Here’s a Step-by-Step Plan for New Investors
It’s been said that a good location can make a bad laundry owner look good, while a poor location can make a good operator look bad. With this in mind, let’s go hunting for the next great laundry site!
If you are just starting out on your own and you’re looking for a site on which to build a brand new vended laundry (as opposed to buying an existing store, which is an entirely different topic), begin by choosing several areas in which you feel comfortable and that are not too far from where you live.
Typically, the best market areas in which to build a laundromat are not more than a 30-minute drive from the owner’s home. Above all, look for lower- to middle-income demographics; large households with a lot of children; nearby elementary and secondary schools; and areas with several apartment complexes, as well as perhaps mobile home parks.
Most apartment buildings have laundry rooms available for their tenants. Treat these laundry rooms as you would a competing laundromat. Look at the different sizes of machines, the hours of operation, and the condition of the facility and its equipment.
The location you choose must have easy access to and from the street, with plenty of parking and compatible businesses. These complementary businesses should be stores that your customers can visit while their clothes are washing and drying. Some good examples are drycleaners, fast-food restaurants, sandwich shops, hardware stores, discount and dollar stores, and (best of all) supermarkets. Enlist the help of a knowledgeable commercial real estate agent, but also check the listings in the real estate sections of the internet and your local newspapers. And, if you plan to lease, be sure to have your realtor make certain that the landlord is on board with having a vended laundry built in his or her space before going out to see the location.
Beware of what I consider to be natural barriers. These can be permanent concrete strips or medians in the middle of the street, forcing your customers to drive to the stoplight at the end of the block and make a U-turn to come back to your store. Or it can be a situation where customers have to cross a street or go up or down steps from the parking lot (of course, lugging their laundry with them).
I don’t particularly care for huge shopping centers with large department stores as sites for laundromats. First, the rent is probably too high for a typical laundry. And, secondly, department stores are traditionally not great for draw laundromat customers to a location. People shopping at department stores for clothing, shoes, and jewelry most likely aren’t in the mood to be doing their family’s laundry at the same time.
When looking at the potential competition don’t just drive by. Walk in and do a load of laundry. Spend some time in every store you would consider a competitor. Pay attention to the vend pricing; days and hours of operation; the customer work space; the number of folding tables and laundry carts; the overall size of the store; the number, size, age, and condition of the machines; whether or not the business is attended; and if wash-dry-fold and/or other services are offered.. Try to chat with the attendants to glean as much information as you can. I have always found it refreshing to see how much people love to talk while working in a coin laundry.
Not surprisingly, the best markets will always have the most competition. If there are no laundromats in a particular area, that’s not necessarily a good thing. You need to find out why.
After all, there may be prohibitive tap or sewer impact fees or other restrictions, or there simply may not be enough customers in the area. Remember, you don’t create new laundromat customers just by building a store in their neighborhood. Your customers will be people already using a laundromat. It will be your mission to drive them into your store and keep them. This is where size, condition, and management of your competition is critical.
In general, your self-service customers will come from the lower- to middle-income brackets. They will be people who, by and large, don’t own washers and dryers and whose apartment laundry rooms (if they have one) are unappealing. By contrast, middle- to upper-income and professional, single individuals will be more apt to use a wash-dry-fold service.
The combination of these two varying customer profiles can help create multiple profit centers and – along with perhaps a drop-off drycleaning service and the sale of laundry products and refreshments – should make for a strong bottom line.
When you find an available location in a strong market that meets your criteria, order a demographic study of the surrounding area, from a one-mile radius around your potential store, up to as far as five miles. The proper demographics for a vended laundry will be a critical component in the success of your new business.
The demographic study will show the overall residential population, the number of home owners and renters, and the number of occupants and ethnicities in these households, as well as income levels. Keep in mind that a demographic study typically will not indicate all of the commercial establishments that employ people from other neighborhoods and surrounding areas who come into your marketplace to work on a daily basis.
Ideally, renters with large families and lower income levels (30 percent to 40 percent of the market’s population) are preferred to support a strong self-service laundry business. Also, don’t neglect the fact that families who live farther away from your business but have access to a high-speed expressway can be at your laundry relatively quickly, despite being 10 miles or more away, and also may be considered potential customers.
If you are satisfied with the results of the demographic study, the next step is to call the landlord or property rental agent. I always prefer speaking directly with the landlord; however, in many cases, I wind up dealing with the property manager. Tell them exactly what you are proposing to do in their space.
Don’t shy away from mentioning the possibility of having to make roof penetrations for the dryer vents and concrete cuts for water lines in the premises as part of the buildout. This is not part of your lease negotiations; it is simply a necessary part of installing a modern vended laundry. You don’t want any misunderstandings down the road with regard to store development.
Years ago, many landlords and anchor stores (with the power of final approval over new businesses coming into a shopping center) were reluctant to rent to a laundromat. Fortunately, that’s no longer the case in most instances. Today’s fully attended, state-of-the-art laundromat has proven to be an asset to shopping centers, and landlords are happy to have them.
If the landlord is open to the ideas adding a self-service laundry to the mix of businesses in the shopping center, I recommend you get a preliminary concern out of the way before going any further. Inform the landlord that there will be a sizable capital investment in the space – which may include upgrading utilities – and that you will be needing a long-term lease. Some landlords consider a three-year lease with a two-year option to be “long term,” but for a laundry business, it’s not.
Personally, I’m always looking for at least a 20-year lease, which includes an initial term and several options to continue operating into the future. Keep in mind that the number of years left on your lease, including all options, can be either an asset or liability when you finally decide to sell your laundry business.
The initial term can be five or 10 years, depending on whether you’re financing your equipment through a bank or your distributor. The initial term of the lease should be long enough to cover the length of the financing. Actual lease negotiations and landlord participation can begin later. Be sure to have competent legal representation during this critical phase.
While awaiting the initial approval from your landlord, you can visit the local and county municipalities, as well as the various building authorities. You need to get specific requirements, restrictions, impact fees, and timelines from each local authority in order to open for business.
Always be sure to ask the building officials if anyone else has recently applied to build a new laundromat in the same area. It happens rarely, but it’s always a good idea to check. Also, it’s time to start calling the utility companies, cable companies, and so on – to compare pricing and place your initial deposits.
Thus far, we’ve discussed developing a laundry site, with you doing almost all of the leg work. However, your local equipment distributors can do all of that for you and more. They have relationships with the local landlords, realtors, shopping center owners and officials at the various municipalities. Many distributors already have storefronts available for buyers to look at. What’s more, their knowledge of building and operating laundries can prove invaluable, especially to new investors.
Even if you have already progressed to the point where you have a lock on a particular location, your equipment distributor will play a key role in the development of your business.
Distributors can provide you with a scale drawing of your laundromat with the proper mix and configuration of washers and dryers for your chosen market, as well as all of the ancillary equipment and supplies – such as a water heating system, folding tables, laundry carts, a scale, bill changers, soap vendors, etc.
In addition, distributors have access to finance companies that specialize in laundry equipment. Typically, the manufacturer that your distributor represents will offer financing, so they will have a vested interest in your success. They also have access to architects, contractors, sign companies and more – to provide a complete buildout, from beginning to certificate of occupancy to grand opening.
The distributor also will generate a pro forma, showing the various number of “turns per day” the machines are capable of within your market, along with the expenses related to your operation. You will be able to see where your breakeven point is and when you will begin turning a profit.
At this point, all that’s left to do is order the equipment from your chosen distributor and sign the lease from landlord…
Good luck in your brand new laundry venture!