If you open or purchase a laundromat, you’ll be in good company. There are about 30,000 coin laundries in the US, generating about $5 billion in annual revenue, according to the Coin Laundry Association, which represents the laundromat industry.
A laundromat in the right location can create a profitable business for years to come. But how much does it cost to open a laundromat? Here we’ll explore the costs and benefits of a coin laundry business.
Why Open a Laundromat in 2023
Here are seven reasons why laundromats can be a great business to own, according to Dave Menz, aka “The Laundromat Millionaire.” He’s an industry veteran laundromat owner with a chain of laundromats in Cincinnati, Ohio as well as an internationally published author, keynote speaker, business coach and co-host of the Laundromat Millionaire Show Podcast.
Menz points out that laundromats offer:
- A simple cash business model. There are no accounts receivable so you won’t have to worry about collecting invoices.
- Lots of opportunities. The business tends to be “antiquated”, he says, and because it is generally not modernized there’s a lot of opportunity.
- A very flexible business. While a laundromat is not a passive business, it is often very flexible for owners.
- High profit potential. Owners can earn 20-100% cash on cash ROI (return on investment), he says.
- Ability to scale. Many owners own more than one store.
- Real estate wealth-building opportunity. Owners often use cash flow to acquire the real estate in which the laundromat operates, offering the ability to build significant wealth. Laundromats are great anchor tenants, he points out, as it is very difficult to move a laundromat.
- A vital community resource. Laundromats fill an important need for single parents, families, or seniors who may otherwise not have access to laundry facilities.
As with any business venture, there are challenges, but overall the business can be appealing for entrepreneurs looking for a solid business opportunity.
“High interest rates, persistent inflation, increased buildout costs and ongoing supply-chain issues have put a damper on new store development. However, interest in the industry is still strong, leading many investors to look at buying existing stores with proven track records of performance,” according to PlanetLaundry magazine.
Laundromats have a very low failure rate compared to many other types of businesses.
Owning a laundromat isn’t “easy money,” or “passive income,” Menz advises. But it is “an amazing business for the right operator who’s passionate about serving others and solving problems.”
Initial Investment for a Laundromat Business
When starting a laundromat, you can either build one yourself or buy an existing business.
A search of laundromats for sale on BizBuySell June 27, 2023 listed laundromats for sale as low as $30,000 in small markets, to as high as nearly $1.8 million in West Hollywood, CA. Prices vary depending on cash flow; the size, type and condition of equipment; location and whether real estate is included in the sale.
Upfront costs for building a brand new laundromat are significant. Equipment must be purchased, and will usually be leased or financed. Real estate will typically be leased or financed.
It is also possible to purchase a coin laundry franchise. Building your own coin laundry can also be an option, though it will likely involve a significant investment. Startup costs can include:
- Real estate acquisition, construction and/or renovation
- Utility hook ups and deposits
- Equipment purchases and/or leases
- Business formation and licensing
- Legal fees (contracts, business formation, trademarks etc.)
- Business insurance
- Marketing expenses
If you build a new laundromat or turn an existing space into a coin laundry facility, it’s crucial to work with construction professionals familiar with the unique needs of this type of business.
“If you are buying a run down laundromat and retooling over time, a minimum requirement can be $50,000 to $100,000,” says Menz. “For new construction costs can begin in the $250,000 range and go upwards of $3 million.”
“Of course the business is very leverageable,” he adds. “For the first example, $50,000–$100,000 is cash required to get started.” But in the second example, financing would be common with a down payment of 30–40 percent.
Common Monthly Operating Costs
Here are common ongoing expenses coin laundry business owners should budget for:
Utilities: This tends to be one of the biggest costs for laundromats, after equipment leases and rental space. While these costs will vary greatly depending on the state and county you are operating in, you should still expect to see large water and electricity bills each month. You should also check with the county you will be operating in to make sure there won’t be additional costs such as upgrading pipes, sewer hook-up fees, etc.
Often you will also need to pay for wi-fi both for your business use, and for customers.
Rent or mortgage: Whether you decide to rent or buy the space your laundromat will be operating out of be prepared to pay that mortgage or rent payment every month. Triple net leases are common, and these require the lessor to pay base rent plus additional expenses for maintenance, real estate taxes and other costs.
Payment processing: You’ll need to be able to collect payment from customers. For some coin laundry operators, coins are most customers’ preferred option, which means you’ll need to provide a change machine. Some customers, though, may prefer to pay by card or through an app, which means you may need a merchant services account and some type of point of sale system that may have ongoing costs.
Laundry detergent, fabric softener, etc: Though you may be able to resell these times for a profit, you’ll need to purchase and stock them first. If you also offer wash and fold service, you’ll pay for these and build them into the cost of that service.
Payroll: If you hire employees, you’ll need to budget for payroll as well as a payroll services provider. You may also want to offer benefits to be competitive. This is a commonly overlooked expense, says Menz. “Laundromats do not run themselves,” he warns.
Office supplies and services: You’ll have expenses for accounting and payroll software combined with regular office equipment costs such as computers and printers (if you are renting these items), pens, paper, printer ink, etc need to be factored into your monthly budget.
Equipment: You may purchase or lease your equipment, or if you purchase an existing business, you may own it outright. Even if you do, you will have costs for maintenance, repairs and upgrades. “Many owners repair their own equipment and do not charge themselves for their time in doing so,” Menz notes.
Taxes: While your business will likely be able to take a variety of tax deductions, you may need to pay a variety of taxes such as payroll taxes, sales tax, use tax, and income taxes, including both state and local taxes.
Insurance: You will need to budget for insurance, including commercial liability insurance, worker’s compensation insurance, and property insurance. If you are building your facility you’ll need builder’s risk insurance.
Security system: Most laundromat has a security system and this is especially important for those that are open 24/7.
Marketing: You’ll need to help prospective customers find your business, and that means paying for marketing and advertising expenses.
Commercial Laundry Equipment Costs
Equipment will be one of your most common and important expenses. Reliable, clean machines can make or break your laundromat. A broken machine doesn’t bring in revenue.
Washers and dryers: Newer commercial grade washers generally run $5000–$7000 per machine, while larger commercial washers can run $15,000, advises Menz, while commercial dryers start at $6000–$7000 and can go up to $10,000.
If you purchase an existing laundromat you may get the equipment you need to get started, but you’ll want to budget for equipment repair and replacements. Other ways to save include buying used vended laundry machines that are not truly commercial grade, says Menz, or to purchase used equipment.
Water heating system: Sufficient hot water is essential to keeping customers coming back. Options include a water heater with a storage tank, or instantaneous water heating systems, and it is not uncommon for laundromats to need multiple water heaters.
Change machine: Customers will undoubtedly need to exchange dollars for coins and/or pay with a credit card. Change machines can start at around $1,300 and climb all the way up to over $10,000, and that is before you consider any maintenance or installation costs.
Credit card readers/Point of sale devices:. Card readers that can be added to machines or used to process credit card and debit card sales for wash and fold services around $400 per machine and climb to over $7,000 before installation and maintenance. Learn how to find the POS system for your business here.
Furniture and Fixtures: You’ll also need chairs, folding tables, and laundry carts.
Location is definitely an important factor when it comes to the success of your laundromat, but you also don’t want to use up all your capital just on the rent or mortgage.
For some laundromats being in a walkable part of the city will be super important while others may want to make sure they have a large enough parking lot. Whatever you need, just remember that it takes a while for new businesses to get up and running so try to choose a place you can afford until you build up a solid customer base. .
You will want to understand the demographics of the area in which you plan to operate and clearly identify your target audience.
Potential Earnings for a Standard Laundromat Operation
There is a lot of variability here, but Menz says that “smaller laundromats can make $500-$1000 per week gross at 20% profit. Larger facilities can make up to $50,000 per week gross at 40% profit.” There’s a wide range, though, and business owners will want to look for opportunities to improve and increase profitability.
In addition to revenues from washers and dryers, some laundromats create additional revenue from sales of laundry supplies, wash and fold services, dry cleaning, vending machines, and even lottery ticket sales or slot machines!
Here are some examples from recent BizBuySell laundromats listed for sale:
- Coin laundromat in Greene County NY. Cash flow: $125,721
- Boutique laundromat in Essex County NJ. Cash flow: $61,000
- Laundromat with shower facility in Watford City ND. Cash flow: $148,878
- Laundromat in Houston Texas. Cash flow: $60,000
How will your customers find your laundromat? Good signage will help but beyond that you need to find ways to get word about your service out to your target audience.
When you open your laundromat, you may want to make a splash with a grand opening and to make that successful, you’ll need to invest in marketing.
Your business should have its own website and invest in search engine optimization (SEO) to help it come up in search engine results when potential customers are looking for laundry facilities.
You may want to invest in direct mail advertising, advertise in a local newspaper, print and distribute flyers, sponsor a local school or sports team, etc.
Social media marketing can also bring in new customers, and build customer loyalty.
Business Licensing Costs
When you start your coin laundry business, one of your first steps should be to form a business entity such as an LLC or corporation. This can limit the owner’s personal liability in claims resulting from the business. You’ll also need to get an Employer Identification Number (EIN); you can get a free EIN from the IRS.
In addition to the initial state filing fees, your state may require annual fees. You’ll also likely need a business license, and there may be other licensing requirements depending state and local requirements.
These may include a health department license, water pollution control permit and more.
Financing Options for Your Laundromat Business
If you’re like most business owners, you’ll pull together several types of financing to start or acquire and then run your business. Industry financing is very common, and may be helpful for specific expenses such as laundromat equipment.
Here are other types of small business loans and financing small business owners can consider:
Small business loans guaranteed by the US Small Business Administration may be used to help finance the acquisition of an existing laundromat, or the cost of a new one. SBA loans come in several varieties: 7(a) loans and 504 loans are the most popular for this type of business. They require good to excellent credit, a solid business plan with financial projections, and the application process will be fairly involved but they can be an excellent option for business owners who qualify.
Equipment Loans or Leases
Washing machines and dryers are expensive; equipment financing or equipment leases can help finance these purchases over time. (There may also be tax advantages to leasing equipment. Check with your tax professional.)
Business Line of Credit
A business line of credit is the most popular type of small business financing for working capital and short-term needs. Once you’re approved for a line of credit, you can use it when needed.
Business Credit Cards
A business credit card is a great way to pay for business expenses, manage cash flow, and earn rewards. Charge as many expenses as possible to a rewards credit card, and pay in full to avoid interest, and earn cash back rewards, travel rewards, or both.
Most business credit cards offer an underlying line of credit, which means you can use it for short-term financing in a pinch. But interest rates are often high, so you’ll want to be careful about relying too heavily on them. (Some business credit cards offer intro 0% APRs which can be helpful toward startup costs, or for times when cash flow is tight.) Business credit cards can also help establish business credit.
Business Cash Advance
While it’s not the cheapest type of financing, you may be able to use a business cash advance to access funds quickly. This type of financing doesn’t usually require good credit, and the amount of financing will be based on past receipts, such as credit or debit card sales.
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This article was originally written on November 28, 2023.
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Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.