# Coin Laundry Business



## Letran (Apr 7, 2014)

Hello All,

I'm on the hunt to start a small business that I can handle with minimal time.

For this reason, I've been looking to buy a resale midsize coin laundry. There is not too many in the market. Majority of them in the range of 300k to 600k ussually selling for a factor of 4 to 7 times net profit.

e,g, $125k net business will sell for 625k factor of 5

I am completely new to this business or buying any business in particular. and would appreciate any feedback.

One of my biggest concerns is that it would usually take 5 to 8 business years to pay off the cost of the business. Therefore I consider that I do not see my first penny until after that. Since most do not own the property I see no appreciation of value of my 625k that was tied in, not to mention any opportunity lost.

Any guidelines or basis to consider in buying businesses will be helpful. Thanks

Also these lines of businesses usually does not qualify for loans therefore all cash which is another concern


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## fatcat (Nov 11, 2009)

yeah, as someone who has owned a few small businesses
spend about 15% of the time that you plan to own them investigating them
if you plan to own it for 10 years, spend a year and half learning and understanding the businesses

consider a franchise which also need to be investigated _carefully_ but are probably a better choice for a first timer


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## Rusty O'Toole (Feb 1, 2012)

The laundromat business appealed to me so I did some research a few years ago. Typical price for a small business is 2X annual earnings. As you point out, they want multiples of that for a laundromat. If you build your own laundromat the price is even higher, to where there is no way to sell and break even, you have to keep it for several years and pull some of your money out before you can sell.

This convinced me the laundromat business was not for me.

I may be a pessimist but I don't see much future for any small business in Canada anymore. You would be far better off in every way to go to work for the government.


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## OurBigFatWallet (Jan 20, 2014)

I'm curious how a car wash would compare.....seems like an interesting business and would be awesome to see all the different types of cars coming in (yeah, I'm definitely a car guy)


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## Synergy (Mar 18, 2013)

l looked into the car wash biz and I came to the conclusion that the real money was in purchasing the land, building the car wash, running it for a few years and flipping it for a big profit. The valuations / asking prices for many of the existing coin car wash businesses I've looked at where too rich for my blood. The mechanical equipment can get pretty complex these days with the automatic bays and makes it harder for a DIYer. 

The coin laundry business doesn't appeal to me as there's generally no RE involved in the deal.


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## Just a Guy (Mar 27, 2012)

I think there was an article in Moneysense or Money magazine in the last month or two where they profiled a woman who started a chain of upscale laundry mats. You may want to look it up.


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## tygrus (Mar 13, 2012)

I was doing a lot of research on a car wash and had a real plan to go ahead and develop one, until I saw this video:

https://www.youtube.com/watch?v=UwoGsCAKsxU


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## Janus (Oct 23, 2013)

Am I missing something? This seems oddly attractive.

If you're describing a business that makes $125k in *profit* for a 625k investment, that's an earnings yield of 20% or a P/E of 5. Very cheap, but what do you expect for low growth.

I think the way to approach it would be to compare it to annuities - and here's why it seems attractive to me. Where else can you put down $100 for a stream of $20 a year into perpetuity, and largely protected from inflation to boot? I've never looked at an annuity product before but I imagine yields are what... below 10%?

If you go to the RBC insurance website and put in 625,000 as your investment and try to buy an annuity, you get... $34,343.38 per year. Versus $125,000. Now of course there is business risk, but you see the argument I'm trying to make. Extremely low risk business, almost no direct involvement, and it has an earnings yield of 20%? You can't think in terms of the payoff period*, think in terms of what a similar risk investment would yield you. Described as-is it seems like a great investment in my opinion.

To get $125,000 per year in passive income I need a stock portfolio yielding 5% of roughly $2.5M... and you can do it with a single $625,000 laundromat?


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## Janus (Oct 23, 2013)

To illustrate, here's your cash flow balance if you bought a laundromat every 5 years. Cash flow includes yearly aggregated profits and the cost of each and every laundromat. So for instance, year 1 cash flow is the cost of $625,000 plus the inflow of $125,000 profit. Year 5 all of your aggregated profit is spent on another laundromat, but now you're making $250,000 a year in profit, and so on. 

*Point is, I'll take a 20% ROI any day of the week, even if it's not growing. The laws of compounding will do the rest.* 

Year	Cash Balance
1	-500000
2	-375000
3	-250000
4	-125000
5	0
6	-375000
7	-125000
8	125000
9	375000
10	625000
11	375000
12	750000
13	1125000
14	1500000
15	1875000
16	1750000
17	2250000
18	2750000
19	3250000
20	3750000
21	3750000
22	4375000
23	5000000
24	5625000
25	6250000
26	6375000
27	7125000
28	7875000
29	8625000
30	9375000


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## tygrus (Mar 13, 2012)

For $125k a year in profits, we are talking in the range of about 100 customers per day. Seems like a lot, but in a 24/7 operation it might be possible. 

I am trying to figure out who uses a coin op washing outlet when most people and apt blocks have their own washer dryer on premises. Maybe a demand for washing oversized items like comforters and such.


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## donald (Apr 18, 2011)

I would bet it comes down to location(ie this scenario is prob laid out perfect in theory but doesn't match reality)1st and foremost(this is prob the biggest hurdle)
Nobody mentioned capital expenses!To service 100 customers a day a owner would need how many washing machines?I understand if your buying the business pre-existing your also buying the sellers inventory(where is the life cycle of the machines at in the op's example?hintrob near the end?)How much does 1 coin laundry machine cost?how many hrs can they withstand before replacement?(cost of one new one?)what about the service manual of said machines?(how many hrs does one need to update certain parts on warranty?how much are parts?how much a hr does the service company charge for repairs?
With 100 customers on the premise a day is there need for supervision?do you not need at least somebody(employee)monitoring the business?(for say liability purposes?do you really just open your coin laundry in the mourning and than come back at night and that is it?(I doubt it?)nothing figured in for wages being paid.
What about the supplies?baskets?carts,detergent,dryer sheets who pays for that?you or customer?(do they bring there own?)
What about cleaning the premise itself?floors,walls.mats,dusting,window cleaning(cleaning company?once a week?)
What kind of insurance do you need(liability)so you don't get sued to high heaven if someone breaks there neck on your premise
I think if one was to dig deeper one would prob start discovering it is not as it seem.


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## Rusty O'Toole (Feb 1, 2012)

The problem is, it is not a passive investment. It is a business and a certain amount of work is involved. Also, repairs and upkeep are required. And unless you own the property, eventually your lease comes up for renewal.

It is a business not a passive investment and needs to be valued as such.


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## Janus (Oct 23, 2013)

Rusty O'Toole said:


> The problem is, it is not a passive investment. It is a business and a certain amount of work is involved. Also, repairs and upkeep are required. And unless you own the property, eventually your lease comes up for renewal.
> 
> It is a business not a passive investment and needs to be valued as such.


Well said - I imagine any "simple business" investment with 20% earnings yield involves a lot of time spent on random tasks and enduring a lot of bullsh*t that a paper security doesn't burden you with.


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## JordoR (Aug 20, 2013)

I really wouldn't have even though coin-laundry businesses were still around. To me it seems pretty standard that any home/apartment comes with an in-suite unit. Where location might come into play, is finding a location with a lot of older apartment buildings in the area, because it seems to be the older apartment buildings that have the coin operated laundry rooms in the basement. 

I could have seen a play for something like this maybe 5-10 years ago, but I think as time goes on (especially in the 10-20 year timeframe), the customer base will decline more and more. No new apartment/home will be built this day without laundry in the unit (in my home city at least) and eventually the older buildings will be phased out with the newer. I would be concerned about investing in something that has decreasing potential and ability to eventually get my money out. However I suppose if you only need 5 years to get your capital back, it should be OK... I would just be very cautious about a coin operated laundry business.


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## Eclectic12 (Oct 20, 2010)

^^^^ 

Yet the two locations I pass regularly seem just as busy today as they were ten years ago.


For the one location, there's at least three new high rise condo building that have replaced older two store front. Like you, I'd have expected a drop off in traffic but have yet to see it.

The second location has mainly homes and businesses around it so I don't know why it's there (also three new tall condo buildings built in a four block radius) but it's still there.


So investigation IMO is needed.


Cheers


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## bgc_fan (Apr 5, 2009)

There's one near my place that does dry-cleaning as well. So you have the dry-cleaning business being supplemented by the coin-op. That deals with the issue of monitoring the machines. They can be popular in high rental areas, or student ghettos. I think there's one near Ottawa U in Sandy Hill. It's all about location.


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## Synergy (Mar 18, 2013)

Some of the coin laundry businesses have those extra large machines that are great for large items that typically don't fit well in residential machines - such as duvets, large blankets, winter jackets, etc. That will continue to be a draw for some people.


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## e86s54 (Mar 27, 2014)

tygrus,

The video is along the same lines as self-healing paint Nissan put out a few years ago. Lots of hype and no substance. First, Nissan is not going to be selling the product. Why? Cause it doesn't really work. This after-market spray will cost several hundred of dollars and won't last very long (months)....kinda the same as wax which has the same hydrophobic kind of behavior. In the video, they have dirt suspended in water, if the dirt is not in water, it will stick. If the dirt is then sprayed with water, it will hot loosen the soils off the surface. I know a few car wash operators and none are worried about this product and are hoping they come up with a better product as it would make washing cars easier. Does this make sense...sure, look at California...nice weather, no rain, every car is shiny, yet car washes prosper. Car washing is a much mental as physical.


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## e86s54 (Mar 27, 2014)

1st, who's numbers are you going by? These cash businesses are notoriously skimmed and numbers are hard to prove. If the owner is strait up, that's great...if he has 2 sets of books, you can't trust a word he says and so walk away.

2nd, don't under estimate the work involved. Someone needs to do the work and be on standby. You may make $125k a year, but is that after you pay yourself for time cleaning, maintenance, accounting, etc? Not likely. If those are the real numbers, then think 50% of the $125k as ROI.

There are 5 laundromats in my area, I have looked at a few as they are all for sale (not a good sign). I suggest you go to a laundromat forum and start educating yourself before going much further.


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## Oldroe (Sep 18, 2009)

The basics of this Rich Dad Poor Dad books is owning laundry mats, car wash and any other biz that doesn't require 18 hrs. a day on your behalf.

Most hire minimum wage workers to do laundry for people without the time or energy. They act as security, cleaning and trigger maintenance calls.,

And yes a river of cash is likely going threw these places.


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## e86s54 (Mar 27, 2014)

Oldroe said:


> The basics of this Rich Dad Poor Dad books is owning laundry mats, car wash and any other biz that doesn't require 18 hrs. a day on your behalf.
> 
> Most hire minimum wage workers to do laundry for people without the time or energy. They act as security, cleaning and trigger maintenance calls.,
> 
> And yes a river of cash is likely going threw these places.


Well having owned these kinds of businesses and knowing about a dozen people who do or have, I would say that your assumptions are generally incorrect.

First, you get what you pay for in staff. So low skilled/education people are typically in that situation for a reason and thus have a plethora of personal issues. So it may work in a structured environment like a fast food restaurant, but not in situation where the employee is mostly alone and needs to motivate him or herself. So you get lots of turnover and some really useless people. I once had one employee who asked me where the light switch was (it was next to the door, like any other room). They also typically can't do maintenance over and above the simplest non-technical issues.

I would also say that most of those businesses (except for some car washes) are 'low barrier to entry' anything but highly profitable. Usually they're barely worth the bother and the owner loses interest in working since the compensation is not reflected. That 'laundromat people' clientele that are typically a pain to deal with.

The 'show up and collect the cash' belief is a myth.


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## fatcat (Nov 11, 2009)

the fact that they look busy when you drive by doesn't mean a lot
they could be the only one left in an area that used to be served by 4 or 5 of them
how often do you see a brand new laundry going in ?

my impression is that its a slowly dying business, ok for established players but not a growth area

if you want to mix a laundromat and a diner and or coffee house, maybe that would be different, target a younger demographic that will drive across town to do their laundry perhaps

for that kind of money i would be picking something off this list: http://www.entrepreneur.com/franchises/rankings/franchise500-115608/2014,-1.html#


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## OurBigFatWallet (Jan 20, 2014)

tygrus said:


> I was doing a lot of research on a car wash and had a real plan to go ahead and develop one, until I saw this video:
> 
> https://www.youtube.com/watch?v=UwoGsCAKsxU


That's really cool. I imagine that is a new type of final coat they put on the clear coat which I assume is expensive now but maybe it will become standard in the future. If that's the case most car washes would see significant decreases in business


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## Eclectic12 (Oct 20, 2010)

fatcat said:


> the fact that they look busy when you drive by doesn't mean a lot
> they could be the only one left in an area that used to be served by 4 or 5 of them


For these two ... there's no other places for the last 11 years ... no idea before then.




fatcat said:


> how often do you see a brand new laundry going in ? ...
> 
> if you want to mix a laundromat and a diner and or coffee house, maybe that would be different, target a younger demographic that will drive across town to do their laundry perhaps ...


I find this line interesting ... the only new laundry I am aware of was a combination laundry and bar, in a trendy area of town.
It lasted about five years before closing up shop.


... not that any of this applies to the OP, who should do appropriate research ... :biggrin:


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## e86s54 (Mar 27, 2014)

OurBigFatWallet said:


> That's really cool. I imagine that is a new type of final coat they put on the clear coat which I assume is expensive now but maybe it will become standard in the future. If that's the case most car washes would see significant decreases in business


Nope on all 3 counts. See my earlier post.


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## Oldroe (Sep 18, 2009)

And the other point is people are adding to your wealth 24hrs day 7 days a week.


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## Rusty O'Toole (Feb 1, 2012)

First off if you take advice from Rich Dad Poor Dad you will get hurt badly. Take it for the cheerleading if it motivates you, but don't take it literally.

Most laundry machines in apartment houses are placed there on a 50/50 split. In other words they do not belong to the building owner, they belong to an independent contractor who supplies them for 50% of the take.

To me this is a much better deal than owning a laundromat.


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## Oldroe (Sep 18, 2009)

Well Rusty I read it 15-20 years ago and laughed and bought bank stock.


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## donald (Apr 18, 2011)

This prob goes without saying but.........we all know rich dad is a myth right!there was no rich dad.(some good principles in the book though)


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## Letran (Apr 7, 2014)

Thank you all for the feed back.

*fatcat-(Reply to Post #2)* I've looked at franchises. Most of them are in the food industry, not too many deal with cash. ATM's is another but income small and business growth very gradual 

*Rusty O'Toole-(Reply to Post #3)* Most are multiples of 3 even as much as 7. The way I calculate it it will take me about 4-6 years depending to recover the price I paid for the business. That is when I see that real profit begins assuming that the business income is stable. But then the equipment is then 5-6 years older which also depriacates. I think that calculating it is this way is prudent but not necessarily the correct way.
Small business from my understanding TODAY is growing and the backbone of our economy, its what I read somewhere anyway.

This way probably makes more sense

Price of Business: 625k
Oppourtunity cost of 625k (5%) =
Depreciation of chattels and equipment (over 20yrs) =
Net profit yearly= +/-

Above might give me the numbers I'm looking for

*OurBigFatWallet-(Reply to Post #4)* im a car guy too but but start up for car wash mostly with property is over a mil. I'm not too sure if net income is anybetter than these coin launrymats

*Synergy-(Reply to Post #5) *During my research into small businesses. It is dawning on me that taking the risk of opening something new or taking over a business and reselling it for multiples of unrealized profit is also a good business in it self but I'm looking for a litlle more stable income and im looking to transfer the businesses to relatives down the line anyway.

*Just a Guy-(Reply to Post #6)* Thanks, a twist in the Laundrymat business will set your business apart. This will reinforce hopefully to me that coin laundrymat is NOT a dying business 

*tygrus-(Reply to Post #7)*I hope u weren't serious when u said that a futuristic add discouraged you. Reminds me of when 20years ago that books will be soon obolete. Amazon apparently did not read that article 

*Janus-(Reply to Post #8) *Thanks Janus for a different point of view. It did give me a different perspective. Though I was counting on a stream of income as oppose to capital growth hence I did not dump the money in equities.

*tygrus-(Reply to Post #10)* 100 customers per day is not an issue. in this business number of cycles per machine is what counts. I need each of the 24 washers to be used at least 7.33 per day. To generate 31k per month gross or 7k/wk thats $200k in net income for the year
Each cycle is about 20 minutes. which equals to rougky 3.5hrs,even at 16hrs per day normal opening hours

*donald-(Reply to Post #11)* LOcation is key, parking is important, foot traffic is a bonus. Maintenance of machines is also a big cost specially for laudrymats over 15years. I've been assured that a night school course on appliance repair and or training from the current owners will count down on repair costs. I would also staff the place with staff to keep it clean which will also allow for income from Wash Dry & fold. It is mimal cost about 2.5k per month which in hopes the WD&F will most likely cover. The place will also have liability insurance as most businesses

*Rusty O'Toole-(Reply to Post #12)* I'm blessed with a few relatives that will be happy to work the business for me that I trust. Part of this is also a make work project for a couple of realtives that needs help.

*JordoR-(Reply to Post #14)* Very valid points, like any business you will have to know when to get out. The location you have will determine the long term potential of these laundrymats. but make no mistake there is amarket for them. My wife even with the full size washer and dryer in our home will go and spend $30-40 to use the double-triple loaders for duvets and comforters. as Eclectic12 and Synergy has pointed out

*bgc_fan- (Reply to Post #16)* Yes possible Dry clean drop off depot and small alterations for extra income

*e86s54-(Reply to Post #19)* the same reason of course I want to get into CASH business.

There are a couple of ways to substantiate the net income numbers from the sellers. There are of course no Guarantees
1. Machines running sampling - As prospective buyer frequent the establishment and at different times of days count the number of washer and dryers running
the more sample counts you have the better. This will give you a good percentage of how many machines are used at any given time. Depending of the income that you need to achieve. OVer 35% is a good number
2. Count Days - Do a minimum of 3 count days where the machines are emptied and proceeds counted in front of you.
3. Utilities- One of the beauties of the business is that through calculation of water usage for the day the week, month gives you a good indication how much business flows in those machines.


There are a couple of hundred of active laundrymats in the same area only 12 are for sale today and most are overpriced

*Oldroe-(Reply to Post #20)*Thanks OldRoe, never really bought in to the RDPD, but that is the idea me leveraging some time.

*e86s54- (Reply to Post #21)* e86s54, I'm guessing you are a high net worth individual.
I hear good things and bad things about any business. Before I bought my first rental property I asked around. My brother in law that owns a few said "too much trouble, tenant's do this tenants do that" I own 3 of them know, plus one student rental (my daughter going to university), and also a couple in the US. I can tell you that I my experience have been largely positive a couple of situations. nothing too drastic. I'm calm in approaching situations, I've done my homework prior. For the amount of wealth I've accumulated with the rentals and compared to the work that I've done. I'm way ahead. Not only would I do it again I have taught and guided people how to do the same things. 

I'm hearing the same for Laudrymats, "It is a dying business", "not worth the trouble" I DO value every feedback. All opinions have its place. Reminds me of what my stock broker told me. 

"Watch out where you get your opinions, The most expensive ones are usually the ones you got for free"

Nothing of value will be achieved without any work or sacrifice

Thank you all again. Look forward for further feedback and opinions from everyone. Cheers


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## e86s54 (Mar 27, 2014)

Letran,

I'm not saying you shouldn't do it or it isn't profitable (none would exist if that were the case). Your post sounded like you were a newbie and without small business experience. I was simply trying to give a sober view of it. I have done a few business evaluations on car washes (hired independently by the buyers who were largely unfamiliar with the industry). Usually within minutes I can have a ballpark figure on valuation based on income (gross & net) and replacement cost. Typically, the results are poor to fair with the buyer prepared to overpay (sounds like most stocks these days). Many try to convince me (or themselves) that its worth more and have already painted a rosy picture for themselves. They are typically annoyed that I burst their bubble instead of being grateful I prevented them from making a big mistake.

So I guess I'm saying, start with a negative view and hope to be surprised. Keep the rose coloured glasses for the Maple Leafs  

PS, you would need to do far more counting than what you are proposing. If the machines are new with a digital display, see if you can hack into them for the coin count (I've done this to flush out real numbers a few times), the stuff you can learn on the internet these days. Or, park a vehicle with a camera setup for time lapse exposures (every 10 sec or so) for a few days and see the foot traffic or even perhaps the usage. A small DVR with a fair bit of memory would work well also.

Water meter reading would work somewhat...combined with the hydro meter and getting the machine water usage and current draw specs, along with a small hydro audit could paint a closer picture. Do the same for competitors and it should make it even clearer.

Happy Hunting!


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## kcowan (Jul 1, 2010)

My son evaluated buying coin laundries about 10 years ago. He concluded that the pay he would earn from the necessary maintenance would be less than minimum wage. The ROI was marginal.


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