Starting or Buying a Laundromat

A laundromat sells time on machines. Customers pay to use a washer for 25 to 35 minutes and a dryer for 30 to 45 minutes. There is little inventory, no receivables and, in a self-service model, small payroll. That is why the business attracts investors. But the store still carries heavy fixed costs: rent, water and sewer, natural gas, electricity, equipment loans and repairs.

Where the money goes

Every store is different, but a self-service laundromat's costs, as a share of revenue, often fall in these ranges:

The wide labor range is the key variable. An unattended store with remote monitoring may spend almost nothing on staff. A fully attended store open 6 a.m. to 10 p.m. with wash-and-fold will spend a quarter of revenue on wages, though it also earns more.

Laundromat buyers usually talk about net operating income (NOI) or seller's discretionary earnings (SDE). NOI is revenue minus operating costs, before loan payments and owner pay. SDE adds back the owner's salary and personal perks. Know which one a broker is quoting.

The turns-per-day number

The core productivity measure is turns per day: the average number of paid cycles each washer completes daily. A store's washers might average anywhere from 3 to 8 turns per day, with busy urban stores higher and struggling stores lower. Dryer revenue follows washer revenue, so most owners analyze the washer side first.

Monthly washer revenue = Number of washers × Average vend price × Turns per day × 30

Example: 30 washers × $5.25 average vend × 5 turns × 30 days = $23,625 in monthly washer revenue. If dryer revenue adds roughly 25% to 40% on top, the store might take in about $29,500 to $33,000 a month from self-service alone.

The same formula tells you what improvement is worth. Raising turns from 5 to 6 on 30 washers at $5.25 adds $4,725 a month. Raising the average vend by $0.50 at 5 turns adds $2,250. Both are realistic levers.

A sample monthly profit and loss

Here is an illustrative month for a 2,800-square-foot store with 34 washers and 40 dryer pockets, partly attended, with a small wash-and-fold service.

Notice two things. First, the debt service line is large; a laundromat is often bought with substantial borrowing. Second, wash-and-fold brings revenue but also most of the labor cost. That is fine if it is priced correctly, which Chapter 9 covers.

Why stores last, and why some fail

Laundromats tend to have long lives because demand is steady: renters without in-unit machines need clean clothes every week regardless of the economy. Stores that fail usually share a few causes:

• A lease that expired or was not renewed on reasonable terms
• Aging equipment that breaks often and drives customers to a competitor
• A new, bigger, cleaner store opening nearby
• Utility costs that rose faster than vend prices
• An owner who bought on inflated, unverifiable revenue claims