Buying a Laundromat - Posted by David C. Cooper

Posted by David C. Cooper on September 30, 2009 at 12:17:10:

Ari, thank you for the input. I didn’t consider asking if the machines
were owned or leased thanks for the tip.

As for adding value, I think I can improve the bottom line by replacing
the vending machines and adding a few more. Right now the only
vending machines are for soap and softener. I was thinking I would
add some that sell snacks and drinks. I was also considering adding a
wireless internet hot spot. I think they would both add potential
revenue to the location.

Buying a Laundromat - Posted by David C. Cooper

Posted by David C. Cooper on September 23, 2009 at 12:42:23:

I’m looking at a laundromat for which the owner is willing to carry a note. It
is located in the busiest retail center in town. I’ve been told the monthly
lease is currently $1050 and gross receipts are around $4000/month.

The owner is asking $80,000

I know I will need to find out cost of insurance, taxes, water, electric, repairs
and maintenance.

Are there any other costs I am overlooking?

What other due diligence would you recommend before making an offer on a
business like this?

Thanks in advance for your helpful thoughts and advice.

Re: Buying a Laundromat - Posted by ray@lcorn

Posted by ray@lcorn on October 01, 2009 at 14:11:58:

David,

I’ve built, owned, operated and sold a number of Laundromats. I’ve started a couple of times to write up a manual for general guides but it never gets to the top of my to-do list :wink:

Some brief points…

First, the sales price is almost 2x gross, and almost certainly overpriced. Typical expenses can run 50% of gross, so you’re looking at 4x net, before debt service. Once you do the math for your return my guess is you’ll re-visit the price.

A side note about market area… you mentioned being in the busiest center in the area. That may actually be a detriment. The prime driver of laundromat revenues is the number of rental apartments in the lower 50% percentile within a one to three mile radius, or ten-minute drivetime, which ever is lower. Lower percentile because those units usually don’t include washers and dryers, upper end units do. Low drivetime because, plain fact, people hate doing laundry and will generally pick their place based on which is 1)the closest, 2)easiest/quickest to get in and out of, and 3) the newest that meets numbers 1 & 2 first, in that order. Wireless hubs, vending machines, even beer (Suds & Duds was a franchised concept that I think has gone away, but I may be wrong on that)) may help on the fringes, but it won’t likely be a prime driver of the decision to use this mat over another if the 3 factors above are in the way.

Next, these things need daily maintenance. They have to be cleaned at least once a day, twice for a high volume location. Machine maintenance is a given, but if they are leased that’s often included. If not, you’ll either have to do it yourself (which you may enjoy, as my brother did at one time) or have someone on call. They do break, malfunction, and water and natural gas is involved, so things can get dicey in a heartbeat.

If the machines are owned, then the age of the machines is an issue. Functional life is about 15 years max. Replacement cost is high, which is why so many use leasing. However, that sector of the capital markets is still under some duress, so the availability of new lease funding may be scarce and/or expensive.

Next, the volume is on the low end. An average location does around $75T, and top locations can go to $150T or more before someone figures it out and builds competition. One way to increase revenue is with a drop service run by an independent contractor who collects from the customer and uses your machines at the coin price. Which brings up the final and most important issue… collecting the money. This is a cash business, so anyone who collects the money other than the owner is a potential source of loss, including a lessor of the machines. Trust, but verify.

That’s my nutshell primer on laundromats, hope it helps.

ray

Re: Buying a Laundromat - Posted by Ari Kumpis

Posted by Ari Kumpis on September 24, 2009 at 13:47:56:

I’ve looked into purchasing a laundromat awhile back. You will want to know if the machines are owned or leased. And how old are they? It would be bad if you bought the place and a few months down the road you have to dump more money into repairing them. What kind of security does the place have? Do you have to lock the place up at night or does it have security doors that lock automatically? Why does the owner want to sell? I think you have all the expenses correct, but there are things that you should find out before you make an offer. Can you add value to the place so you can increase your bottom line?