SUCCESSFUL COIN-LAUNDRY INVESTING STARTS HERE…
If you are considering investing in a laundromat, you can download some basics here.
Although the laundry mat industry enjoys sound fundamental demand, it is important to remember there are pitfalls and significant fine-points to beware of.
(Client Testimonial) Mr. Ruff Thank you once again for your time this
morning. I cannot tell you how much I appreciate the conversation we had
today. I was telling my wife, what an eye opener it was just speaking with you.
I admit I am jumping into this with blinders on and unfortunately I trust
people too much and take their word (which is really stupid). I told her
the best thing we did was spend the money for your expertise. I would have
had no idea all the items to look for which you pointed out. Once again
thank you for the education. Best Regards Thomas B. "Prior
results do not guarantee a similar outcome.” N.Y. CLS Jud §1200.6(a)1 forbids attorney
use of false or deceptive advertising
Thank you once again for your time this morning. I cannot tell you how much I appreciate the conversation we had today. I was telling my wife, what an eye opener it was just speaking with you. I admit I am jumping into this with blinders on and unfortunately I trust people too much and take their word (which is really stupid). I told her the best thing we did was spend the money for your expertise. I would have had no idea all the items to look for which you pointed out. Once again thank you for the education.
"Prior results do not guarantee a similar outcome.”
N.Y. CLS Jud §1200.6(a)1 forbids attorney use of false or deceptive advertising
SOME POINTS FOR THE CAUTIOUS BUYER:
You must understand what you are buying and you must be very careful not to pay too much. Major key to price is gross sales. In fact, it is fair to say that a 10% misrepresentation as to gross sales can impact the overall value of a coin-laundry business by some 20%, and maybe considerably more; therefore, you must ask the right questions, and be able to assess the accuracy of the answers.
Coin-laundries may appear straight-forward – that is part of their appeal to investors - but they are not transparent - they lend themselves well to fraud and significant omission. Therefore, seller representations - especially those as to gross revenue must be verified by independent means. “Financial Statements” are representations of the seller - they are not independent means.
One means of independent verification is the comparison of claimed revenue to water and fuel usage.
More information on the analysis of water usage is available from me, but you must remember that constantly leaking water will affect the accuracy of the analysis. Therefore, you must be alert for water leaks. Choose a time when there is no washing machine activity and check the waste-line outflow to ascertain that water is not leaking through the machines. As most machines sit idle with the dump‑valve open, any water leaking into the machine (due to a defective water‑valve) will pass undetected through the machine and into the waste‑line.
A more reliable, but more complex, alternative to water bill analysis is analysis of fuel usage. It is more complex because it involves more variables, but more reliable for two reasons: firstly, as fuel is never permitted to leak, one need not allow for leakage; secondly, as fuel is far more expensive than water, willful distortions are cost prohibitive to effect. When advising a purchaser as to the potential gross sales of a laundromat, I rely heavily upon analysis of fuel consumption.
Be alert to seasonal weather changes when evaluating a coin laundry. Both the first week of warm weather in the Spring, and the first week of cold weather in the Fall can excite a 10% to 20% increase in coin laundry business.
IDENTIFY ANY NEED FOR MAJOR REPAIRS:
An example of a major repair is replacement of basket or tub shaft bearings. Whenever you consider a launderette purchase, open the door on each dryer and each front-loading washer, reach in and try to rattle the basket or tub. If you can rattle it, it needs bearings ‑ an expensive and difficult repair ‑ especially for front-loading washing machines, due to the water‑tight seals.
DON’T PAY TOO MUCH:
This site generates a fair amount of email response. With alarming regularity I receive emails from desperate people who are seeking my help. Typically, they had a lifelong dream to be in business. Then someone died and left them a little money, or they retired and received an associated sum of money. Then they purchased a laundermat without knowing how to figure out what it was worth and they paid too much; after they make their note payments and pay their expenses, there’s no money left - no return on their investment – and frequently worse. I’m sorry, but the time to correctly evaluate what the business was worth was before it was purchased. Usually, it’s too late for me to be able to help.
YOU NEED A COIN LAUNDRY EXPERT:
In the evaluation of any business, competent assessment of risk versus reward is not possible until all significant issues have been identified and accurately analyzed. Laundry mats are no different; however, it’s difficult for newcomers to get the help they really need - certainly, neither the seller, nor the broker, will point out any problems with the business. The average lawyer is no help- their only job is to get you what you are paying for- not to reach the issue of whether or not you are paying too much. An accountant’s evaluation is only as reliable as the accurate information you can present him or her with. In fact, I recently represented an accountant who had made a careful analysis of a coin-laundry business based upon information given him by the seller; after reviewing his analysis with me (I identified two significant misrepresentations), he drastically revised what he was willing to pay for the store.
WHOM CAN YOU TRUST?
Even if you wisely elect to seek professional advice, unbiased* advice isn’t easy to come by. It’s difficult to find someone who has no self-interest in the outcome. Business brokers have an obvious self-interest. So do laundry equipment salespeople (before they can sell you equipment, they need you to buy or build a coin laundry). Books on laundromats are very often published by people who sell laundry equipment; trade magazines are published by those who sell advertising space to those who sell equipment; “consultants” are almost always those who are selling (or collecting finder’s fees from those who sell) equipment. These sources will always exclude important information that is inconsistent with the promoter’s desire to sell equipment.
* unbiased: impartial; having no interest in the outcome
HERE’S WHAT I CAN OFFER YOU:
If you have read to this point, you are seriously considering buying a business you don’t understand. That’s OK – and it’s where I come in, for the key to success is to secure impartial expert advice. This is exactly what I offer. My loyalty is solely to my client. I do not broker coin laundries. I do not benefit from the sale of laundry equipment. As my only source of income is the fees I receive from my clients, my economic survival depends upon my reputation, which in turn depends upon honest assessments.
For a very reasonable fee, I will empower you with information you must have, and I will “walk through” the first coin-laundry with you to make sure you understand all of the important issues (there is very much more to a laundromat than meets the eye). You will learn to ask the right questions of the seller and I will assist you to verify the accuracy of the answers. With reliable and complete information, we can properly evaluate the purchase, and if it survives scrutiny, commence legal acquisition.
MY LEGAL COUNSEL IS ALSO AVAILABLE TO YOU:
My consultation fee includes my showing your local attorney how to incorporate laundromat specific terms of purchase which will significantly improve your deal, enhance your legal position, and make it much harder to cheat you. It makes no difference where, in the U.S.A or Canada, he or she practices, my purchase agreement clauses will enable him or her to protect you, get the equipment transferred to you in excellent running condition, and ensure your success.
In some cases, I am available to personally represent you. Information on Legal representation is available below.
If you are considering building a new laundromat, first contact one or two laundry equipment distributors in your area. Distributors usually offer “turn key” (they will build the whole thing for you) proposals. Generally, a distributor proposal will include demographic data, a “radius map”, estimates as to prospective gross and net, a sketch of the proposed facility, a list of recommended equipment, and an estimate of construction costs. Laundry equipment distributors never advise against new coin-laundry construction (no construction = no equipment sale). Familiarize yourself with the proposal and then consult with me.
MY MOST IMPORTANT ADVICE:
Be it a coin-laundry purchase, or the purchase of some other business, if owner financing is part of your deal, avoid personally guaranteeing notes. A personal guarantee not only renders you personally liable, it has the effect of reducing the sellers financial incentive to see you do well and give you whatever help you may need.
A FEW WORDS IN CLOSING:
As laundrymat principles are universal (in my consultant practice, I decline to do site inspections- they are unnecessary to my analysis) the above is applicable to any laundermat in any area. However, although this piece was calculated to be informative, it should not be regarded as comprehensive; it is not. Fundamentally important issues such as: business analysis techniques that are unique to laundromats; specific terms of sale that are unique to laundermat transactions and necessary for the protection of launderette purchasers, including the transfer of laundry machinery in excellent running condition; laundry mat marketing and demographics; and many other issues unique to laundromats are not even touched upon here. Please don’t use this limited information to go out there, buy a coin-laundry, and get yourself into trouble.
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