There’s Lots to Earn in the Laundromat Business

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Photo by Fotolia/Kondor83
A clean, well-lit space with well-maintained machines are essential in the laundromat business.

Two years ago, my family and I yanked up our urban roots and made a long-dreamed-of move to the Ozarks. And to “fertilize” our transplant, we “hoed in” a good measure of blind faith, hoping—seemingly against all reason—that an interesting means of earning a living would offer itself in our new, fairly rural environment.

Alas, it wasn’t long before our eyes were opened enough to confront a few “weedy” realities. Number one, the kind of businesses that fascinated us were generally enduring a mighty precarious existence in today’s economy. Second, we considered ourselves too inept to join the ranks of fine crafts people in our area. We also quickly decided that trotting out our city-bred skills in social service would simply be a return to one of the aspects of our lives that we’d fled the metropolis to avoid. And last, the thought of slaving away at minimum-wage, zero-benefit factory jobs didn’t swell our hearts with joy either.

At that point, our dream of remaining in the Ozarks might have gone down the drain, except for the fact that our home’s Victorian dungeon of a basement lacked that very feature. And no drain meant no laundry hookups, which in turn meant that our clothes had to be schlepped to the local laundromat on a regular basis.

Well, it just so happened that the “suds parlor” we visited sported a dog-eared “For Sale” sign. And as we waited for our clothes to dry, we looked over the building. The more we thought about it, the better the opportunity appeared to us. Now in retrospect, having taken the plunge, we can honestly say we’re very glad we did.

After all, our laundromat business is virtually inflation- and recession-proof. As long as we remain competitive, we can set our own prices. (We charge 50¢ per wash load and 25¢ for each 40 minutes of drying.) The business can also be reasonably lucrative. In our town of 11,000 folks, with two competitors, we owner-attendants can gross close to $4,000 in quarters monthly. With a little boost from vending machines, coupled with our leave-the-washing-to-us “bundle” business at 60¢ per pound, we’ve netted a surprising $1,800 per month.

And we can even set our own schedules as long as we comply with a few basic rules, such as opening on time, keeping the building and environs clean, and servicing the soda pop, coin, and detergent vendors on a regular basis. With those chores taken care of, we can harvest our fields or laze in the river while our 30 dryers and 25 washers toil away (for the most part faithfully) at the task of earning our living.

In fact, we heartily recommend that other folks consider buying into a lowly, unromantic suds parlor — provided, of course, that such individuals study the prerequisites of becoming an owner as well as the demands of ownership before taking any big steps.

Best Bets

If you do decide to take the plunge, choose a functioning laundromat with energy-efficient, minimal-repair, recently installed equipment; ample adjacent parking; a handy location; and a detailed financial statement showing a history of profit. Don’t convince yourselves that a low-cost, beat up bargain washeteria is a better buy. Older machines will gobble up lots more energy — in fact, utility bills can consume 40-60% of your gross income — and will also tend to break down. (In contrast, our 1979 washer and dryer models bite off only a 22% chunk of our gross.)

Eligibility for investment tax credits is another advantage of having newer equipment. Come April 15th, those machines can save you thousands of dollars in deductions subtracted from the amount you owe Uncle Sam. And in addition to all of the above, state-of-the-art equipment will often attract more customers.

Parking Is a Priority

As anyone who has used a laundromat can attest, people don’t enjoy carting their heavily laden baskets over long distances. Therefore, convenient parking is a real must. Our little enterprise happened to be smack dab in the middle of a shopping center, which also housed a supermarket, catalog pickup store, and retail hardware outlet. This setup would have been ideal if we could’ve moved our laundry to an end slot, which would have successfully wed the advantages of a one-stop-for-all-your-needs marketplace with greater accessibility. (As it is, customers of the other businesses often fill all of the nearby parking places.)

The Bottom Line

When considering a Laundromat, keep in mind that buying into a business with a lot of “potential” when you need cash now is about as practical as purchasing a packet of tomato seeds in the morning in hopes of making ketchup that night! Unless you can bankroll yourself and your family until that lucky day when potential becomes reality, pick a laundry with a proven strong profit base.

And do tread carefully if you find yourself talking to a business owner who claims he or she is making a mint in undeclared income. After all, a person who cheats the government may merrily bilk you, too. (If the record books are nonexistent or in a shambles, you may be able to estimate his or her gross income by studying the utility usage figures and employing the energy/profit percentages I mentioned before as a general rule of thumb.)

In all events, hiring the services of an accountant will likely be a very worthwhile expense. The financial expert can check over the books, help you set up your own accounting system, and acquaint you with your tax responsibilities.

Once you’ve completed your search and have scouted out the best prospect, approach the owner about possible terms and financing. And even if you are flush, I suggest that you scrap the idea of investing out of your pocket. Most big-time entrepreneurs use other people’s money, and do so because it’s usually to their advantage. Don’t be panic-stricken at the idea of owing thousands of dollars. We nearly fainted when we signed on the dotted line for our $43,000 mortgage, but managed to console ourselves with the thought that what counts is net, not debt.

Basically, then, you’ve got two options: Finance through an institution or talk the present owner into one of a number of other possibilities. If you decide on bank financing, shop around for the best terms. Our lender insisted on taking a mortgage on our (handily) paid-off house. Later, though, we discovered that another bank would have been content merely to consider the business as collateral. (In addition, if you can generate a little competition among lending institutions, you may be able to swing interest rates a point or two in your favor.)

On the other hand, if you hope to interest the seller in an alternative purchase scheme, make the acquaintance of several good books on creative financing. These should explain such strategies as offering a specified number of notes to be paid over a mutually acceptable time period at prearranged interest, with or without a down payment; or the foregoing situation laced with a sweetening of collateral; or securing a partner (maybe even the seller) who agrees to put up some (or all) of the cash in exchange for a share of the profits.

Of course, it’s wise to inspect the premises thoroughly before finalizing any deal. And if you’re actually buying the building, consider everything you’d take into account when purchasing a residence. Check the age and condition of the roof, wiring, plumbing, air conditioning, screens, and storm windows, plus the type and thickness of insulation (frozen pipes in a laundromat can be terminal), the condition of the parking lot, the age and condition of the water heater (and softener), the local availability of water, and last but not least, the reliability of your equipment.

You’ll especially want to make certain that the building’s foundation is strong and closed off against varmints. A skunk in the basement can close a washeteria with lightning speed.

Then again, if you decide to rent the building, do be sure to read over the lease carefully. Check, for instance, for specific clauses detailing real estate tax liability. Determine exactly who is responsible for exterior maintenance, especially of the roof, doors, and plate glass. Find out when the lease is due to expire and look into your option to renew, as well. Most coin laundry leases cover an extended period, perhaps ten years, at a stated rent. However, if the current lease is due to expire soon, asking to negotiate a new, satisfactory long-term lease — as a condition of purchase — is simple farsighted prudence.

After you’ve studied the paperwork carefully, pass it along to a good lawyer. Failing to include the cost of an attorney in your business budget is a foolish form of economy. For instance, a seemingly clear cut lease may not spell out all of your legal obligations. As an example, when you decide to sell the business, the landlord could choose — as a precondition of reassigning the lease — that you be held responsible for the new owner’s actions for as long as ten years after the purchase!

And More Red Tape

Once you’ve inspected the place and gone through the financing process, you’ll have three more hurdles to jump: acquiring insurance, making (or avoiding) utility deposits, and handling negotiations with suppliers.

Skimping on insurance protection is ill-advised, of course, but do shop around for the best buys. Our $100-deductible comprehensive business policy (which gives us $40,000 coverage) insures against all of the standard sorrows plus theft and business interruption (exclusive of plate glass, which is — fortunately — our landlord’s headache). This umbrella protection cost us $340 in 1982.

While you’re in the insurance office, ask about utility deposit bonds (if your local utility companies permit them). Ours cost $30, and saved us from tying up hundreds of dollars in direct deposits when setting up our laundry’s utility accounts.

Finally, you’ll quickly discover how profitable those beverage, snack, and detergent vending machines are, so negotiating with the necessary suppliers should be a top priority. Usually, such individuals will deliver only on a C.O.D. basis until you’ve established a spotless credit rating, at which time they’ll likely offer you the convenience of monthly billing.

Obligations of Ownership

There are four fundamentals to laundromat ownership: Keep the place clean, satisfy the customers, maintain the machines, and find ways of pleasing yourself.

Wiping counters, cleaning machines, mopping the floor, and scrubbing the bathroom ought to be daily chores. Properly designed equipment from a janitorial supply house, an industrial vacuum cleaner, a paintbrush (for dusting crevices), and a tape deck loaded with your favorite tunes can all help make these tasks seem less burdensome.

Naturally, ornery washers and dryers will demand a lot of your attention. Often a machine will break down for no explicable reason, only to resurrect itself just as mysteriously. Your best hedge against such annoying behavior is to establish a regular maintenance schedule that includes daily, weekly, and seasonal upkeep. If and when trouble does strike, haul out the owner’s manuals. They usually feature simple diagrams and lots of pictures to help those of us who aren’t mechanical geniuses tackle basic repairs. Consult the reference works at your local library, too, if necessary, and line up a good appliance repairperson in the event that all else fails (try to find someone who doesn’t mind teaching you how to diagnose and remedy problems). And if you become overwhelmed with interest and enthusiasm, correspondence courses in washer and dryer repair are available. Similar instruction can be found at many technical schools. (Manufacturers often offer owner-repair courses, too. Maytag, for example, runs intensive three-day owner-repair classes in Newton, Iowa.)

Of course, washers and dryers aren’t the only machines that are likely to give you a hard time. The dollar bill changer (which is just about mandatory in a laundromat if you don’t hire an attendant) is composed of many tiny, eager-to-malfunction parts, and unfortunately, service people for these specialized changemakers aren’t abundant in rural areas. For that reason, it’s a good idea to order lots of spare parts. (Otherwise, you may go stir-crazy — as we did when we were forced to hand out change from 7:00 a.m. to 10:00 p.m., seven days a week, for an entire month, while the local repair shop repeatedly bumbled our order. There was never a couple so glad to be replaced by automation!)

Customer Caricatures

Basically, you’ll find that there are two kinds of typical laundromat patrons: those who appreciate the care you give to their facility and those who couldn’t care less. Let the light shine on the former group — literally! Doing laundry is nobody’s favorite pastime, and washing clothes in a place that resembles the Black Hole of Calcutta is worse yet, so make the environment of your suds parlor as bright, pleasant, and cheery as possible. Extras can really make a difference, too. For example, you might want to give your customers the benefit of air conditioning during the sweltering summer months.

As for the more inconsiderate patrons, we’ve divided those often unpleasant customers into the following four categories, and have developed tips on how to deal with each one.

Unpopular parents are those who seemingly curb their children everywhere but in laundromats, which they appear to view as a kind of public park. Don’t expect them to care about your property, but keep in mind that you can usually get them to control their youngsters by diplomatically emphasizing the harm that may befall the children when they engage in unsafe practices. For example, say, “I fear that if you let your daughter swing on the dryer doors, she might fall and hurt herself.” Despite such tactics, though, unspeakable things will happen.

The misers will balk at spending 50 cents to do a load of wash, and will try to jam 20 pounds of laundry into a 12-pound-capacity washer (often packing it in with sticks brought along for that purpose). Or they’ll gorge a dryer chock-full of wet towels. Then, when the clothes don’t come clean — or the towels don’t dry — they’ll complain bitterly about your rip-off machines. The best you can do in such situations is to keep your eyes open for folks of this personality type and advise them of the load limits from the first.

However, you’ll also do well to make sure that your prices are competitive. Customers are extremely cost-conscious when it comes to doing laundry. You might have the cleanest, brightest, best-kept parlor in the county, but if some other place has lower prices, you can kiss a good bit of your clientele goodbye. So if energy costs (for instance) force you to contemplate a price hike, try to persuade your nearest competitors to go along with you.

A third group of unpleasant visitors, the thieves, will rob you of anything that isn’t tied down, including other people’s laundry. Some even attempt to rifle change from your machines. Your best defense will be to remove all of the coins on a daily basis. (By the way, the delights of fingering all your silver loot will pale quickly. Take your business to a bank with an automatic coin counter.)

The final class of less-than-welcome customers is made up of the hole hunters, who’ll blame your machines for every rip, tear, stain, or missing button. You’ll have to establish a wash-at-your-own-risk policy, or you will get taken. Furthermore, if you don’t make a habit of appeasing these folks, they’ll soon move on to easier pickings. However, do take care to respond to the legitimate complaints from customers who deserve compensation when a malfunctioning machine attacks their clothes. And, especially, be ready to bend over backwards to accommodate those “regulars” whose weekly multiple loads of dirty laundry will constitute a considerable percentage of your business.

Please Yourself

Of course, most of the foregoing customer-control ploys hinge on your being on hand to intercede in and/or intercept potential problems. However, you’ll also have to learn to relax and please yourself. It’s nearly impossible to be present every minute that your laundromat is open. And it’s a fact of life that no matter how many hours you make yourself available, catastrophe will usually wait to spring the minute you step out the door.

But you do have some options. Try, for instance, employing a part time attendant, paying him or her more than the minimum wage (to impress upon the individual that more than minimal effort is expected). Or you might even cut back on the hours your suds parlor is open for business. (All-night laundries are only for those owners who never worry about what has happened in their absence.) Do make an effort to be on duty when it counts the most, though, during boom times. In our facility that means Saturdays, Sundays, and Mondays.

Maybe you even have children you can interest in spending some time with the business, or perhaps you can offer friends a percentage of the daily take in exchange for standing “guard duty.” In any event, always leave your telephone number with your retail neighbors. And, above all else, keep smiling. If you live up to your responsibilities — and are blessed by good fortune — you’ll be “cleaning up,” and other people’s washday blues will keep you grinning all the way to the bank!

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