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Existing Stores: Buyer Beware

Craig Dakauskas |

Why would anyone re-invent the wheel? That’s why so many newcomers to our business set out to find an existing self-service laundry for sale, rather than start from scratch. It’s a great course of action that takes away many of the variables that are in play, and it can reduce the barriers to entry in the market if your municipality has exorbitant tap fees.While it may look like the easier course for a new investor, buying an existing store carries its own set of variables and potential pitfalls. My first piece of advice is not to fall in love with a location.It may sound self-serving, but the second piece of advice is to enlist the services of a distributor. Their expertise can and will save you money. Any good distributor who’s active in the market will be familiar with the store at which you’re looking. He will know the store’s history, the owner, and what the opportunities and challenges are.A distributor should have a grasp of whether this is a growing business or one in decline. He also should know if there are any laundry projects planned for the market. Again, this is something that could save you from making a big mistake.IT’S ALL IN THE DETAILSBefore I get into what kind of things to look for in a store walk-through, let’s ponder a few of the details that aren’t so obvious. A trip to city hall is always a good idea. How is this area growing? Are there any major projects scheduled for the neighborhood? Is this market area going to see increases in housing stock? Or are there projects planned that will reduce the number of residential units? This is all-important intelligence that will help you make an informed decision about the store. Likewise, it’s information that won’t make it into a demographic report.If you buy the store, you want to ensure a bright future, so networking with city officials and your alderman will help you get the full picture and vision for the neighborhood’s future.Also, don’t be afraid to ask the owner why he/she is selling. For some, this is difficult to ask, but it’s definitely a question that needs to be asked. This is your money at stake, and the more you know about your investment, the better off you’ll be.WATCH YOUR STEPNow that you’re feeling good about the area and its growth potential, it’s time to take a walk through the laundry. The equipment, obviously, is going to play a major role in how you value the store. How old is the equipment? Has it been maintained? Is there a good equipment mix? These are all questions that must be asked.A store that’s heavy with top loaders can see substantial savings by switching over to more-efficient front loaders. However, the experienced eye of a distributor is going to be required to determine the cost of such a move.Also, is the infrastructure good enough or will a new bulkhead need to be installed? Review the capacities of the washers. We know that large-capacity front loaders are popular with today’s customers. Does this store have an adequate supply of them? If not, can more be added without causing problems?Look at the store layout. Does it make sense? Here’s where a distributor’s experience can pay off. He will be able to make recommendations on improving the store’s flow. Front loaders may fit in a specified space, but once a door is opened and a laundry cart placed in front, there may not be enough space for other customers to pass. These are the concerns that need to be identified beforehand. Is there any room to expand? Can walls be removed to open up the space?Dryers are another area of concern. You’ll want to make sure the number of pockets matches the capacity of the store (or the planned capacity, if you’re adding front loaders). Dryers are also one of those areas where owners tend to adopt an “If it’s not broken, don’t fix it” mentality.A good standard for starters is 10 years. Units that are older than this, even if they look good and are functioning, can be costly to your bottom line. New investors shouldn’t wait for a natural-gas spike to find out just how inefficient their dryers are.INSIDE AND OUTTake stock of what you see inside. Are there water-stained ceiling tiles that could be evidence of a leaky roof? What’s the age and condition of the boiler? Are the doors or windows outdated and inefficient? This information will help you and the distributor affix a value to the business.The point is to never overpay for goodwill. If there are substantial equipment and rehabilitation costs at play, overpaying for goodwill can be costly to a business. The flip side is that not all updates will break your budget. Updated lighting and new paint and flooring can have a more dramatic effect on the store than upgraded equipment.Don’t forget the exterior. If it’s dirty, has broken signage or shows other signs of disrepair, these are good insights into the landlord’s commitment to maintenance, or lack thereof. In our business, first impressions count. If the outside is not maintained, potential clients may go right past, never even seeing how clean and efficient your store’s interior is.Who are your neighbors? Bars and liquor stores are not good neighbors, while beauty salons and markets are.Obviously, you’ll need to do additional homework beyond a store walk-through. Due diligence will include reviewing utility bills and making sure there are no red flags on income.If all these things check out, feel free to fall in love with the location, because you’ve probably found one with great potential. Still, don’t forget the other details involved in buying an existing location. Seek legal counsel in drafting the purchase documents. Writing in a noncompete clause will protect you from the seller plugging the proceeds from the sale into a new location down the street.It’s the business world — anything can happen. Be prepared. 

About the author

Craig Dakauskas

Commercial & Coin Laundry Equipment Co.

Vice president

Craig Dakauskas is vice president of Commercial & Coin Laundry Equipment Co. in Gulf Breeze, Fla. He has 12 years of experience in the industry.

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