Laundromat Appraisal

There are many factors that figure in the price of a Laundromat for sale. One has to take into consideration the factors mentioned on Before You Buy a Laundromat and above all look at the revenue and income statements.

The ROI (Return On Equity) rate will vary depending on the age of the equipment, long term potential, lease terms, general store conditions. But you will usually find newer Laundromats asking for higher multiples of yearly income than older operation. Ranges of multiples can go from 4 times annual income to 6 times annual income but each case is unique and thus different factor should be considered. The best way to do an appraisal is to have a broker do it for you in addition to hiring an independent auditor who understand the industry. A broker who is selling you a Laundromat will always paint a favorable picture to the seller's interest as he wants that 10% commission. An independent auditor on the other hand gets paid a one time fee to give you an unbiased assessment of the business. If you are actively looking for a Laundromat and need Appraisal services feel free to contact me at vclinla at gmail do com so I can recommend someone local to you.

Theft Prevention

The Coin Laundry Business lends itself to various form of theft that are common to most businesses as well as unique to the Laundromat business. Some forms are the obvious ones such as thieves stealing directly from you and other forms come from employees, customers, etc. Therefore, it is important to keep a close eye on the operation at all times. Here are some of the situations that every Laundromat owner should be aware of:

Money Collections

Since most Laundromat owners like to collect revenues every few days or once a week, the potential for loss is greater is one is victim to a robbery. Always do the following in order to avoid direct robbery:

- Install security cameras: The advantage is obvious, you can have every single movement recorded and it serves as a deterrent to potential troublemakers.

- Never collect money at night, try to do so very early in the morning or when there are people present in the business.

- Collect money prior to leaving the store. Avoid collecting money and storing in the store while doing other functions such as machine repair, store maintenance, etc.

- Never talk to customers while collecting money. There are thieves whose strategy is to distract their victim prior to robbing them.

- Collect money on different days. Try not to be predictable, watch your perimeter and see if anyone is watching you.

- Never share keys with anyone. An employee or someone else might make a copy of the keys and have access to critical areas of your store and equipment. Keys should be in your possession at all times.

Theft from Machines

Sometimes robbery occurs in an passive manner such as tampering with your washers and dryers. The most common forms of theft from Machines are:

- Placing an obstacle between the coin drop and the coin box to divert coins to be collected. This happens when machines lids are open, therefore always make sure your lids are closed and your employees do not have access to this area.

- Triggering washer or dryer credit with wire. Some thieves are clever enough to use wires to trigger coin credits on your machines. Sometimes it is your own employee doing it, sometimes it is someone who knows how to do this and charges a discounted price in order to give customers credit.



Card System Theft

There are many security advantages to a card system, such as avoiding the display of coins to people in the store to see. However, this system is not full proof and there have been issues with revenue loss due to these machines. The most common issues are:

- Cards issues by hackers: The card system works with a magnetic trip that indicates a certain amount of credit in them. Hackers have figured out how to add credit to cards and sell them on the internet. Thus there are people who will come wash for free using these cracked laundry cards.

- Security codes: Each machine has security codes which in turn can be used by people to make cards to sell them on your Laundromat. Some will purposely jam your card vending machine so they in turn can sell theirs. Always protect your codes and never give them to anyone.

Day to Day Operations of a Laundromat Business

Running a Laundromat can be a relatively easy experience because it is for the most part a mechanically automated business. But just like any other business, a Laundromat owner has to make sure the business runs well and customers are happy. The following are some key factors to consider when operating a Laundromat.

- Hours of Operation: Usually Laundromats are open from 6am until 10pm, some prefer to run longer hours or even 24 hours. Schedule should be set according to the needs of the community and the cost of keeping it open vs potential revenues.

- Employees: A Laundromat is a place where people from the community come to wash their laundry and they expect Laundromats to be a clean place. Employees can be hired full time or part time to make sure the store is clean at all times and make supplies such as hand soap, hand towels, restroom supplies, etc. are readily available to customers. Smaller Laundromats are able to operate with part time employees while larger operations should consider hiring full time staff. The key to offer customer a pleasant experience when visiting your store.

- Machine Maintenance: Laundromat owners usually have a technician on call to repair their machines or in a monthly contract where repairmen commit a certain time of the month to come repair or maintain any equipment that needs service.

- Money Collections: Depending on the size of the operation, an owner needs to collect proceeds every week at the very least. If it's a coin operated Laundry, owners make sure machine's coin boxes are emptied and bill changers fully stacked with coins. There are some stores that use a card system that can save owners a lot of time collecting coins, the downside however is higher maintenance cost, installation cost, and the fact people usually prefer to use coins.

- Vending Machines: Some machines are serviced by contractors who pay revenue share with Laundromat owners while other machines are owned by the Laundromat. For those that need inventory, an operator should set aside time to buy and stock vending machines every week.

No Laundromat operation is the same. An owner can spend as little as couple of hours a week at the store to dozens of hours depending on the store. But overall, time required to run a Laundromat is on the flexible side and that is one of factors that make this business so attractive.

Sources: Laundromat123.com

Commercial Laundry Equipment Brands

The following companies specialize in Laundromat equipment. Check their sites and their local distributor to see if they are a good fit for your operation.


- Continental - http://www.continentalgirbau.com
- Milnor - http://www.milnor.com
- Dexter - http://www.dexter.com
- General Electric - http://www.geappliances.com/commercial_laundry
- Maytag - http://www.maytagcommerciallaundry.com
- Speed Queen - http://www.speedqueen.com
- Ipso - http://www.ipso.be
- American Dryer - http://www.amdry.com
- Huebsch - http://www.huebsch.com

What to Look for in Potential New Sites

- Long term lease: You want to have as long of an lease option as possible. You want to make sure your investment have a good return for a long time to come. And if you decide to sell, the lease will play a significant part in the buyer's mind.
- Good parking: Must have good parking area so customers can bring their clothes in and out with ease.
- Visibility: High visibility by cars or pedestrians is the best. Therefore you should choose locations that are clearly visible and where big signs can be put up.
- Must have 6" sewer line, 2" water line. Gas meters nearby, Six hundred amps of 3 phase power.
- Make sure the new location meets the criteria for population density, demographics, and competition.

Sources: Laundromat123.com

Building a New Laundromat

The obvious question to many people thinking about entering the Coin Laundry Industry is whether it is better to build a new Laundromat vs Buying a used Laundromat. There are advantages to both approaches but the risk is much higher when building a new one from scratch, especially if you are not experienced in this industry. Other options include renovated Laundromats which I highly advise people NOT to buy. Many brokers buy old Laundromats, renovate them, and then try to resell them at a much higher price by using "projected" increased revenue because of these renovations. But this is really no more than a scam. That's why I always advice new entrants to do their due diligence on the industry, it is sad to see people lose substantial amounts of money based on a Laundromat broker's greed.

With this said, the benefits of building a new Laundromat are many as well. Larry Larsen of Laundromat123 believes one can have a selection of the layout of the store, brand new equipment with warranties, higher income potential, better lease terms. If this is the option you would like to explore, you should contact at least 3 different Laundromat companies and have them do the following for you:

- Laundromat layout
- Market and competition review
- Education on how to run a on Laundromat
- Site analysis
- Demographic reports review
- Necessary Lease concession for Laundromats
- Financing by equipment vendors
- Contractor and Building Architech recommendations
- Construction oversight of project
- General Advice on building and running a new Laundromat

Always MAKE SURE you check brokers with the Better Business Bureau, ask for references, search online for comments on prospective brokers.

Laundromat Demographics

The local demographic to the Laundromat will essentially give you an idea of potential for a Laundromat business. One should always drive around to look at the competition but also get an idea of the neighborhood driving around at least a mile radius. Ideal neighborhoods tend to be those with a higher concentration of apartments with working class families who do not have washers at home. College areas, working class neighborhoods or those with younger populations are also good locations. In order to get an specific idea, one should purchase a local demographics report and look for more data.

As a rule of thumb these are some of the factors favorable to Laundromats:

- At least 25% renters with higher percentages the better
- Older neighborhoods with higher concentration of apartments, at least 20 years old.
- At least 35% working class with higher percentages the better

Sources: Laundromat123.com

Water Meter Analysis

Water Meter Analysis is the one method people in the Coin Laundry industry agree as a way to asses revenue. The results are not always precise but if done correctly one can verify income claims by going over the water bills. The idea behind this concept is simple. Washer machines at a Laundromat are the main drivers for revenue and each machine uses a certain amount of water every time it is used. Therefore, checking the volume of water used during a certain period of time can tell you how many times the washer machines have been used and thus one can come up with a revenue estimate.

Problems with Water Analysis

Sometimes water meters reading are wrong due to several reasons and the buyer should always keep this in mind. Water meters are sometimes not reliable if they are not working properly. Sometimes water meant for laundry operations are diverted or used by other tenants, and sometimes unscrupulous owners will leave the water running few months prior to the sale in order to give the reading a higher usage since he knows this will be looked at. The best way to inspect an operation using water analysis is with a professional third party consultant using the IRS method for auditing Laundromats. Seek a consultant to do this analysis and compare it to what brokers or sellers show, sometimes brokers will collide with sellers when it comes to this analysis.

How to Calculate Water Usage

Water companies sell water in HCF or Hundred Cubic Feet units. One cubic foot of water is equivalent to 7.48 gallons of water. Therefore, 748 gallons of water per HCF (Hundred Cubic Feet). There are some water companies that will write the actual gallons used as opposed to HCF. To analyse total usage, one gets the total number of HCF for 30 days and multiples that number by 748. We then divide the total number of gallons of water by 30, which would give us the total number of gallons of water used per day. So for instance, if top loaders at a Laundromat get used 100 times a day, one multiplies the number of gallons a top loader would use times the number of cycles (100) and come up with total usage. One could then match these numbers and see if they are congruent.

Dryer Income Estimates

Dryer income is usually 25-50% of washer revenue. There is no exact formula for this since habits vary depending on location or circumstances. But as a general rule of thumb there should be 20 minutes of dry time for every wash cycle.

Sources: Laundromat123.com

Pre-Inspection of Prospective Laundromats

Once you found one or more Laundromats that fit your buying criteria, you should start planning for pre-inspection of the premises, the equipment, lease and other factors listed on Before You Buy a Laundromat. The following are must checks for a prospective Laundromat.

Equipment Inspection

First you should set aside a few hours of your time and go to the Laundromat on a busy day like Saturday or Sunday. You should see if customers are happy with the machines they are using and you could also ask them about their experiences with the equipment at the location. You should test and try each machine and write down notes on the model, serial number, etc. and see if they are in working order. Washer Machines should be check for noises, length of cycles and leaks. Dryers should be checked for proper temperature, bearing problems, etc. It would also be a good idea to hire a commercial laundry repairman to check the machines so you can have a clear idea of what is actually being sold to you.

Vending machines such as snacks, sodas, arcades and others should also be checked for functionality. Put money in each of them and make sure they are in proper working condition as that is part of the sale and your future revenues and expenses.



Check Plumbing

There is a great deal of plumbing inside a Laundromat and you should not spare any expenses to make sure plumbing is in working order. Hire a plumber to check for leaks, potential problems in the future, etc. Make sure the copper connections are in working condition or if they need replacement.

Water Heater

Write down the serial number and model of the water heater. Find out when it was last serviced, how long has it been in operation. Do the same for the water pump and make sure they are in working condition or in need of future replacement. Water Heaters costs several thousand dollars to replace and any deficiencies should be factored into the final offer price.

Sources: Laundromat123.com

Finding a Laundromat to Buy

Once you have an idea of the size of Laundromat you would like to buy, the next step is to start looking. The best place to search for Laundromats are usually newspapers and online business to business websites. And from there you can start getting an idea of what is in the market and what to expect.

Another efficient way to find Laundromats for sale is by going to a Coin Laundry broker. But do your due diligence on the brokerages, research their reputation by contacting the Better Business Bureau, look for comments online, ask other Laundromat owners. Unfortunately there are many unscrupulous brokers who are in the market to make the most money without the interest of the buyer at hand. Always have a third party advisor like a consultant and a lawyer in addition to any broker.

All Laundromat Buyers Need to Consider this

There are dozens of factors that figure into the selling price of a Laundromat. As a buyer you have to be mindful that a seller will have considered the following items when coming up with the asking price. As a buyer, you have to go over the assessment the buyer took into consideration and see if you agree. Obviously, the seller will always ask for the highest price possible but like in any other sale, the buyer should always do his own assessment and come up with an optimal offer.

Among the items that should be kept in mind in making an offer are:

Where is the Location - This will be a very important factor. Laundromats are popular in low income areas and colleges. Other factors to consider are the local utilities and their rates, zoning, etc.

Net income - This one is obvious. Every buyer will want to know what to expect when buying your Coin Laundry as an investment.

Current Economic Environment - You will be able to get a premium in times of general economic growth as opposed to economic slowdowns and recessions. People tend to reduce the loads they wash in times of economic stress.

Lease Terms - Time remaining on the lease, rent increases, options to renew, etc. will affect the price in the end. The less time remaining on the lease, the lower the price you will be able to get.

Revenue and General Records - The better your books, expenses and tax receipts have been kept to prove the health of your operation, the better.

Competition - Generally speaking, there is an optimal population per Laundromat. You have to assess how many competitors you have within a mile radius and compare that to the population of the area.

Condition of Laundry Equipment and Store - Age of the washers and dryers will tell if they need to be replaced or repaired. Buyers will also be looking at plumbing, water heater, water tank, general store conditions.

Terms of the sale - Financing or Cash? obviously, a higher asking price will take place when financing is an option.

Growth potential - Is there room for improvement in your operations that would lead to higher revenues and income? if so, that should factor into the asking price.

Sources: Laundromat123.com

Before You Buy a Laundromat

People get into the Coin Laundry business for a variety of reasons. Mostly, Laundromat buyers just want financial independence and the relatively comfortable lifestyle a successful Laundromat can provide. Reasons for selling Laundromats include disputes, divorce, illness, moving, etc. And a buyer should ALWAYS be mindful of who he or she is buying from.

Buying a Laundromat can be somewhat tricky in that more times than not revenues are not easy to assess because of the cash nature of the business. An Laundromat owner might now keep the best of records, etc. But with the help of Laundromat auditing consultants, a buyer can get a range of revenues and double check claimed income. As a buyer, you MUST ALWAYS verify revenue by using utility methods and site visits. Something to keep in mind is that brokers are salesmen and most will lack the objectiveness of a third party consultant.

Who is Selling?

One has to know who and why a person or entity is selling the business. The seller will be providing revenue records for buyers to analyse and before giving credibility to the revenue records, one has to trust the seller. A broker receives from the seller a revenue statement and all expenses and this data is used in a spreadsheet to present a financial picture of the operation.

Water, Gas and Electric Bills

Usually 95+ percent of the revenue from a Laundromat is tied to water usage. A competent consultant can verify seller's revenue information by using a formula that provides a range for revenues. Many times brokers will assist in verifying revenues but as a buyer you should always double check information with a third party consultant. A seller should have at least a year's worth of utility records to be verified.

Financial Records

Ask for tax and bank deposits if available. Do they match claimed revenues and income?

Joint Coin or Money Collection

While not necessarily a way to verify income or revenue, a buyer should request seeing collections and seeing the "coin count". This is particularly useful if the water meters are being read at the same time, that way one can attribute the exact correlation between revenue and water usage. ALWAYS have a third party auditor or consultant with you when doing this. Problems with inflating revenues by "sprinkling" coins in the boxes prior to joint coin collections are a common problem with unscrupulous sellers. And some brokers who are focused on commission and who hide behind the clause of "not being responsible for information provided by seller" might look the other way costing you, the buyer potential financial pain and frustration.

Site Analysis

One should always visit other stores in the area to asses the competition. Factors such as pricing, equipment, etc. has to figure in the final offer for the Laundromat. In addition, one can get an idea for room for growth. If being represented by a broker, they will do that as well because it is their job but as the buyer you should always do this yourself as well.

Store Visit

You should visit the store randomly and see how it operates. Better yet, you should spend 2-3 days at the store and get to know the clientèle, the workers, issues, etc. One can get a better idea of what is working and what can be improved by doing this.

Lease

Ask for a copy of the Lease and read it carefully. Call the landlord and get to know them as well. Sometimes unfavorable lease terms will damage the potential of a Laundromat. Have an attorney go over the Lease with you to avoid any surprises in the future.

Industry Research

Look online for Laundromat resources. Ask other owners of what issues, ideas, or suggestions they might have for you. You can also join trade groups or visit trade related events for a better idea of the Coin Laundry Business.

Sources: Laundromat123.com

Considering Buying a Laundromat

The Coin Laundry Business is an attractive operation because of it's relatively low level of maintenance and potential cash flow. Many people consider this business as a retirement business or as primary business, whatever attracts you to this industry, these are the factors usually considered:

ROI (Return On Investment)

Relative to the time spent on this business, a Laundromat offers very attractive rates of return. Some Laundromats are able to return up to 25% on Investment.

Absentee/Part Time Business

You can run a Laundromat with as little as 3 hours per week. Therefore, this can be the perfect part time business or absentee business.

Tax Benefits

Because of the equipment included in a Laundromat, one is able to use depreciation of equipment against income which leads to great tax benefits.

Recession Proof

While Laundromats are not fully recession proof, people still need to do their laundry. Recessions usually force people, especially in lower income areas to cut back on the frequency of going to the Laundromat. But washing laundry is a must and regardless of economic environment, there always be a supply of customers.

Cash Business

Laundromats are an all cash business

Low Labor Requirements

Labor for Laundromats usually requires minimum skills, therefor labor costs are minimal. One can opt for part time workers or full time and equipment repair can be done at reasonable prices.

Minimum Inventory

Technically speaking, all the inventory you will ever need are for your vending machines. Laundromats function on water, electricity and gas. All variable expenses tied directly to how much the machines are used.

Easy to Sell

Laundromats are highly in demand because of the relative ease of operation and cash flow and there will always be a demand for them. Therefore, this is not a business that would require especial training or much advertising as most people know what a Laundromat does and how it operates.

Sources: Laundromat123.com

How Make your Coin Laundry Sell Faster

If you are selling your Coin Laundry Operation or Laundromat you want to get the most out of your operation and the best way to do it is by making sure potential buyers get a favorable impression of you Laundromat. Here are a few tips on how to make your Laundromat stand out:

- CLEAN! Make sure your Laundromat is spotless clean. People go to Laundromat to clean clothes and buyers want to see a store that gives a congruent impression. Make sure the machines are clean of soap and sud, floors clean as well as windows and ceilings.

- The restroom should be as clean as the store. This is an area that can be a problem because sometimes it gets neglected or people trash the restrooms. Make sure whenever you are showing the store the restroom is as clean as the store in general.

- Make sure the outside of the store is clean as well. All windows should be spotless. The sidewalk leading to your store, especially traffic areas should be pressured cleaned prior to showcasing your store.

- If your store has rugs, make sure they are clean as well. Sometimes owners clean everything else but leave a dirty doormat.

- Make sure all your machines are in working condition. Nothing worst than seeing "out of order" signs on machines. Buyers don't want to be fixers.

- All lighting should be in perfect condition. Make sure there are no burnt light bulbs on your ceiling. Also, remove any gum or items glued to the ceiling. Better yet, clean the ceiling!

- Make sure your store sign is in proper working condition. All signs inside the store should be legible and in clean condition.

- Let your employees know that the store is for sale and buyers will be potentially asking them for their opinion.

- Try giving your store the best look possible. Just like used cars get detailed before they go sale, a Laundromat needs cosmetic touches to give the right impression.

Sources: Laundromat123.com

What do Laundromat Buyers Usually Need?

The following are documents you should have ready when planning to sell your Laundromat.

Two years of income. If listed on your tax return even better.
Two years of expense records, includes utilities, labor, general expenses.
Your lease and any addendum
Your Triple Net records
List of all equipment in the store and the years when they were put into service.
Why you are Selling

Things to Consider when Selling a Laundromat

There are dozens of factors that figure into the selling price of a Laundromat. Among the items that one should keep in mind are:

Where is the Location - This will be a very important factor. Laundromats are popular in low income areas and colleges. Other factors to consider are the local utilities and their rates, zoning, etc.

Net income - This one is obvious. Every buyer will want to know what to expect when buying your Coin Laundry as an investment.

Current Economic Environment - You will be able to get a premium in times of general economic growth as opposed to economic slowdowns and recessions. People tend to reduce the loads they wash in times of economic stress.

Lease Terms - Time remaining on the lease, rent increases, options to renew, etc. will affect the price in the end. The less time remaining on the lease, the lower the price you will be able to get.

Revenue and General Records - The better your books, expenses and tax receipts have been kept to prove the health of your operation, the better.

Competition - Generally speaking, there is an optimal population per Laundromat. You have to assess how many competitors you have within a mile radius and compare that to the population of the area.

Condition of Laundry Equipment and Store - Age of the washers and dryers will tell if they need to be replaced or repaired. Buyers will also be looking at plumbing, water heater, water tank, general store conditions.

Terms of the sale - Financing or Cash? obviously, a higher asking price will take place when financing is an option.

Growth potential - Is there room for improvement in your operations that would lead to higher revenues and income? if so, that should factor into the asking price.

Sources: Laundromat123.com

Issues with current Laundromat operation

Issues such as the lease, partnership dissolution, taxes, worn-out equipment, zoning, health or other Laundromat regulations can generally be resolved with help from consultants from the industry. Personally, I would recommend looking into site dedicated to Laundromats or local trade associations.

As a seller you must be sure your Coin Laundry Business is in good condition physically and legally in order to get a better price and avoid future lawsuits, etc.

Sources: Laundromat123.com

Is there a certain "best" time of the year or in the operational cycle to sell a Laundromat?

When it comes to seasonality, the best times are usually after winter season as that is traditionally the busiest season of the year and one can show the business at it's peak. It usually takes 2-3 months to close a Laundromat sale and assuming the sale will take in the summertime, it will also be best since summertime tend to be slower in terms of business because of warm weather.

As far as in the operational cycle, the best time to sell is when the business is doing well and looks in it's best condition. Appearance is 50% of sale, if it looks in top condition, buyers will pay special attention. Another important factor is to make sure you have enough time in the lease and the equipment is in good condition. Nothing worse than walking into a Laundromat that has half a dozen "out of order" tags on them.

Selling Your Laundromat Operation

Are you in the Coin Laundry Business and are thinking of selling your business? Here are some of the questions and answers to most common questions when it comes to selling a Coin Laundry Operation.

Should I sell myself or choose a broker?

The benefit of selling a Coin Laundry Operation yourself is that you get to pocket more of the sales price by not paying a commission to a broker. However, one has to consider the expenses for advertising, issues such as financing, etc. By choosing a broker an Laundromat owner pays usually about a 10% commission on the sale but in turn one doesn't have to deal with the issues mentioned. The best is to try sell the business yourself first and then choose a broker as an alternative.

Sources: Laundromat123.com