For Laundromat investors who are currently looking to enter the industry, these can be very challenging times. On the one hand, this is the beginning of a new tremendously significant industry that is surging due to the quality of the "smarter" equipment, cleaner customer spaces, more staff presence, and a heightened awareness of the larger payback for offering a better customer experience. On the other hand, though, too many of the brokers’ and sellers’ valuations are unrealistic, and therefore reasonably priced laundromats are not coming to market; it’s just all out of sorts.
The most significant issue affecting too high pricing is the large number of brokers competing for listings by promising higher selling prices to owners. Brokers who dabble but are not committed solely to this business may fail to realize what damage this overpricing can do to their buyer clients. Investors that are not aware of the hidden complexities of the laundromat investment often go forward and purchase these for that high price. Many of these have no realistic path. Many of these independent or industry-disconnected brokers fail to make certain that good laundry diligence is done or know how it’s done or even where to send someone to be sure that it is getting done. Or, that the lease itself is acceptable to invest. It is not uncommon to acquire a laundromat for one hundred thousand dollars and put three hundred thousand dollars more into it. But you must be assured that the path is clear for that to work out. If the lease does not meet industry requirements, financing the project may be difficult, even impossible.
So, when other laundry owners who wish to sell hear how much other laundromats are selling for they want more for theirs too. A broker willing to promise to get the high price is likely to get the listing. With the anticipation now unrealistic it may take a lot of convincing and the seller may be turning down several reasonable and even very good offers looking for that person who is, maybe, willing, knowing or not, to overpay. But don’t get fooled and don’t get discouraged either. This can be seen as a sign of what a powerful future this industry is growing into - so many want to get in. As I will explain more later, it is the total cost of the laundry project, including the acquisition cost, with all of the required interventions and the determining of the anticipated results that will dictate the highest selling price in the end.
However, there are plenty of laundromats on and off the market, and many are prime for retooling and rebranding. So, you need to understand what constitutes the value of a laundromat business. The high-paying, easily operated, sustainable laundromat that you are seeking is not on the market. It must be created and you must create it. And it pays well to do so.
The most overall acceptable value of a self-service laundromat is 60 times the monthly cash flow. This is most common but various areas are equated differently. So, what does a laundromat with this valuation look like on paper?
If there is a failure to meet these standards you may want to challenge the price.
It is doubtful that you will be successful by looking for these already fully sustainable investments. They are in short supply and when found will frequently go at a very high price and then still need restructuring and other work. The biggest rewards in laundromat investing come from the retooling and rebranding process. For the most part, by the time the laundromat is put on the market, the timelines are typically worn down and the laundromats you will see will mostly require some level of restructuring of the investment.
This is the independent entrepreneurial experience that you are looking for. You may just not recognize it yet. The operations are easy but the investment is very complex and most buyers find that out after the purchase. The growth we see from doing the work of retooling and branding is truly impressive.
In the end, the value of the laundromat is based on the final return after the costs of acquisition, restructuring the elements, and the cost of any lease adjustments required to achieve the desired terms, then new equipment, and so on.
All of this being said, this is a great business. Try not to get too discouraged while the markets adjust. You might use that time to educate yourself better and make a point of continuing to look at laundromats as they become available. Trust but verify all statements made about any business and do good laundry diligence in all acquisitions.
Chuck Post,
President, Chief Consultant, and Broker at, PBI Laundry Consulting, Inc. and, Author of the book, The Laundromat, an American Dream Business and Entrepreneur’s Playground.”
Chuck and his partner Chris Mason own and operate PBI Laundry Consulting, Inc. a laundry investors consultancy business. Chuck and Chris are well-established due-diligence experts in the field. They provide full-service consulting and due-diligence services to laundry investors. Chuck also does Expert Witness work in the field.
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I am an experienced entrepreneur, attorney, & business professor. I & my EvergreenGold® team offer business owners sound advice & expertise to build business value & achieve profitable sales. Call me today for a business evaluation & SWOT analysis for your business anywhere in the USA.
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Laundry consulting, due diligence, buyer representation: We preview laundries for you and evaluate them. 28 years laundry industry experience: buying, selling, valuing, retooling, analyzing, consulting services for laundry buyers and entrepreneurs in California. Contact us today about our services.
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For over 25 years Peter Siegel, MBA has been providing niche business purchase financial advisory and loan placement services with SBA Loans, Non SBA Financing, Retirement Plan Conversions, Note Restructures, etc. Call me regarding business purchase financing and to get pre-qualified: 925-785-3118.
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Cheryl's a restaurant business broker, over 25 years in the bar and restaurant industry coupled with a J.D. Cheryl works tirelessly to create successful strategies and effective negotiations for those who wish to purchase a new or sell an existing bar, restaurant, cafe, or night club. 415-309-2722
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If your business involves alcoholic beverage sales, we can help. Obtaining a liquor license transfer or selling a business with a license in California does not have to be a frustrating and overwhelming process. We have procured thousands of licenses for our clients.
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