How to Buy a Laundromat
From startup costs to growing pains, starting a business from the ground up can be challenging. Buying an existing laundromat could help you break into the laundry business without having to carve out your own space in the market.
- Buying an existing laundromat is generally more affordable than starting a new one.
- You can find laundromats for sale on commercial real estate websites and business marketplaces.
- Before you make an offer, consider the laundromat’s location, equipment and overall financial health.
1. Choose a business model
Before you invest in a laundry business, you need to decide the type of laundromat you want to run. Laundry businesses come in a few shapes and sizes. With a full-service laundromat, customers pay a higher price to have their laundry washed, dried and folded for them. With a self-service laundromat, also referred to as coin laundry, customers pay to use the machines you provide to do their own laundry.
Self-service laundromats focus on convenience, with coin-operated washers and dryers generating consistent income. Vending machines sell detergent, dryer sheets, fabric softener and other extras to ensure customers have everything they need.
Because minimal staff is required, coin laundromats tend to have lower operational costs than full-service locations. However, some business models combine aspects of both self- and full-service laundromats to diversify their revenue streams. For example, a coin laundromat may choose to provide:
- Washing or folding services: If your customers don’t have time to hang around while their clothes are washing and drying, you could offer an add-on wash-and-fold service, charging more for the convenience.
- Dry cleaning partnerships: Some coin laundromats partner with full-service dry cleaners to offer a wider range of services. Dry cleaning often requires specialized equipment, so outsourcing could help you save costs while cross-promoting both businesses.
- Other payment methods: Though self-service laundry once required coin payment, many modern laundromats now offer card and mobile payment options.
2. Look for laundromats for sale
Once you’ve determined the type of laundry business you want to buy, it’s time to start looking for laundromats for sale in your area.
In some cases, it might make sense to work with a business broker or commercial real estate agent to find a business that meets your criteria. You can also search for businesses that are for sale yourself by using commercial real estate websites and business sale marketplaces.
For example, BizBuySell.com is a business marketplace that allows you to browse franchises and stand-alone businesses for sale. You can filter your results by industry, location, listing type and price range, which can help you narrow your search.
As you’re looking at laundromats you might want to purchase, consider how each is positioned in the market. Is there a lot of foot traffic? Is there heavy competition with nearby businesses? Location is one of the most important factors in any business, so you should weigh your options carefully.
As you evaluate what’s for sale, make a list (or bookmark in your browser) any laundromats you’re interested in for the next step.
3. Estimate costs
Now that you have a better idea of how laundromats in your area are priced, use the businesses on your shortlist to estimate upfront and ongoing costs to see how they align with your finances.
Though buying an existing laundromat is generally less expensive than building one from the ground up, you’ll still need a significant sum to purchase the business and make it your own. In general, buying an existing laundromat costs between $200,000 and $600,000, though costs vary significantly by location. To estimate costs for each of your options, follow these steps:
- Estimate your down payment: Using the listed price for the first laundromat on your list, calculate the down payment you might need to purchase the business. Down payment requirements depend on the type of financing, but you generally expect to put down at least 10%. If you’re able to manage the down payment, continue on to the next step. If not, go back to your list of businesses for sale and eliminate any that are too expensive.
- Estimate monthly loan payments: Subtract your down payment from the total purchase price. The result is what you’ll have left to pay on your business loan. From here, you can use a loan calculator to estimate your monthly payments. Keep in mind that this is just an approximation — your actual costs will depend on the rates and terms you qualify for.
- Estimate operational costs: Some business listings include information on current business expenses, which can help you estimate other assorted costs like rent, utilities, inventory, maintenance and more.
- Estimate business revenue: Look for listings that include information on gross revenue and business cash flow, as these numbers can help you make financial projections. If financial information isn’t included on the listing, you may be able to contact the listing agent directly for more details.
- Estimate potential profit: Subtract the estimated business expenses, including loan payments, from the estimated revenue to understand the potential profits. Make sure you consider how profits could change if revenue went down and costs went up.
Use these estimates to decide if a business makes financial sense for you. Is the potential profit within the range of what you would need to live comfortably? If not, that business may not be a good fit. Taking the time to run these calculations for each laundromat on your list can help you narrow down your top choices.
If you prefer to build your laundromat business from scratch, be prepared to pay a hefty price. Laundromats can be a lucrative business, but they require a good location and a fair amount of equipment to operate. As such, experts suggest that a new laundromat costs between $200 and $300 per square foot, with total costs averaging between $400,000 and $1,000,000.
4. Issue a letter of intent
If you find a business you’re interested in buying, it’s a good idea to issue a letter of intent. This nonbinding agreement communicates your intention to buy the business, which gives you the right of refusal, meaning someone else can’t swoop in and buy the property.
It also allows you to gather more information about the laundromat you’re interested in buying, including the detailed financial, tax and legal information you’ll need to decide if the purchase is worthwhile.
5. Do your due diligence
At this point, you’ve found a laundromat in a good location that fits your budget. Now you need to double down on your research to make sure the business is worth buying. This is called due diligence: the process of thoroughly investigating a business before buying it.
Due diligence includes digging deeper into the company’s legal, tax and financial records, among other things. Here are some of the areas you’ll want to inspect:
- Bank and tax records: Recent bank statements can shed light on the profitability of the laundromat, while income, employment, excise and sales tax returns can help you understand the costs of running the business. Make sure that the financial projections provided by the seller match the information reported on these documents.
- Licenses and permits: To be legally compliant, your business will need certain permits and licenses. While licenses and permits can be transferred in certain circumstances, you’ll need to submit a form to complete the change. Depending on where you live and how the laundromat is run, you may need to apply for new licenses.
- Zoning and environmental regulations: These vary significantly between locations, so you’ll need to do some research to understand the rules and regulations that apply to you. For example, some localities may set specific energy standards that must be met.
- Age and condition of equipment: A laundromat’s revenue is entirely dependent on washers, dryers and other equipment. Ask for service logs and repair history for all washers and dryers, and consider how the age and condition of the equipment could impact your maintenance costs.
- Lease agreements: If the business is leasing commercial space, find out if the lease can be transferred to a new owner. If so, review the lease terms to make sure you’re comfortable with the monthly cost and renewal options.
- Legal issues: Check if there is any pending litigation involving the business or its current owner.
If your due diligence uncovers information that doesn’t bode well, the business probably isn’t a good fit — but that doesn’t mean your dreams of owning a laundromat are dashed. Circle back to your shortlist of businesses for sale to see if there might be a better option.
6. Secure financing
If you decide to move forward after careful review of the financial and legal aspects of the business, the next step is to figure out how to finance your laundromat. There are multiple financing options you can consider to fund your business, including:
- Business loans: Both traditional and online lenders offer small business loans you can use to acquire a business, though the best rates and terms may be reserved for business owners with excellent credit history.
- SBA loans: Backed by the U.S. Small Business Administration, SBA loans have lengthy repayment terms and capped interest rates. SBA 7(a) loans can be used for a full or partial change of ownership, but you’ll typically need a strong credit score and a down payment of at least 10% to qualify, and loan funding can take several months.
- Seller financing: In some cases, the current laundromat owner might be willing to loan you the money to buy the business. This is called seller financing, which refers to buyers and sellers negotiating financing without involving a third-party lender. Seller financing can be faster and more attainable for borrowers who don’t meet the minimum criteria for a traditional business loan. However, the overall purchase price might be higher.
7. Negotiate and close the deal
Some industry experts suggest that an existing laundromat should be worth four to six times its annual net revenue, though things like location and the age and condition of equipment can affect this price. Your business attorney can help you decide what the business is worth and what you should offer. They can also work with the seller to negotiate the best purchase terms.
Before you close the deal, make sure your attorney examines all legal documents, including contracts, lease agreements and financial disclosures, to make sure there will be no surprises down the road. Your attorney can also help you update any required business paperwork after the deal is done.
8. Advertise your laundromat
Once your laundromat is bought and paid for, you’ll need to prepare to re-launch it as your business. This might include updating equipment and decor, creating new signage and advertising your business on social media.
Keep in mind that while the business is already established, new ownership can potentially affect customer relationships, especially if repeat customers had established a personal relationship with the previous owner. For this reason, it’s important to invest in marketing and advertising to reach new customers in addition to existing ones. Discounts, promotions and loyalty programs can be a good way to attract new customers and encourage repeat business.
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