ITEMS AFFECTING VALUE
1. Location
2. The economy
3. Terms and length of
lease
4. Option terms of lease
5. Level of competition
6. Age & condition of
equipment
7. Net income
8. Gross income
9. Quality of books and
records
10. Terms of the sale
11. Seller financing
12. Down payment
13. Growth potential
14. Brand recognition
PICKING A BROKER
Here are some questions you could ask before selecting a broker to help you in your search for a Laundromat:
1. Do you work full-time
in the business of
brokering Laundromats?
2. How long have you been
in the Laundromat
business?
3. Will you help me
analyze anyone's
listing for a fee?
4. Have ever operated a
Laundromat?
5. Can you provide
reference of
successful customers?
6. Can you teach me about
a utility analysis?
7. Can you inspect the
equipment & facility?
8. Do you work from your
home or an office?
OWNERSHIP BENEFITS
Guaranteed:
-Income tax benefits
-Community contribution
Probable:
-Cash flow
-Tax benefits
-Pride of ownership
Sometimes:
-Appreciation
-Life long enjoyment
SERVICES AVAILABLE
1. Utility analysis
2. Site selection
analysis
3. Books and records
inspection
4. Financing suggestions
5. Pre-purchase education
6. Equipment evaluation
7. Appraisal of assets
8. Landlord assistance
9. Training of newcomers
10. Business operation
forms
A HELPFUL HINT
Laundromat sales people are not able to provide:
1. Legal advice
2. Accounting advice
3. Income guarantees
LEARN TO TRUST YOURSELF
You should take enough time to learn the background of the business from reading and research. Use your own judgment and verification techniques to assist you in your final decision to purchase a Laundromat. Remember a Business Opportunity is not a business guarantee.
Laundromats are purchased for a variety of reasons: a desire for business ownership, pride, self-employment opportunities, employment for a relative, estate planning, potential tax benefits, cash flow and equity gain are examples of these reasons. Businesses are sold because of illness, retirement, partnership disputes, relocation and a variety of other reasons that require a professional to find.
You should carefully consider your resources and your reasons for buying a Laundromat before you begin your investment journey. The Laundromat business is an "all cash" enterprise making absolutely accurate verification of income on an existing Laundromat difficult. Income and expense projection on new stores should not be taken as a guarantee of actual performance, but as a reference for comparison. Some of the following might be helpful in your decision to purchase.
SELECT THE BROKER
You should have confidence in the broker who is going to assist you in your investment. You have a right to insist on having the person of your choice representing your interests. Some Laundromat brokers refuse to "co-operate" with other licensed brokers and firms because the majority of work is done by the experienced agent.
MEET THE SELLER
The most often used verification of income is the statements of the seller. The listing agent receives from the Seller a statement of income and expenses and this information is used to prepare a setup or sales information sheet. A meeting with the Seller will give you an opportunity to access the Seller's character and might also provide valuable information on the operation of the Laundromat.
UTILITY BILLS
Review the utility bills. Water bills are frequently used in a variety of formulas to give an indication of income. Make sure that you review at least one year's bills since Sellers have been known to leave the water running in the back room to pump up their income numbers for this method of income verification. Under normal conditions, this method can be considered accurate to within 5-15% of the actual income of the Laundromat. Be cautious if anyone suggests utility bills can verify income alone: expenses are suggestive and not a guarantee.
BOOKS AND RECORDS
The written records and bank statements of the Seller can assist in income verification.
INCOME TAX RECORDS
The income tax forms of the Seller are private, but if extended the opportunity, review them, since few people over report income on tax forms.
STUDY THE CASH FLOW
The main factor of determining value for Laundromats is the actual cash flow benefiting the owner.
COLLECTION PERIOD
You may feel comfortable requesting a period of joint collection of the coin boxes. Since you cannot verify that the Seller did not "salt the mine," use this as a method of learning how to collect the proceeds from a Laundromat, not as a method of income verification. All brokers in the Laundromat industry know the "salt the mine" trick of Sellers, so avoid the suggestion from anyone who suggests this is a method of income verification.
STORE SITE SURVEY
A professional salesperson will have a Site Survey form available so you can compare a potential purchase site against various locations known to be successful operations.
Observe business activity at the Laundromat site at various times during the week and at different times during the day. Spend two full days at the site from opening to closing and count the actual income. Pick one day on a weekday and one on the weekend; combine the income together, divide by two and then multiply by thirty and you'll have an idea of actual monthly income. This should be used in combination with other income verification methods.
LEASE REVIEW
Carefully read the entire lease agreement and all of the provisions. Consult an attorney if you do not understand your rights and obligations. The most overlooked provision relates to option periods being granted at "market rate."
RESEARCH
Spend a little time reading trade journals, magazine articles, repair manuals, and books on the Laundromat business that are available in most public libraries.
TRADE ASSOCIATIONS
National, state, or local organization of Laundromat owners have information available, can be biased because Laundromat distributors and brokers may be financial supporters of these organizations. They may also have a regional outlook or slant to their information.
FINDING A GOOD LAUNDROMAT
"What is the best way to find a deal on a Laundromat" is frequently asked by my customers. Many potential buyers believe they can save some money by negotiating their own deal and locating their own store. Unfortunately without the experience to access real value or find the pitfalls of a transaction, they end up being contacted by broker friends of the Laundromat owners or offered deals that appear good on the surface but in reality have glaring defects which I would spot. Use the following letter as a template; if a better way existed to get the first look I would tell you. Take the letter to your local copy shop and print it on bright colored paper. Carry them with you when you visit Laundromats and put a copy under the doors of every Laundromat within ten miles of your home or office. Let me have your contact information and I will work as your go-between.
Check out the surrounding apartment buildings and look at their laundry facilities, as your major competition, and stop in any other Laundromat facility located withinone mile of your potential purchase. It would be prudent if you also visited with the building departments of the local city and called the leasing
THINGS TO KNOW AND DO BEFORE BUYING