel to the study under a separate professional.11 That combination — independent demand, a graded membership ramp, competition, and a stressed DSCR — is what lets the lender rely on the file.
Representative engagement
This is an anonymized, illustrative worked example of our methodology, built on market data current to 2026; figures are representative of a typical engagement of this type and do not depict a specific client, site, or completed transaction.
Underwriting a Texas car wash for an SBA loan? Start with the feasibility study.
Feasibility Study Company prepares independent express car wash feasibility studies for SBA 504 and 7(a) credits, built to the coverage standard your lender must document across the membership ramp. A methodology briefing walks through the demand, membership, competition, and DSCR analysis behind a case like this one, calibrated to your corridor and format.
Request a methodology briefingData sources and dates.
The deal figures are illustrative of the engagement type; the market data that grounds each dimension is real and sourced, drawn from our standing Texas, Car Wash, and SBA 7(a) & 504 analyses and the primary authorities they cite. Car-wash readings are point-in-time and provider-dependent; leased-fee cap rates and going-concern multiples are different bases and are never blended.
- U.S. Census Bureau, Vintage 2024 Population Estimates (Texas population ~31.3 million as of July 1, 2024; Houston metro added more than 198,000 residents in 2023–24; exurban Texas cities among the fastest-growing nationally), as compiled in the firm's Texas market analysis.
- Texas Comptroller of Public Accounts, Texas economy and GDP data (Texas the 2nd-largest U.S. economy, ~$2.9 trillion GDP; 90%+ of Texans in metropolitan counties; no state personal income tax); National Conference of State Legislatures on Certificate of Need (Texas has no general CON law).
- U.S. Small Business Administration, Texas district office directory (six district offices; Texas ranks #2 nationally in SBA 7(a) volume); SBA combined 7(a)-plus-504 loan-cap increase to $10 million effective July 4, 2026; Texas business personal property tax exemption raised to $125,000 per location effective January 1, 2026 (Texas Proposition 9 / HB 9).
- International Carwash Association (ICA), carwash.org: 2020 third-party site-count study (~17,500 conveyor/tunnel, ~29,000 in-bay automatic, ~16,250 self-service washes); ~80% of drivers now most frequently use a professional wash, up from ~48% in 1994; industry added 3,500+ stores since 2020 (ROADMAP).
- Curt Hutchins, Sonny's Enterprises, via Carwash.com “2025 State of the Carwash Market”: new-store construction peaked near 850–900 units in 2023 and normalized toward ~550 per year; express tunnels are “well into 90 percent” of new builds and capture more than half of the North American market.
- Mister Car Wash FY2025 results (February 18, 2026): Unlimited Wash Club sales 79% of total wash sales in Q4 2025 (up from 75% in Q4 2024), ~2.3 million members, full-year net revenues $1,051.7 million; scaled-operator per-location revenue ~$1.9–$2.0 million; unlimited plans typically $20–$40 per month, membership 70–80% of wash sales at scaled operators.
- Rinsed: Q3 2025 (industry monthly churn ~7–8%, compounding to ~30% annually); Q3 2024 (member revenue +16.6% while retail revenue −5.3% YoY); the 2025 retail decline was a volume problem despite ~3% price increases; via carwash.org. Cannibalization “treadmill” capture thresholds and 120–180 cars/day leveraged breakeven per operator underwriting analyses.
- DRB usage analysis and industry member-count benchmarks via Carwash.com: a mature express site carries a median near 2,875 members, best-in-class exceeds 5,000, and below ~2,000 signals weakness; members washing 1.7 times or less in month one are 75% less likely to reach month two; DRB's 2023 saturation model put the U.S. average near 11.5–12 years from saturation, with Texas holding the most remaining runway on population inflow.
- B+E Net Lease Report: car-wash net-lease inventory easing to 240 listings in December 2025 at a 6.26% average cap rate, a $4.99 million average price, a $312,822 average NOI, and an 18.6-year average term, cap rates down 38 bps YoY, Texas leading listed inventory (56 as of April 2026); going-concern operating businesses trade around 8–10x EBITDA. Leased-fee asking metrics; not blended with going-concern multiples.
- U.S. Small Business Administration SOP 50 10 8 (effective June 1, 2025) and 13 CFR 120.160(b): a feasibility study is discretionary but expected for special-purpose properties and ground-up projects; car washes are named special-purpose property; owner-occupancy of 51% (existing) or 60% (new construction); the 504 program is purpose-built for owner-occupied fixed assets via a bank first mortgage, a CDC debenture in second position, and borrower equity.
- SBA SOP 50 10 8; Growth Corp / CDC guidance: special-purpose and start-up projects commonly carry a 15%+ equity injection on 504, with a 10% minimum for stronger profiles; SBA/504 DSCR convention of roughly 1.15x or higher; a car-wash-only facility may begin environmental review with a Transaction Screen rather than a full Phase I, a lighter path than a gas station, with the lender governing scope; change-of-ownership deals over $250,000 of goodwill require an independent business appraisal.
- George Odden, Ardent Advisory, via Carwash.com (2025): ground-up express-tunnel cost near $7 million today versus about $5 million historically; going-concern EBITDA multiples from a decades-long 5–6x (pre-2019) to ~10–12x at the 2022 peak, firming toward ~8–10x in 2025; Car Wash Advisory: the largest scaled operator runs near a 30% corporate EBITDA margin.