Brian Brunckhorst is someone to trust. In this

“Brian Brunckhorst is someone to trust. In this book, he blends his
considerable experience in the Laundromat business with his knowledge of
what it takes to be successful as an entrepreneur. His warm and human
approach addresses fears experienced in owning a business with wisdom of
how to make it work. Most importantly he tells you all the facts,
beautiful and ugly, of owning a Laundromat business so that you can
make informed decisions. This is a must read if you ever considered
buying a Laundromat or even if you are considering buying another
business.”
-
Jimm & Susan Hughey, SharedVictory.com
“Upon nearing retirement as a financial officer for a large retail
corporation, I happened upon Brian B’s published articles on finding,
purchasing, and owning a coin Laundry. I felt this business would be a
good “fit” for my retirement years and proceeded to purchase and study his
extensive CD course on this subject. These materials, and in particular
the business purchase price valuation and due diligence segments, were
most helpful in guiding me through the tasks of finding, valuing,
negotiating, and ultimately purchasing my first coin Laundry. Thankful
for the reader, these materials (and more) are now presented in an easy to
follow written format. There are many coin laundries for sale, but “buyer
beware.” Only a very few are reasonably priced good investments. Brian’s
book will help you find the one that is right for you!”
-
Grover White, BS, MBA, CPA, Owner, A1 Laundromat,
Oakland, CA
"Thanks to Brian's programs and Secrets of Buying and Owning
Laundromats, I was able to take the plunge into owning a business and
am well on my way to living the 'Laundromat Lifestyle'! Thank you
Brian!!"
‐
Nam Duong, Owner, West Market Laundry, Salinas, CA
“Brian Brunckhorst is one of the world’s leading experts on buying and
owning Laundromats. If you are considering buying a Laundromat this
is a must read! If you already own a Laundromat this book can help you
increase your profitability every month for the rest of your life!”
- Eric Lofholm, President, Eric Lofholm International,
EricLofholm.com “I only wish that "Secrets of Buying and Owing Laundromats" was
available twenty eight years ago when my wife and I bought our coin
laundry. The introduction to the coin laundry industry and the section on
valuation and negotiating a fair price for a coin laundry business makes it
a valuable tool on any potential investor's due diligence check list. If you
own a coin laundry or are looking at the coin laundry business as an
investment, this book is a must read. If you are evaluating any small
business opportunity, this book will be a valuable, easy to read reference.”
‐
Aaron E. Thompkins, President, Golden State Coin
Laundry Association,
Owner, Highlander Laundry Center, Albany, CA
"This book is a must-read for anyone considering buying a Laundromat
business. It is easy to understand and covers all aspects of Laundromat
ownership. Brian's vast hands-on experience in running a successful
Laundromat business is evident in this book. He points out all the
pitfalls and provides advice and solutions which can help both beginners
and industry veterans avoid costly mistakes and develop winning
strategies."
‐
ii
Shahid Habib, Founder, WealthAndHealthNetwork.com,
ShortSalesAccess.com,
Co-Author, Short Sale Solutions for Homeowners
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“I have been working with Brian since nearly the beginning of his
Laundromat Empire. As his accountant I have been able to see in great
detail how he runs his business. Brian has left me in awe seeing how he
has been able to make success in the Laundromat business into a science.
He has systemized everything from the purchase of an existing
Laundromat, to the managing of the store and absolutely everything in
between. A system that gives consistent predictable results (and you know
how us accounts love predictable results). He has taken the guess work
out of the equation. He has even systemized how to drive people into the
store and maximizing the profits. And now Brian has left me in awe
again with his willingness to share his systems with anybody who wants
success in the coin-op laundry business. Thanks Brian!”
‐
Warren Taryle, CPA, MST,
Taryle and Associates, CPAs, PLLC, www.tacpas.com
“With my over 35 year experience in this business as a multi-store owner
and Equipment Sales Exec, Brian’s book even taught me a couple of
things. This book is a must read for anyone interested in buying or
improving a coin laundry. The lessons and experience Brian is willing to
share could literally save you thousands of dollars!”
‐
Herb McKay, Sales Executive, PWS Laundry
“There is incredible knowledge of the Laundromat business that you won’t
get anywhere else. This is Brian’s account of the business inside and out,
good and bad, that is laid out for you to enjoy. His detailed account as
well as resources listed is invaluable to those wanting to get into the
business. I applaud Brian for his willingness to share the knowledge with
others. These are insider secrets you don’t want to miss!”
‐ Rick Frishman, Publisher, Morgan James Publishing,
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“The industry has long needed a clear, simple and comprehensive approach
to starting and operating a vended laundry business. Brian Brunckhorst
has set about to provide this information in a single book. A wonderful
start for the beginning investor it is also a wealth of tips and golden
nuggets for the experienced operator who is looking to improve his market
position or retool his tired store. Reading this book will give you the tools
to make the kinds of decisions the "big boys" make that seem to always
lead to success. I highly recommend everyone take advantage the
information this book will provide.”
‐
Charles Clark Sr., Senior Manager, Taylor Houseman Inc.
“Brian’s CD course ‘Own a Laundromat Teleseminar’ provided me
everything I needed to enter the coin op industry which in Brian’s words is
A Clean Cash Machine. Within 30 days of taking his training and
applying the due diligence process he outlined I made on offer on our first
laundry, five months later we purchased our second store. Thanks to
Brian I have successfully made the move from a corporate America, W-2
employee to independent business owner earning passive income. In this
book Brian touches on all of the key topics I faced during my first year.
This is a must read book for anyone considering the laundry business.”
‐
Deborah Dower, Paradise Laundry, Sacramento, CA
“Brian has demystified the art of owning and running a Laundromat
business in his most recent book, with relevant examples and memorable
anecdotes from his vast personal experience. Brian is single-handedly
making the Laundromat world accessible for aspiring and experienced
entrepreneurs.”
‐
iv
Brad Roldan, Telecommunications Executive &
Entrepreneur
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"Everything you need to know about owning your own CASH
MACHINE! Brian covers all the details to start your laundry business
and generating cash flow! Wow!"
‐
George Antone, TheWealthyCode.com
“I have to say that I found Brian to be so knowledgeable on the business.
After reading this book from cover to cover and putting all the necessary
information to use, you too can own your own Laundromat. Brian makes
the process easier to get started.”
‐
Linda Distler, Author
“This book is an incredible resource! Brian has done a superb job
providing insider details on this diverse industry. Anyone considering
getting involved in the Laundromat business needs this book.”
‐
Christopher Easley, Investor
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v
Secrets of Buying and Owning Laundromats By Brian Brunckhorst vi
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ISBN 978‐0‐615‐37637‐0 Copyright © 2010 by Brian Brunckhorst. All rights reserved. Published by The Brunckhorst Group, Inc., California No part of this publication may be reproduced or transmitted
in any form or by any means, mechanical or electronic,
including photocopying and recording, or by any information
storage and retrieval system, without permission in writing
from author or publisher (except by a reviewer, who may
quote brief passages and/or show brief video clips in review).
Legal Information and Disclaimer: The author and publisher of this book and the accompanying
materials have used their best efforts in preparing this
program. The author and publisher make no representation or
warranties with respect to the accuracy, applicability, fitness, or
completeness of the contents of this program. They disclaim
any warranties (expressed or implied), merchantability, or
fitness for any particular purpose. The authors and publisher
shall in no event be held liable for any loss or other damages,
including but not limited to special, incidental, consequential,
or other damages. As always, the advice of a competent legal,
tax, accounting or other professional should be sought. The
authors and publisher do not warrant the performance,
effectiveness or applicability of any sites listed in this book. All
links are for information purposes only and are not warranted
for content, accuracy or any other implied or explicit purpose.
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vii
BOOK DEDICATION This book is dedicated to the industry which has given my family and me
so much, and to all those who are looking to change their lives through
business ownership. Whether you are just looking for something that can
be your safety net, a business you can do in retirement, or are looking for
cash flow, tax advantages, or even to diversify your investment portfolio, all
can be accomplished in the coin laundry business.
viii
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ACKNOWLEDGEMENTS Writing a book, as any author can tell you, is no trivial
task and I would like to acknowledge and thank some very
important people in my life that without their love and
support, this book may have never been written. First and
foremost is my beautiful, loving, and caring wife May, and my
three wonderful children, Brooke, Brandon, and Brittany,
whose countless sacrifices, during the many long days and
nights it took me to write this book will never be forgotten. I
love you all very much!
A special thanks to Brion Lau for gently prodding me
along during this process, helping me to create the vision for
this book, and keeping me on track. To my parents, Neal and
Anne, thank you for all your love and support throughout the
years and giving me the gift of entrepreneurialism at an early
age. Also, thanks Dad for the many hours you spent helping
me review the book. Special thanks to my brother David, who
has been a frequent sounding board and his wife Heather, who
lets him get away with talking to me so much. Thanks to Eric
Lofholm, who reminded me to never stop thinking big and
Warren Taryle, whose sage advice and friendship over the
years continues to put money in my pockets.
I want to make a special mention of some of my star
students, who have helped me refine my processes throughout
the years. Their success stories give me the fuel to keep
teaching and spreading the news about how great the
Laundromat business is. Thanks to you all. Dondi & Flo
Dismer, Eric Riddell, Grover White, Deborah Dower, Nam
Duong, Ken & Grace Kotsur, Christopher Easley, and Jason
Nguyen.
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Table of Contents CHAPTER I: INTRODUCTION 1 THE BASICS 1 WHY I CHOSE THE COIN LAUNDRY BUSINESS 5 THE COIN LAUNDROMAT INDUSTRY TREND 10 THE RISKS IN OWNING A LAUNDROMAT 12 STARTUP COSTS 14 CAN ANYONE OWN A LAUNDROMAT? 16 SHOULD I QUIT MY JOB TO BECOME A LAUNDROMAT OWNER? 18 HOW MUCH CAN I REALLY MAKE? 20 CHAPTER II: IS THE LAUNDROMAT BUSINESS FOR ME? 21 THE LIFESTYLE 21 24 Brooke’s Story: MAKING THE TRANSITION FROM EMPLOYEE TO BUSINESS OWNER 27 ARE LAUNDROMATS RECESSION PROOF? 29 THE PROPER MINDSET 30 CUSTOMERS AND EMPLOYEES 34 THE NEED TO BE MECHANICALLY INCLINED OR NOT 35 KEEPING TRACK OF THE MONEY 37 IDEAL STORE SIZE 39 DO BIGGER STORES EQUAL BIGGER HEADACHES? 40 CHAPTER III: RESEARCHING AND SELECTING A LOCATION 43 LOCATION MATTERS 43 WHY RENTERS USE LAUNDROMATS 44 FINDING A GOOD LOCATION 46 LOCATING A STORE FOR SALE 47 RESEARCHING THE LOCATION 50 WHERE TO FIND KEY DEMOGRAPHIC INFORMATION 52 x
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CHAPTER IV: BUILDING A NEW COIN LAUNDRY 55 THINGS TO CONSIDER 55 WHEN SHOULD YOU BUILD A STORE 59 CHAPTER V: SELECTING, MAINTAINING, AND REPAIRING EQUIPMENT 63 EQUIPMENT VALUE 63 THE RATIO OF WASHERS TO DRYERS 65 EQUIPMENT MANUFACTURES 67 PURCHASING VS. LEASING EQUIPMENT 68 EXTENDED WARRANTIES & SERVICE AGREEMENTS 70 FINDING A GOOD REPAIRMAN 71 GETTING THE BEST DEAL ON NEW EQUIPMENT 75 EQUIPMENT FEATURES 76 77 Card Systems ROUTINE EQUIPMENT MAINTENANCE 80 CHAPTER VI: THE STORE LAYOUT 83 PLANNING AND DESIGNING 83 EQUIPMENT LAYOUT 85 HOW TO GET A FREE LAYOUT DESIGN 88 METHODS TO REMODEL A LAUNDROMAT 89 KNOW YOUR CODES AND REGULATIONS 92 CHAPTER VII: LEASE NEGOTIATION 95 LAUNDROMAT LEASE 95 KNOW YOUR LIMITS 99 LOOKING AT COMPARABLE LEASE RATES 100 THE ART OF NEGOTIATION 101 SPECIAL LEASE CONCESSIONS 104 GETTING AN EXPERT OPINION 106 Copyrighted Material
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CHAPTER VIII: ATTENDED VERSUS UNATTENDED COIN LAUNDRIES 109 ADVANTAGES AND DISADVANTAGES OF HAVING AN ATTENDANT 109 DETERMINING THE BEST OPTION FOR YOUR LAUNDROMAT 112 WAYS ATTENDANTS GENERATE MORE PROFITS 114 CHAPTER IX: FINANCING A LAUNDROMAT 117 FINANCE VERSUS ALL CASH PURCHASE 117 DIFFERENT FINANCING OPTIONS AND KEY CONSIDERATIONS 121 SELLER FINANCING 124 OTHER FORMS OF FINANCING 126 RESPONSIBILITIES TO INVESTORS 131 HAVING AN EXIT STRATEGY 132 CHAPTER X: SECURITY FOR LAUNDROMATS 137 VIDEO SURVEILLANCE 138 MONITORED SECURITY SYSTEMS 140 COLLECTIONS 141 CHAPTER XI: ADVERTISING AND PROMOTION FOR LAUNDROMATS 145 MARKETING 145 MY THOUGHTS ABOUT ONLINE MARKETING 148 HOW TO SPEND YOUR MARKETING BUDGET 151 TRACKING YOUR RESULTS 152 FREQUENCY OF MARKETING 154 JOINT MARKETING IDEAS 155 MARKETING COST CONSIDERATIONS 156 CHAPTER XII: MANAGING YOUR BUSINESS 159 DO IT YOURSELF OR GET HELP 159 IDENTIFYING, SCREENING, AND HIRING YOUR STAFF 164 CREATE AN EMPLOYEE MANUAL 165 xii
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BONUS TOPICS: 169 SQUEEZING MORE PROFITS OUT OF YOUR STORE 169 VENDING MACHINES ‐ OWN VERSUS RENT 171 TAX ADVANTAGES FOR LAUNDROMATS 172 INCOME ANALYSIS 174 TOP 4 MISTAKES THAT BEGINNERS MAKE 175 BUILDING YOUR TEAM 177 PRODUCTS AVAILABLE 184 Copyrighted Material
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Chapter I: Introduction The Basics The coin laundry business, also known as coin-op
laundries, Washaterias, Launderettes, and Laundromats, has
been in existence since the early 1930s when the first
documented Washateria in the US was opened on April 18,
1934, by C. A. Tannahill in Fort Worth, TX, according to
“Texas Landmarks and Legends.” The business was run by
Andrew Clein, and according to “Wikipedia” customers would
rent the washers using a coin-in-the-slot, which would activate
the machine by a 'coin weight' system. The history of the
washing machine, however, dates back even further to 1691,
when the first patent in England was issued.
Prior to the invention of the coin operated equipment,
shop owners charged customers a fee to use their large wash
boards and tubs. As washing machines evolved, an agitator
was inserted into the tub which created washing action and
replaced the wash boards. Clothes would be rolled around
inside the tub by an agitator, often tying them up in knots.
This would pull and bend the fabrics of the clothes and
sometimes even damaging them. Later, a basket was placed
horizontally, on its side, within the wash tub and a crank was
used to rotate the basket. A small fire pit under the machine
would hold coal which was used to heat the water in the tub.
Since the hot water was a commodity, multiple loads were
washed in the same water, starting with the loads that were
least soiled, working their way up to the most soiled load.
There was no rinse cycle and when the clothes were finished,
they would be taken dripping wet and wrung out by twisting
them to extract the water. Later, hand cranking wringers were
added to the washers to squeeze out the water from the
clothes. Eventually, motors and mechanical timers replaced
the hand cranks and the baskets were spun to extract the
water, replacing the wringers.
Today the coin laundry business is considered to be a
mature industry with over 35,000 Laundromats in the United
States. Despite what some might think, there continues to be a
strong demand for coin laundries and there are no signs that
demand will decrease in the near future.
Let’s begin with some basics by starting out with the
definition of a coin laundry. A coin laundry is a consumer
laundry facility, which offers the public the ability to pay for
the use of washers and dryers. Although Laundromats can be
in stand-alone buildings, they are usually located in retail
centers or strip malls.
What makes a Laundromat appealing to its customers
is the speed in which they can get their laundry done, by
washing all at once. This is due to the large number of
machines that are typically available at a Laundromat. Most
coin laundries also have machines that come in various sizes.
The larger capacity machines are capable of handling a
customer’s large blankets and bedspreads. These items
generally won’t fit in smaller washers that you would find in a
home or an apartment.
Washers come in two types, the type that load from the
top of the machine and the type that load from the front of the
machine. So it is only fitting that these washers are called topload and front-load washers, respectively.
Top-load washers are the older and smaller of the two
types of machines. Most top-load washers have a capacity of
10 to 12 pounds of clothes (dry weight) and large capacity topload washers can handle up to 16 pounds of clothes. The
lifespan of a top-load commercial washer ranges between 6
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and 8 years (this is dependent upon several factors including
the amount of use, maintenance schedule, and general upkeep
of the equipment). Top-load washers clean the clothes by
filling the basket full of water and agitating the clothes in the
basket. On average they tend to use significantly more water
per pound of capacity than front-load washers. This is because
a top-load washer needs to fill the basket to a much higher
water level than a front-load washer does in order to achieve
good washing performance.
Front-load
washers are machines in
which the basket is laid on
its side (which is why they
are sometimes referred to
as side-load washers).
These machines range in
capacity from 18 to 125
pounds of clothes. In most
cases, front-load washers
are “hard mounted” (or
fixed mounted), meaning
they are literally bolted to a
base which in turn is bolted
to the floor. This is in
contrast to a top-load
washer which is considered a soft-mounted machine and is
movable. Today, front-load washers come in both soft and
hard mounted versions, but except for the smaller washers,
most large capacity soft mount machines are rarely seen in coin
laundries, due to the added costs of the machines. Front-load
washers are also extremely heavy, ranging in weight from 300
to over 1000 pounds. These machines are also more durable
than the top-load type of washers and have an average lifespan
of 10 to 15 years. Front-load washers use less water because
they only need to get the clothes wet and then drop the clothes
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into the basket by rolling them to get them clean. The impact
of the clothes falling against the basket bends the fibers of the
clothes and gets them cleaner than a top-load washer.
Although commercial dryers range in capacity from
30 to 125 pounds of clothes, it’s rare to find a dryer with a
larger capacity than 75 to 80 pounds in Laundromats. The vast
majority of stores only have 30 pound dryers. Like washers,
dryers come in two basic types; single pocket and dual pocket
(commonly referred to as stack dryers). The single pocket
dryers were the first to be developed for the coin laundry
industry. Airflow would radiate up through holes perforated in
the dryer basket as the clothes would tumble to dry. Initially, it
was common to have one dryer for every two to three top-load
washers. As washers began increasing in size, so did dryer
capacity. The problem was that the new larger dryers took up
considerably more space. To alleviate this problem, the stack
dryer was introduced. In roughly the same width, you could
now have two 30-pound dryers instead of just one. Further
refinement of dryers led to a design change where the heat
would radiate from the back axle and be drawn out the front
part of the dryer. This change improved energy efficiency and
reduced gas consumption. Today, stack dryers are available in
sizes up to 125 pounds. The average useful life of dryers is
between 15 and 20 years.
There are two other major components in a coin
laundry that we should touch upon and these are the boiler
and the change machine.
Boiler systems are used to heat the water and come in
many different forms. The most common types pump water
through a coil that is heated by gas, oil, or electricity. Boilers
are rated, in most cases, by BTUs (British thermal units) and
range in size from 80,000 to over 1,000,000 BTUs. Older
boilers typically have an efficiency rating of between 50% and
60% while new boiler systems have efficiency ratings of up to
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99.8%. Most boiler systems are usually accompanied with
water storage tanks. These storage tanks can hold anywhere
from 200 to over 500 gallons of water and have a pump that
continuously re-circulates the water between the boiler and the
storage tank.
Change machines are used to break bills into quarters
for the customers and are the life-blood of a coin operated
laundry. If customers cannot get change, they will be forced to
go elsewhere to do their laundry or bring their own change
with them. Change machines come in many different sizes.
Most will hold between $750 and $3,000 dollars worth of
quarters. They will either open from the front or from the rear
and usually are bolted to their location. Change machines have
two major components, the bill acceptor and stacker, and the
hopper(s). The bill acceptor validates the bills when entered
into the machine and checks them to make sure they are not
counterfeit. Then it stores the bills in a bill stacker. In some
machines the stacker will even separate the bills into
denominations. The hopper(s) hold and dispense the quarters.
Quarters are quite heavy, for instance, $500 weighs about 25
pounds. Because of the weight of the quarters, hoppers tend
to only hold between $500 and $750 dollars each, so larger
capacity machines have more hoppers.
Why I Chose the Coin Laundry Business It wasn't that long ago, in an economy very similar to
this one, when I was called into a conference room at the
startup company I was working for in “Silicon Valley.” The
entire Engineering Department was there for a meeting.
During the meeting the Vice President of Engineering
informed us that at the end of the month we would all be
losing our jobs.
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I had at that time what some might call a Paradigm
shift. I called it a rude awakening because that experience
woke me up to the reality that no matter how good I was at my
job, as long as I worked for someone else, I was vulnerable
and could be let go at any time for any reason!
I decided that I wanted to have a business in addition
to my job, so that if I ever got laid off again, I could still
provide for my family. The business didn’t need to make me
rich; it just needed to make enough money for us to get by on,
a safety net business, if you will.
Well, owning a Laundromat is a great safety net
business. It’s great for people who have jobs, people who are
concerned about having enough money during retirement, and
Real Estate or business investors who are looking for cash
flow, tax advantages, or even to diversify their investment
portfolio.
Here is what I was looking for in a business:
• I wanted a business that I could do part time because I
intended to get back to work.
• I wanted something that would not be too laborintensive, so it would be easy to manage.
• The business should be fun, easy, and kind of run itself
because at times, I’m kind of lazy and somewhat of a
procrastinator.
Before settling on a coin laundry, I looked at buying several
different types of businesses. These included everything from
franchise sandwich shops to window covering companies,
from maid services to dating services. The biggest thing that
clinched it for me was that with all the other types of
businesses, I felt like I was just buying a job. Sure, I would be
my own boss, but each of these business opportunities would
require me to work in them on a full-time basis and to be
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honest, I didn’t want to work that hard. Like I said, I wanted
something that I could do part time. With a Laundromat I felt
that once I got it up and running the way I wanted, it would
kind of run itself and that is exactly what ours do.
But what I didn’t know at the time was that a Laundromat
would not only meet all of my requirements for a business but
also, in time, replace my wife’s income, and then as our
business expanded, replace mine as well. This created time
freedom. With time freedom, I didn’t have to go back to work
and get a job. I was now able to spend my time doing the
more important things in life. Aside from the cash flow, it also
dramatically increased our Net Worth and my wife and I
became millionaires.
Over the years, at the urging of friends and loved ones, I’ve
developed a system to find potential Laundromats for sale,
analyze them, negotiate their purchase, and turn them into a
highly profitable source of monthly income. But when I
started this business, like I said before, it was simply to have a
safety net. I never would have imagined that I would someday
be teaching others about Laundromats. But now people ask
me all the time about the coin laundry business and want to
learn how I became successful.
One of the most important things I have learned and what
has been a big key to become successful in this business, is
learning how to think like an entrepreneur. It’s this mindset
that has helped me go from working a job to owning multiple
businesses. This business has literally changed my life. The
reason I decided to write this book was to help others follow
the same path that I took and to give back to the industry that
has given so much to me.
Now many of you may be wondering, why Laundromats?
And I’ll tell you, as businesses go, a Laundromat is one of the
simplest businesses to run, and I like simple. Here is a list of
some of the benefits to owning a coin laundry.
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Minimal Time Requirement: The beauty of owning a coin
laundry is that it is a business that, if set up properly, should
only require 5 to 10 hours a week of your time. That’s less
than two hours a day with weekends off. I spend the majority
of that time collecting and counting the money, filling up the
change machines and taking the money to the bank.
Few Employees: This is a business that is NOT labor
intensive so you won’t have a lot of employees to manage.
Most Laundromats only need to hire staff with basic skills to
open and close store, keep the facility clean, and wash and fold
customer’s clothes. I have yet to find the need to hire a
Rocket Scientist.
No Sales Skills Required: In this business, there’s no selling
involved. You are simply providing the use of your equipment
and facility to the public at a nominal fee.
Recession Resistant: The Laundromat business is servicebased and fulfills a basic necessity in life. What’s more, it is
commonly referred to a counter cyclical business, meaning that
the business may even increase during a recession. It will be in
demand for as long as people have the need to do their
laundry.
Very Profitable: This is a very profitable business. Coin
laundries will typically provide investor returns of 25% to 50%.
This is because self-Service laundries have high fixed costs and
low variable costs. What this means is that, once you have
covered your monthly overhead, every additional dollar of
revenue will typically produce between 70 and 85 cents in
profit. So think about this, if you can increase your gross
income by $1,000 a month, your net income will increase by
$700 to $850.
All Cash Business: Although there are a few stores that now
offer customers the choice to pay for their washing and drying
on a debit or credit card, this is still one of the few businesses
where the customers pay you up front and in cash. I love that!
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There are no “checks in the mail” or Account Receivables.
You don’t have to have a collections department or deny them
access to the building because they haven’t paid their bill.
Low Risk: This is a real brick and mortar business, in an
industry that has been around for more than 60 years and
generates annual sales of over $3.4 Billion dollars (source:
Small Business Association).
Tax Savings: A large portion of the assets of a Laundromat
can be found in the value of its equipment. This means that
Laundromats can take advantage of tax laws by writing off the
value of the equipment over time. When done properly and
according to a qualified tax professional, this can also provide
you with a significant Tax Savings. By using an advanced
strategy, you can even convert some of the income from active
income into passive income, and when this is combined with
other investments the net result can be a huge, legal tax
savings.
Increase Your Net Worth: Owning a coin laundry can add a
significant amount of money to your net worth. As you
increase the net income from the business it will be worth
more money to prospective buyers should you ever decide to
sell it in the future. Additionally, if you financed the business
when you purchased it, over time you will be paying off the
loan which will also add to your equity in the business.
Consistent Cash Flow: My second most favorite benefit of
owning a Laundromat is the cash flow. The coin laundry
business generally has only a small seasonal change in gross
income. This means that you can count on a consistent stream
of cash each and every month.
Lifestyle: My favorite benefit has got to be the lifestyle that
this income provides. Before we owned Laundromats, like
many people, my wife and I only had the time and resources to
take a couple weeks of vacation a year. Now we can go on a
trip whenever we get the urge. I love to go on trips and I
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think my wife enjoys planning the trips almost as much as
taking them. Whether it is a quick getaway up to a cabin at
Lake Tahoe, a weekend in Las Vegas, taking the kids to the
Zoo in San Diego, Zip-Lining through the canopy in Mexico,
or spending a lazy afternoon with the kids at the pool, we now
have the time and financial freedom to really get out and enjoy
the best of life. When it all boils down to it, isn’t that what we
all really want, to have the time and the freedom to live each
day, doing all the things we love?
The Coin Laundromat Industry Trend The industry has experienced some minor changes
during the past 7 years. Utility rates started to spiral upward,
in some areas even doubling in price as the cost of natural gas
and electricity soared; then prices began rolling back to where
they were five years ago (gas and electricity represent between
10% and 20% of expenses). While fluctuations in utility costs
do impact the bottom line, they do not make up the majority
of the expenses. As an example, let’s say your utility costs are
averaging about 20% of your gross income and they jump by
50%, your utility costs will now be 30% of your gross income.
Does that take money out of your pocket? Absolutely it does.
Will it put you out of business? No. That being said, a smart
business person will always try to reduce costs where he can,
and reducing utility costs are an area I look at when trying to
evaluate and improve a store.
In some parts of the US, water prices, which are the
other variable cost in a Laundromat, also began to fluctuate.
In the Western part of the United States, water prices have
increased over the past few years as drought conditions have
forced some municipalities in California to incorporate water
restrictions and rationing. Even though many water agencies
have been increasing the cost of water, this increase has only
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had a minor effect to coin laundries. This is because the
average Laundromat’s water bill only represents 5% to 10% of
the store’s expenses.
Another trend I’ve noticed is that, over the last 7 years,
the cost of equipment has increased dramatically. This
affected me first hand when I recently remodeled one of my
stores. In fact, prices for the exact same equipment I
purchased three years ago had increased by 25%. The main
reason for the increase in cost can be attributed to the price of
steel, which has increased over time. Since washers and dryers
are made out of heavy gauge steel, this increase in material
costs have been passed on to the consumer in the form of
higher equipment prices.
Commercial rents have also been going up over time.
This is to be expected, as most leases include some sort of rent
adjustment on an annual basis. If you are smart about buying
a store, however, you will negotiate your lease so that the
rental increases happen once every five years or so, instead of
annually. This will help you maintain a steady cash flow year
after year and protect you from rising rents. Always
remember, you make your money when you buy the business,
not when you sell it. Having a well structured lease with terms
and conditions favorable to you will play a critical role in
determining the overall success of your business.
To this end, you should use a strict set of criteria when
looking for a store to buy. This criterion will guide you in
making a wise business decision, help keep you out of trouble,
and dramatically increase your chances for success and profit
over time.
On this note, I have even developed a proprietary
system based on my experience, which lists the rules that I use
when searching for and analyzing a Laundromat. These rules
are designed to keep me out of trouble and give me the best
possible chance of success in this business. This is not a
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business where one can afford to skip proper due diligence. If
an individual does not know enough about this business, that
person will run the risk of significantly overpaying for a store
and get taken to the cleaners.
The Risks in Owning a Laundromat Small business represents over 99% of all businesses in
the United States, according to the U.S. Small Business
Administration (SBA), and employs more than 50 million
people nationally. There is no doubt that small business is
what drives the national economy. Unfortunately, for those
interested in starting a new small business, statistics indicate
more than half won’t survive the first five years and less than
30% will survive the first ten years (source: SBA).
With these kinds of odds, it is important to select a
business with a proven track record to increase your chances
of success. Since the coin laundry business has shown to be
very resistant to economic changes and provides the means for
customers to fulfill the necessity of having clean clothes, it is
an excellent choice for those who wish to limit their risk. That
being said, owning a business does have certain risks and one
should be aware that regardless of the business type, you could
lose some or all of your investment.
The coin laundry industry does have a great success
rate. Unfortunately, however, some do fail. For the coin
laundry businesses that don’t survive, their demise is typically a
result of one or more of the following reasons: demographics,
competition, lease, and/or management.
In this great recession, the self-service laundry’s
reputation for being a recession resistant business has been
tested and overall has held up well. However, it has also
highlighted how major changes to the demographic makeup of
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the neighborhood in which a Laundromat is servicing, can
substantially impact the business. This is most evident where,
due to economic reasons, a segment of the population moves
out of the area. If this migration is large enough, the resulting
customer base might not be large enough to support the
operations of the business.
Likewise, when a new Laundromat is built, instead of
adding new customers to the neighborhood base, it often just
splits the existing customers with the other coin laundries
within the neighborhood. The result is a drop in sales for
existing stores as customers begin using the new store.
Remodeling and re-tooling an existing store can have a similar
impact on the competition closest to the newly renovated
location. Although the entry of a new competitor or one that
has re-tooled their store can significantly impact revenue, it
doesn’t always cause older stores to go out of business.
Another reason leading to the failure of some
Laundromats has to do with increasing expenses, the most
notable being the increasing cost of rent. If a self-service
laundry’s rent increases too often or by too much, the resulting
overhead will make the business unsustainable over time.
Don’t just look at the cost of the rent at the beginning of your
lease, instead, consider your lease expenses throughout its
term, especially towards the end of the lease.
Additionally, it stands to reason that coin Laundromats
which are not well managed and are neglected by their owners,
have a greater risk of failure than those that are well run.
Sometimes owners will lose interest in the business or for
some reason will not be able to spend the time to properly run
their store. Signs of this are easy to spot. Neglected stores will
often have many broken machines and are usually not kept
very clean. Sometimes the owner won’t even bother to empty
the machines, until several are out of service, and they will
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rarely return a phone call if a customer has a problem. It is no
wonder that customers will eventually leave a poorly run store.
There is inherent risk in starting any kind of small
business. Relatively speaking, a coin laundry business is a very
safe, reliable, and consistent income-generating business that is
easy to run and requires minimal experience.
Startup Costs Before I went into the Laundromat business, I
examined many other types of businesses. Most of the
franchises that I looked at had startup costs that ranged in
price from $100,000 to $500,000. These businesses were very
expensive to get started and they wanted an all-cash
investment.
It is possible to get a Small Business
Administration (SBA) loan on some types of business, but
when you are starting a new business that has no track record,
sometimes it is difficult to get funding even from the SBA.
A coin laundry can cost from $30,000 to more than
$1,000,000 to buy an existing store. If you are planning to
build a Laundromat from scratch, depending upon the size, it
could cost somewhere between $300,000 and $500,000.
Obviously, if you build a very large one, then the price would
go up significantly (On average most Laundromats range in
size between 1,500 and 2,500 square feet.).
Another thing to consider about the coin laundry
business is that many of the municipalities throughout the
country often charge Laundromat owners an impact fee when
they are building a new store. This fee is meant to discourage
entrepreneurs from building new coin laundries and covers the
city’s “increased expenses” in cleaning the discharged water
from Laundromats. This fee is often called a “sewer impact
fee” (or sewer hook-up fee) and can range anywhere from a
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couple of hundred dollars per washer up to several thousands
of dollars per washer. If you have a sewer impact fee of
$3,000 per washer and you’re installing 100 washers, this would
equate to $300,000 in fees before you ever spend a penny on
washers, plumbing, or electrical. As one can see, it can be very
cost prohibitive to build a new store in some areas.
The good news here is that once a Laundromat is in
place and those fees have been paid, the store never has to pay
the fees again. This is good news because even if you buy an
existing store and remodel it, you won’t be subject to
additional impact fees in most cases. This is a very good
strategy if you want to avoid sewer impact fees and save
yourself quite a bit of money when starting a Laundromat
business.
Impact fees do, however, have a positive side, for they
act as a buffer to the entry of new Laundromats in the area you
may be considering, thereby limiting competition. It is rare
that someone will build a new coin laundry where there are
high hook-up fees.
Coffee shops, in contrast, do not have impact fees so
they are in constant competition with each other. All one
needs to do is pick a location, invest in equipment and
supplies, hire some employees and then open the door for
business. Coffee shops have very little competitive barriers to
entry compared to a Laundromat. When looking at different
businesses, I quickly realized that I wanted to get involved with
one that has some form of competitive barrier to entry so that
I would be able to maximize my profits and minimize the
amount of competition I would face.
As I’ve said before, a Laundromat can cost anywhere
from $30,000 to over $1,000,000 dollars, depending upon the
size. When you start a store from scratch, you start out with
no customers and no revenue. However, when you purchase
an existing Laundromat business, you will be purchasing a
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business that already has an established customer base and
revenues. If the business you purchase has been well run and
has a good set of books, it may even qualify for a SBA loan.
The last time I checked on SBA loans, you could borrow up to
70% of the cost of the store, which greatly reduces the amount
of startup capital you need to invest in the initial purchase of
the business.
Recently, however, due to the economy, bank financing
has become more difficult to obtain. Because of this, we are
starting to see more and more sellers willing to do seller
financing. This can be good news for some prospective buyers
that would not otherwise qualify for an SBA loan. The
incentive for the seller is that they can spread the income from
the sale of their business over several years, reducing their tax
liability. If the buyer ever defaults on the payments, then they
can take back the business.
Can Anyone Own a Laundromat? I am living proof that anyone can not only own a
Laundromat, but also succeed in this industry. Before I owned
a Laundromat, my business track record wasn’t what most
would call stellar.
• I sold Amway® at 16. I even signed up a couple of
friends, but never made any money.
• Started a mobile DJ company at 17, playing music at
weddings and school dances, I was even a club DJ for 3
years, but when all my partners got married the business
folded.
• I sold Cutco® Knives door to door at 22, but cut my
finger during a demonstration and gave it up.
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• I became a National Safety Associates Distributor at 23
selling water and air purifiers, but couldn’t sign anyone up
except for my roommate.
• When I graduated from college I became a Real Estate
Appraiser, but then two months later the refinance market
died and I couldn’t find any work.
Owning a coin laundry was my first, real, brick-andmortar business. Like many first-time business owners, I made
my share of mistakes. I also learned from those mistakes.
Sadly, in this business many sellers overstate the actual
profits their businesses are generating because this business is
all cash. In reality, most stores for sale often make less than
what the owners claim, either because the owner kept poor
records or did not keep any at all. As I have said before,
proper evaluation is incredibly important because a
Laundromat business is valued based on how much net
income the business generates. It’s the net income that is
really important. For most small businesses, their value is
based on a multiple of the net income.
The multiple that is used is generally related to the
amount of time required of the owner to run the business. As
an example, let’s say you are an accountant with your own
small accounting practice. You’re the one doing all the work,
recruiting your clients, preparing their taxes, and billing them
for your services. This business would have value to someone
if you were to sell it because you have an existing base of
clients and a certain amount of predictable net income (the key
word being net) generated from their business. In other
words, this business has value because someone who wanted
to start an accounting business would not have to start from
scratch. That person could simply buy your existing business
practice and its clients. The value of the business -- because
you do all the work, may be equal to between one-half and one
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times the net yearly income of the business. So, if the business
generated a yearly net income of $100,000, that book of
business would be worth between $50,000 and $100,000.
Once an owner can start backing out of their business,
meaning the business requires less and less of their time, the
valuation tends to go up. Because a coin laundry business only
requires a small amount of the owner’s time to run, the
valuation of most stores are somewhere between 3.5 and 5.5
times the yearly net income before debt service. Therefore, a
Laundromat that nets $100,000 dollars a year would be worth
between $350,000 and $550,000.
As businesses become more and more successful, they
require less of the owner’s time. Think of a publicly traded
company or a stock that you would buy. The owners of a
publicly traded company are seldom involved with the day-today running of the business operation. Essentially, the amount
of time required by the owners to make that business work is
zero. It’s no coincidence these businesses have valuations
from 20 to 30 times the net income. As I said, the more an
owner can back out of a business, the more valuable that
business becomes and the larger its multiple of the net income
will be.
Should I Quit My Job to Become a Laundromat Owner? Speaking from my own personal experience, I don’t
recommend quitting your job, not just yet anyway. After all,
you first have to find a store. Since Laundromats are an all
cash business, stores that are performing very well are rarely
listed for sale. You need to have a way of weeding through the
stores that don’t make a profit to find the stores that do make
sense. I like to think of it as a numbers game. Finding a good
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coin laundry business can be difficult and take a while. My
advice is not to settle for a store with books that don’t reflect
the figures you come up with during the due diligence part of
your analysis. Remember, you make your money when you
buy the business so be careful and take your time when you
purchase your first store.
When trying to figure out what your requirements are
for the perfect business, remember this, everybody has
different ideas and money rules. For example, if you are the
type of person that wants to buy something that is top-of-theline, shiny, and new, then the right store for you might be a
brand new, built to spec store, or one that has just been rebuilt
with all new equipment and also has some business
performance track record. If it is a new store you are after,
you would want to call all of the local equipment distributors
and see what new coin laundries they have sold to in their area.
If a newly-remodeled store is more your preference, then you
would want to look at all the Laundromats in your
neighborhood to find the ones that have been recently
remodeled. It doesn’t matter whether they are technically for
sale or not because we all know that everything is for sale for
the right price. You would then want to contact the owners of
those stores and let them know that their store fits your criteria
for a store that you are interested in buying, and that you’d like
to see if you can work out some sort of purchase agreement.
For others, the type of store that appeals to them might
be one that is on sale. I don’t know anyone who doesn’t like a
good deal! If you are looking for a Laundromat that is on sale,
then you are looking for an underperforming store. The store
you’re after will probably have older equipment. However, the
long-term value in buying an underperforming store lies in
retrofitting that old store with new equipment and remodeling
it. Let’s face it. This will require a lot more work than buying
the brand new, shiny store, which is why you have to find out
which store is right for you.
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Size also matters. You might want something small to
start out with, which means that you are looking for a store
between 1,000 and 1,500 square feet. On the other hand,
maybe a larger store, in the 3,000 to 4,000 square feet size
range is more your style. Larger stores contain more
equipment and have a larger income potential, but also cost
more money to purchase. Regardless of the size or type of
store that meets your idea of the perfect Laundromat, you
need to pre-establish which criteria you will use before you
start your search.
How Much Can I Really Make? Laundromats are highly profitable businesses and in my
experience, usually sell with an annual return on investment of
between 20% and 30% when purchased for all cash. If you
finance the business, your cash on cash return can increase
because of the power of leverage, but your net income for the
business after debt service will decrease by the amount of debt
service. Typically, a $200,000 coin laundry will generate a
monthly net income of between $3,333 and $5,000 before debt
service. However, with a little bit of work, and improvement
in the business, it is not uncommon for a Laundromat to
generate net profits in excess of 50%. Likewise, a store that is
miss-managed and neglected, or one faced with severe
competition, can lose 15% or more.
I have seen stores generating monthly profits, after
debt service, in excess of $20,000 while others, lose as much as
$3,000. Unfortunately, there are no guarantees in business,
only opportunities, and that is what this book is about. Once
you finished reading it, you should be able to avoid the major
mistakes that cause the uninformed to “lose their shirts” and
instead, possess the knowledge to make your acquisition so
profitable, that you will be “smiling” all the way to the bank.
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