GLENDALE, Ariz. — I wish I had a dollar (coin) for each time I heard, “How can I find the best Laundromat for sale in my area?” There is more than one road to achieve this.
First, you must ask, “Do I have enough money to buy and improve the best mat in my area?” Undercapitalization is one of the main causes of business startup failures.
You also need to know what’s the best mat for you. A cheap, run-down mat is usually better for an experienced mat operator who knows how to raise it from the dead.
For a profitable mat that’s been earning great money for years, is in tip-top condition, sports new equipment, comes with the building, and has an owner who’s willing to train and partially finance, well, expect to pay a lot more.
Then there are the mats in between: nice, earning some income, but there may be some issues.
Really profitable mats rarely come up for sale. They’re passed from one family member to another, or someone with inside information may buy it before outsiders knows the owner is selling.
If you can, try first to find mats for sale that include the building. Why be at the mercy of a landlord if you don’t have to be? Obviously, this requires more capital on your part.
Is the building even allowed to house a Laundromat? Not all commercial buildings are zoned for it. You, your lawyer or your architect can do a search at your local building department to see if the structure meets the zoning requirements.
You also need to be sure there are no expensive problems with the building, so hire an inspector, just like you would when buying a house. For instance, are the proper utilities even available in the street? Are you allowed to tap into them, and is there enough capacity available for a laundry’s needs?
Most of the better locations are lease only. A local shopping center that includes “chore stores” such as a supermarket, dry cleaner, dollar store and a fast-food restaurant or two is preferable. Locating a mat in a shopping center that has mostly upscale stores may not be a good idea.
If you lease, you may be able to get a great deal for the original lease but some landlords may put the squeeze on when you need to renew or to sell.
Many times, a leased mat provides a cheaper entry into the business, but if you’re not thinking 15-20 years ahead, you may not be happy at renewal time.
When you eventually sell, make sure the lease is reasonably assignable to a new buyer! I was once caught in a big landlord squeeze at selling time. The landlord’s argument was that he would not transfer the lease to anyone who was inexperienced and didn’t already own a mat, but 90% of my buyers were newbies. It cost me many potential buyers and, of course, money. I was finally able to sell but never again would I allow that to happen!
I like to add language that reads something like this: “This lease is assignable (transferrable to a new buyer), and landlord’s consent shall not be unreasonably withheld.” A good lawyer who specializes in commercial real estate can help you.
Investigate the landlord’s reputation. Ask the other existing tenants for their pros and cons about them. And if you have a good commercial real estate attorney check a proposed lease for traps, you’ll make better decisions.
Keep in mind that a reputable laundry equipment distributor can be one of your best assets! They know the ropes, so to speak. You’ll just want to make sure the distributor you pick has your interests at heart, hoping that you will be successful enough to stay with him if/when you get to the point to open another mat in the future. To me, the distributor is just as important as the brand of equipment you pick, if not more.
There are some distributors who are just looking for a quick sale, so do your homework and vet them by talking to mat owners who use their equipment. If you’re wary of a car salesman who’s selling $35,000 cars, you can just imagine the temptations involved when a rep is selling laundry equipment for $300,000, especially if a newbie is asking for advice.
STRATEGIES FOR FINDING THE BEST STORE
So let’s get into those basic strategies for finding the best mat:
1. Build a New Store
This seems to work better for more experienced mat owners who can better discern if the target neighborhood really needs a new mat or not. Keep in mind that your new mat will be viewed as a “spoiler” by the other mats, most of which will come back hard at you to compete. If you don’t know anything about the business, you may have serious problems. Again, a great distributor can help you.
2. Buy a Healthy Store from a Qualified Seller
Buy from someone who is sincerely retiring after many profitable years and has no new competition on the horizon. As bad as this sounds, a sale due to death or sickness, if true, could be a rare opportunity.
Make sure you really check out the area before you commit or sign, to make sure there will be no big, new mats built there in the near future; the mat for sale may be on the market because the seller knows there is fresh competition coming. Call or visit the building department to ask if any new permits have been issued for Laundromats in your target area.
Another tip is to simply drive around the neighborhood looking for vacant stores that could house a competing mat. Ask the neighboring businesses but don’t let on what you’re planning, lest you give someone the idea.
If the seller is willing to issue promissory notes, i.e. a loan directly from seller to buyer, that may lower the risk a little. You give a down payment and the seller gets monthly payments from you. This lowers your initial cost. It may also show that the seller is confident in the health of his business, and confident in you, that you can keep the mat strong enough to make the payments. Seller also gets a decent interest rate.
The downside? If you don’t make the payments, the seller can repossess the mat minus your down payment! So if you do this, make sure you make the money down as little as possible.
You also want some language in the sale documents that allows you to pay off the notes ahead of time, if you wish, and a grace period if you miss a payment or two.
Beware a seller who lists a cheap price and demands a quick, cash sale. If it looks too good to be true, it probably is.
Check back on Tuesday for six more ways to locate the best store for sale!