How to Analyze a Laundromat Deal
When you are looking for a new laundromat to invest in, it is important to analyze the laundromat deal carefully. Some laundromat businesses have their success or failure decided at the purchase, so doing your due diligence is vital to your business’s success. There are many factors you need to consider before making a decision.
In this blog post, we will go over some important factors you need to look at when considering purchasing a laundromat. By analyzing these factors, you can make sure that the deal is either right for you and your business or one that you need to move on from!
Location, location, location! We have all heard it before when it comes to real estate but the same applies to laundromats as well. The laundromat needs to be in an ideally situated location with plenty of parking for your customers.
You will want to get an idea of who your ideal customer will be near your laundromat. Many different demographics make up ideal laundromat customers, so make you know the surrounding areas’ demographics, that way you know if the store is set up properly for the right customer. A few examples include blue-collar, lower-middle-class apartment-dwelling families, a large population of college students, or commercial businesses with washing needs.
You also want to make sure that there are not too many competitors in the immediate vicinity as this could cut your profits. Always do a quick check to see if any new laundromats are being built around the current one and how many existing laundromats are nearby. However, if there is little competition around, this could be a great opportunity to fill or improve a need in the area!
Size of Laundromat & Budget
The size of the laundromat is also an important factor to analyze. You will want to make sure that it is large enough for your budget but not too large that it is overpriced. If you are looking at a smaller laundromat, you will want to make sure that there is room to grow in the future.
The condition of the building and machines are also important to look at when considering the size. If the store needs major renovations, this could be a huge cost that you had not anticipated unless you do your due diligence. However, if the store is in good condition, this could be a great opportunity to get a deal on a well-maintained property!
When you analyze a laundromat deal, you will also want to look at the different streams of income that the store has. This includes things like vending machines, wash-dry-fold services, pick-up and delivery, and other ancillary services. These additional income streams can help to offset the costs of running the laundromat and increase your overall profits! It’s important to get as much accurate information on these other sources of revenue when analyzing a deal. We have a free Value Add Checklist with tons of great ideas on how to add income streams to your laundromat. You can download that checklist and our other free resources when you join the Laundromat Resource community!
Machines and Equipment
You will want to inspect the washer and dryers in the unit and check if the machines are outdated or in poor condition, this could be a huge cost to you and should be something you anticipate fixing and reflect that in your purchase price. Doing a thorough inspection of the laundry machines and other equipment in the store can save a lot of money in the long run. It’s better to catch problems early so you can factor that into negotiations when looking to purchase.
You will also want to make sure that there is a good mix of washers and dryers in the store. Having the right machines can give you the best return on investment (ROI) possible. Based on the needs of the customers and demographics, you want to make sure the store’s machine setup is optimized for maximum efficiency. You don’t want to have equipment meant to handle huge commercial loads when your customer base is more residential. You want the proper equipment for the job at hand.
This ties into knowing your area’s demographics and the business model you will be running. Having a variety of capacity sizes, based on your customers will help keep the store running smoothly and give your customers plenty of options for their needs.
When inspecting the machines and store equipment, inspect the store itself. Make sure the building is in great shape and make note of any areas that need attention. Are the floors in good condition? Do the walls need a fresh coat of paint? Are the fixtures falling apart? Do the folding tables need to be fixed?
If the store needs to be improved, this can be brought up during negotiations and can also be an area of opportunity for you to improve the store. While improving the store can be extra work, if negotiated into the price, this can be a good opportunity to add immediate value to the store.
You will also want to look at the lease terms carefully. This includes things like the length of the lease, the rent amount, and any other special provisions. You will want to make sure that the lease is favorable for your business and that you are not overpaying for the property.
It’s important to have a good understanding of the local real estate market and what similar properties are renting for. You don’t want to be paying too much rent or be locked into a long lease when prices in the area are going down. It’s important to have flexibility in your lease so you can adjust to changes in the market or fluctuations in business.
It’s important to understand the cost of utilities for the laundromat. This includes water, sewer, trash, and electric bills. You will want to make sure you have the most accurate and up-to-date information on what the current utility costs are.
It’s important to know the average amount of these bills so you can factor that into your overall costs. If the store is in an area with high utility costs, it could eat into your profits and make the deal less attractive.
You will need to know the price of vending in the store and surrounding competitors. Vending prices can have a big impact on your bottom line and you need to make sure that you are competitive. If the store is not charging enough for vending, this could be an opportunity to increase prices and improve profits! If the store is overcharging, resulting in a loss of business, this is something you need to factor in when considering purchasing.
How to Navigate Laundromat Pricing
Value Add OpportunitiesOnce you have done all of your preliminary due diligence, you can now focus on any areas of opportunity you can see for the store. There are many ways to add value to a laundromat and that will be different for every store and demographic. However, some common value-add opportunities include:
- Offering additional services such as pick-up and delivery, or wash and fold.
- Adding a café or seating area for customers to relax in while they wait.
- Installing coin-operated games, vending machines, etc.
- Adding a loyalty program to encourage customers to keep coming back.
- Installing TVs and using Atmosphere Tv for customer convenience (Laundromat Resource Pro Perk)