The Laundry Lease And Its Effect On The Laundromat Valuation


Leases Buying Selling Laundromats

When they say LOCATION, LOCATION & LOCATION, they are definitely including vended laundries at the top of the list.

Many other businesses such as Car Washes, Gas Stations and many others where the investment into the property itself is near or even over half of the value of the business, require longer leases.

They are critical.



The Vended Laundry Is An Investment Business


Most investors in the laundry business know that at some point they may wish to sell their business. There are windows when this can be optimal. In this regards, let us understand why this long lease period is so important. When a developer first develops a laundry the initial lease term is most commonly a 25 or 30-year span, broken into original lease with options. This is good. The initial owner can operate the business using the full life expectancy of the original equipment and still have time to retool the laundry for a second generation. This owner has every incentive to keep improving and maintaining the laundry; expecting growth and a healthy return on the investment that he makes both in increased income and profits upon the sale of the business. The landlord and the property manager are happy. So are the other tenants, for the extra customers you are bringing to their businesses with time on their hands.

On the other hand, a laundry owner with only 15 years or less of lease time (It is assumed that a longer lease extension was attempted and rejected) would be advised to manage any reinvestment very closely. In order to make a reinvestment into a laundry without a longer term requires analysis. Remember, reinvestment in a laundry I often in the 6 figure range. It is common to have 15 years or more for a resale of a laundry. If you are the Seller you will be able to get a reasonable selling multiplier for your laundry with only 15 years, depending on the other elements; equipment condition, operating model and potential for continuing business with some measurable growth.

Now, if you are the Buyer, you will need to concern yourself with how much of what reinvestment you will need to make during the course of the remaining lease. You will want to maximize income but you also need to look at the length of time you will have to return the investment. As this lease gets eaten up the laundry value will also be limited to the ROI, in the remaining time allowed. At a point it is essential that the lease be extended. If not those final years of the lease, once the equipment is in bad shape, can be bad for all. It is clearly in the interest of the Landlord that the lease be sufficient in length in order to minimize the effects of this.

Making An Argument For The Landlord

Many landlords are reluctant to issue long lease periods. The reasons are many. Among them are, who knows what things will be in 20 or 30 years? We don’t see a reason for such a long lease. We get a higher rate with other businesses. We don’t know you. We are not sure we will want a laundry in the center that far down the road. These concerns must be addressed and demonstrated. The fact is, is that if you cannot have adequate time to re-invest into your business and get a reasonable return on the investment, you probably won’t. You will need to make measured improvements and unless a new lease can be negotiated the laundry will begin a process of deterioration causing problems in many ways; affecting the other Tenants, the landlord and Property Manager. It can also make it very difficult for anyone to sell the laundry.

Categories: Buying A Business, Selling A Business

Contributor:

Chuck Post
Areas Served: Southern California
Phone:  619-227-5711 Cell, 949-878-2755
32 years experience in the laundry industry, specializing in assisting laundry buyers with buying or starting up, re-tooling, laundries in Southern CA. Laundry buyer representation, consulting, due-diligence, lease negotiations, laundry valuations. Call 619-227-5711 (Cell).






  Helpful Resources To Assist In Selling And Buying California Businesses
Peter Siegel MBA, BizBen Founder, ProBuy, ProSell, ProIntermediary Programs

Founder Of BizBen.com (since 1994). I am the Lead Advisor for the ProSell, ProBuy, & ProIntermediary Programs. I consult daily with buyers, sellers, and brokers daily about buying and selling California small to mid-sized businesses. Call 925-785-3118.

Larry Larsen: Laundry Consulting, Brokerage, Insurance

I have over forty years of experience in the sales, ownership, management, and construction of coin laundries. He is a licensed broker active in the sale of coin laundries, a licensed insurance agent specializing in coin laundry insurance. Phone me at 714-630-9274 or 714-630-Wash.

Steve Erlinger: Laundry Broker, Consultant - Southern California

I specialize in the laundry industry broker and consultant in Southern California. I assist buyers navigate the many facets of finding, evaluating, and operating a laundry business. I also help current laundry owners find additional stores, sell, evaluate an existing laundromat. Call 949-500-5893.

Chuck Post: Laundry Buyer Representation, Consulting, Due Diligence

32 years experience in the laundry industry, specializing in assisting laundry buyers with buying or starting up, re-tooling, laundries in Southern CA. Laundry buyer representation, consulting, due-diligence, lease negotiations, laundry valuations. Call 619-227-5711 (Cell).

Brad Steinberg, Business Broker: Laundromat Specialist

PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.

Mike Hurrell, Broker: Laundry Specialist - Southern California

Providencia Properties Inc in association with Golden State Laundry Systems is a full service Coin Laundry Real Estate Broker. At GSLS you will receive personalized attention from our professional staff of coin laundry experts. To sell or buy a Southern CA laundromat call Mike at 310-223-2240 X209.

Peter Siegel, MBA: Business Purchase Financing Solutions

Niche business purchase financing advisory and loan placement services with SBA and Non-SBA Financing, Retirement Fund Rollover Solutions, Combo Financing Packages. To get professionally pre-qualified or more information on the ProBuy/ProSell Programs: 925-785-3118.

Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.


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Chuck Post Laundromat Industry Expert
Chris Lazurik Business Broker
Steve Erlinger Laundromat Broker
Larry Larsen Laundromat Broker
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Is The Laundry Business For You? Pros & Cons From A Laundry Broker / Adv...
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When Buying A Laundry Why Buyers Should Have An Exit Strategy When Buyin...
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