Car Wash Letter of Intent Template & Negotiation Guide

Parties and Transaction Overview

Identifies the buyer entity, seller, and target business, and specifies whether the transaction is structured as an asset purchase or equity purchase. Asset purchases are far more common in car wash acquisitions, particularly SBA-financed deals, as they allow the buyer to step up the tax basis of equipment and exclude unassumed liabilities.

💡 Sellers operating as LLCs or S-corps often prefer equity sales for tax reasons. Buyers should understand that an asset purchase protects them from inheriting unknown liabilities — especially critical given potential environmental exposure. If the seller pushes for an equity deal, price in additional indemnification provisions and adjust your environmental due diligence scope accordingly.

Purchase Price and Valuation Basis

States the proposed purchase price, the valuation methodology used to arrive at it, and whether real estate is included in the purchase price or treated as a separate transaction. Car wash valuations in the lower middle market typically apply a 4x–7x multiple to trailing twelve-month or seller's discretionary earnings (SDE)-adjusted EBITDA, with higher multiples justified by strong membership bases and modern equipment.

💡 Push sellers to define EBITDA clearly upfront — add-backs for owner salary, personal vehicle expenses, and one-time repairs are common in owner-operated car washes and can significantly inflate stated earnings. If the seller claims $400K EBITDA but $80K of that is aggressive add-backs, your multiple is applied to an inflated figure. Insist on reviewing 3 years of tax returns alongside the P&L before finalizing the LOI price. If real estate is owned by the seller, determine early whether the seller prefers to sell the land with the business or retain it as a landlord — this significantly affects deal structure and financing options.

Membership Program Representation and Adjustment Mechanism

Addresses the unlimited wash membership base, arguably the most valuable asset in a modern express car wash acquisition. This section establishes representations around active member count, average revenue per member, and churn rate, and creates an adjustment mechanism if membership metrics at closing differ materially from those represented at LOI.

💡 Membership count is the single most negotiated metric in modern car wash deals. Verify active members directly through POS system exports — do not rely on seller-provided summaries. Clarify the definition of 'active': members who have been billed in the last 30 days, not members who signed up and failed to cancel. Churn above 5% monthly is a red flag; industry-leading operations run 2–3% monthly churn. An earnout tied to membership retention over 6–12 months post-close is a reasonable ask from the buyer's side if member count is near your threshold.

Due Diligence Period and Conditions

Defines the length of the due diligence period, what information the seller must provide, and the specific contingencies that must be satisfied for the buyer to proceed. Car wash-specific due diligence must address equipment condition, environmental compliance, real estate and lease terms, and membership program data.

💡 60 days is standard for a single-location car wash; multi-site deals may require 90 days. Sellers in competitive processes may push for 30–45 days — acceptable only if the seller provides a complete data room at LOI signing. Never waive the equipment inspection. Aging conveyor systems, worn rollers, and failing water reclamation units can represent $100K–$500K in near-term capital expenditure that should be reflected in your price. Environmental due diligence is non-negotiable: even clean-looking sites can have historical chemical storage or hydraulic fluid issues that create material liability.

Deal Structure and Financing Contingency

Specifies how the buyer intends to finance the acquisition, including any SBA loan contingency, seller note requirement, and earnout provisions. SBA 7(a) financing is common in single-location car wash acquisitions and typically requires a 10% buyer equity injection, a seller note of 10–15% on standby, and lender-ordered appraisal of assets and real estate.

💡 Sellers unfamiliar with SBA transactions are often surprised by the standby seller note requirement and the lender's environmental questionnaire. Brief the seller's advisor on this early to avoid late-stage friction. If you are a cash or strategic buyer, remove the financing contingency entirely and use that as a negotiating lever to justify a shorter due diligence period or slightly lower price. Earnout provisions tied to membership growth (e.g., $50K additional consideration if active member count exceeds 1,500 within 12 months post-close) are an effective tool when the seller and buyer disagree on the value trajectory of the membership program.

Exclusivity and No-Shop Provision

Grants the buyer an exclusive negotiating period during which the seller agrees not to solicit, entertain, or accept offers from other potential buyers. This is a critical protection given the investment of time and cost in car wash due diligence, particularly environmental assessments and equipment inspections.

💡 Sellers in hot markets — particularly high-performing membership sites attracting PE buyers — will resist long exclusivity windows. 45–60 days is reasonable; anything shorter creates pressure that leads to poor diligence. If the seller insists on a 30-day window, negotiate an automatic 15-day extension triggered by timely delivery of all requested diligence documents. If a broker is involved on the seller's side, confirm in writing that the broker's fiduciary duty to the seller includes honoring the exclusivity provision.

Confidentiality and Non-Disclosure

Reaffirms the parties' obligations under any existing NDA or incorporates baseline confidentiality obligations directly into the LOI. In car wash transactions, this is especially important given the sensitivity of membership data, financial performance, and the seller's identity in a local market.

💡 If a separate NDA was signed prior to the LOI, reference it explicitly and confirm it remains in full force. Membership data is particularly sensitive — a buyer's knowledge of exact member counts and churn could be exploited if the deal falls through and the buyer later opens a competing location nearby. Consider adding a non-solicitation of employees provision here, particularly for key wash managers who may be difficult to replace.

Representations and Key Conditions to Closing

Outlines the material representations the seller is making about the business and the conditions that must be satisfied prior to closing. In car wash acquisitions, key conditions include the assignment or reissuance of membership contracts, transfer of POS system access, environmental clearance, and confirmation of equipment condition.

💡 The assignability of membership contracts is frequently overlooked. Most consumer membership agreements auto-renew and are tied to a credit card on file — confirm with the seller's POS provider (e.g., DRB, Everwash, Washify) that member billing can be transferred to the buyer's merchant account without triggering member notifications that could spike cancellations. A 2-week post-close transition period is a minimum; negotiate 30 days for owner-operated sites where the seller manages day-to-day operations and staff.