secrets of buying and owning laundromats (preview)

Secrets of Buying and Owning Laundromats

By Brian Brunckhorst

Copyright © 2010 The Brunckhorst Group Inc. All rights reserved.

No part of this publication may be produced 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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Table of Contents Chapter I: Introduction ................................................................................................................... 7

The Basics .................................................................................................................................... 7

Why I Chose the Coin Laundry Business .................................................................................... 11

The Coin Laundromat Industry Trend ....................................................................................... 15

The Risks in Owning a Laundromat ........................................................................................... 17

Startup Costs ............................................................................................................................. 18

Can Anyone Own a Laundromat? .............................................................................................. 20

Should I Quit My Job to Become a Laundromat Owner? .......................................................... 22

How Much Can I Really Make? .................................................................................................. 23

Chapter II: Is the Laundromat Business for Me? .......................................................................... 25

The Lifestyle ............................................................................................................................... 25

Brooke’s Story: ...................................................................................................................... 28

Making the Transition from Employee to Business Owner ....................................................... 30

Are Laundromats Recession Proof? .......................................................................................... 32

The Proper Mindset ................................................................................................................... 33

Customers and Employees ........................................................................................................ 36

The Need to be Mechanically Inclined or Not ........................................................................... 38

Keeping Track of the Money ..................................................................................................... 39

Ideal Store Size .......................................................................................................................... 41

Do Bigger Stores Equal Bigger Headaches? ............................................................................... 42

Chapter III: Researching and Selecting a Location ....................................................................... 44

Location Matters ....................................................................................................................... 44

Why Renters Use Laundromats ................................................................................................. 45

Finding a Good Location ............................................................................................................ 46

Locating a Store for Sale ............................................................................................................ 48

Researching the Location .......................................................................................................... 50

Where to Find Key Demographic Information .......................................................................... 52

Chapter IV: Building a New Coin Laundry ..................................................................................... 54

Things to Consider ..................................................................................................................... 54

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When Should you Build a Store ................................................................................................. 58

Chapter V: Selecting, Maintaining, and Repairing Equipment ..................................................... 60

Equipment Value ....................................................................................................................... 60

The Ratio of Washers to Dryers ................................................................................................. 62

Equipment Manufactures .......................................................................................................... 64

Purchasing vs. Leasing Equipment ............................................................................................ 65

Extended Warranties & Service Agreements ............................................................................ 66

Finding a Good Repairman ........................................................................................................ 67

Getting the Best Deal on New Equipment ................................................................................ 70

Equipment Features .................................................................................................................. 71

Card Systems ......................................................................................................................... 72

Routine Equipment Maintenance ............................................................................................. 75

Chapter VI: The Store Layout ........................................................................................................ 77

Planning and Designing ............................................................................................................. 77

Equipment Layout ..................................................................................................................... 79

How to Get a Free Layout Design .............................................................................................. 81

Methods to Remodel a Laundromat ......................................................................................... 82

Know Your Codes and Regulations ............................................................................................ 85

Chapter VII: Lease Negotiation ..................................................................................................... 88

Laundromat Lease ..................................................................................................................... 88

Know Your Limits ....................................................................................................................... 91

Looking at Comparable Lease Rates .......................................................................................... 93

The Art of Negotiation ............................................................................................................... 93

Special Lease Concessions ......................................................................................................... 96

Getting an Expert Opinion ......................................................................................................... 98

Chapter VIII: Attended Versus Unattended Coin Laundries ....................................................... 100

Advantages and Disadvantages of Having an Attendant ........................................................ 100

Determining the Best Option for your Laundromat ................................................................ 102

Ways Attendants Generate More Profits ................................................................................ 104

Chapter IX: Financing a Laundromat .......................................................................................... 106

Finance versus All Cash Purchase ............................................................................................ 106

Different Financing Options and Key Considerations .............................................................. 109

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Seller Financing ........................................................................................................................ 112

Other forms of financing ......................................................................................................... 114

Responsibilities to Investors .................................................................................................... 118

Having an Exit Strategy ............................................................................................................ 119

Chapter X: Security for Laundromats ......................................................................................... 123

Video Surveillance ................................................................................................................... 124

Monitored Security Systems ................................................................................................... 126

Collections ............................................................................................................................... 126

Chapter XI: Advertising and Promotion for Laundromats .......................................................... 129

Marketing ................................................................................................................................ 129

My Thoughts about Online Marketing .................................................................................... 132

How to Spend Your Marketing Budget .................................................................................... 135

Tracking Your Results .............................................................................................................. 136

Frequency of Marketing .......................................................................................................... 137

Joint Marketing Ideas .............................................................................................................. 138

Marketing Cost Considerations ............................................................................................... 139

Chapter XII: Managing Your Business ......................................................................................... 141

Do it yourself or Get Help ........................................................................................................ 141

Identifying, Screening, and Hiring Your Staff .......................................................................... 145

Create an Employee Manual ................................................................................................... 147

Bonus Topics: ............................................................................................................................... 149

Squeezing more Profits out of your store ............................................................................... 149

Vending Machines Own versus Rent ....................................................................................... 151

Tax Advantages for Laundromats ............................................................................................ 151

Income Analysis ....................................................................................................................... 153

Products Available ................................................................................................................... 154

Building Your Team.................................................................................................................. 156

Top 4 Mistakes that Beginners Make ...................................................................................... 162

The Top Misconceptions about Laundromats ......................................................................... 164

www.mrlaundromat.com

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 1900s 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 electronics 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 customers can get their laundry done. 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 top‐load 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 top‐load washers can handle up to

16 pounds of clothes. The average lifespan of a top‐load commercial

washer is between 6 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. Today, front‐load washers

come in both soft and hard mounted versions, but except for the smallest

of washers, the soft mount machines are rarely seen in coin laundries, due

to the added cost for 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

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 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.

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 labor‐intensive, 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 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 does.

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.

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 service‐based 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. According to the Small

Business Administration, coin laundries provide investor returns of 25% to

50%. This is because self‐Service laundries have high fixed costs and low

secrets of buying and owning laundromats (preview)

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