CHICAGO — You’ve come to a point where you’re considering opening a new coin laundry. But should you build it from the ground up, or should you look at rehabilitating an existing store? What are the pros and cons of each?
“There are great arguments for both sides, but there are some catches that you want to look at, whether you’re buying a new store or retooling a store,” says J.D. Dixon, owner and president of National Laundry Equipment, a Huebsch distributor based in Nashville, Tenn. “Both can be great investments.”
Robert Renteria, president of Midwest Laundries, Chicago, and a regular contributor to AmericanCoinOp.com, says he’s seen more “born-again” laundries than ever before in the past year. “The key now is to find laundry locations that are in operating condition but in need of a facelift, or that are closed but have an up side when the competition and demographics are taken into account.”
Setting the laundry apart from its competition has to be at the heart of the decision-making process, advises Carl Graham, vice president of coin sales for Scott Equipment, a Dexter distributor based in Houston, Texas. “Unless you build a bigger, better burger, they’re not going to come.”
Choosing to rehab a store means you’re locked into that location, Dixon says, while building new gives the prospective owner the flexibility to select the best site for his/her business needs.
Whether new or rehab, Graham asks his clients if they’re comfortable with the location. “You’re the one who has to go there all the time, so it needs to be in an area you don’t mind going to.”
Risk and Regulation
Building a new store means taking on more financial risk than you would if rehabbing, plus it’s generally more expensive, Dixon says. “Like starting any new business, you have more pre-revenue time. You have a lot more time before you bring in dollar one.”
When choosing to rehab, Renteria favors fixing any machines that still have useful life, then looking to buy rebuilt or refurbished machines. “This will cut your expenditures about 50% and make for a much better ROI at the end of the year.”
Buying and rehabbing an existing laundry often means the new owner can avoid some expenses and some bureaucracy.
“A lot of times, you can avoid impact fees and code restrictions, which are huge,” Dixon says.
For example, Davidson County, Tenn., where Nashville is located, charges an impact fee of upwards of $3,000 per washer, Dixon says. The impact fee charged in Houston is $1,500 to $1,700 per washer, Graham adds.
“If you buy existing, you’re grandfathered, so those fees are paid,” Graham says. “That’s a pro for refurbishing an existing store. And you don’t have to go through as much red tape either, unless you do a complete rehab of a place.”
“If you buy [an existing store], someone has already gone through that process,” Dixon says. “You still have to pull permits, but it’s a whole lot easier to pull a permit to put in new equipment or upgrade electrical or do something like that than to build a new store.”
Building Customer Base
One potential benefit for choosing to rehab an existing laundry is that it already has a customer base. You have the opportunity to speak to the store’s customers and get ideas for how you can develop the business and attract more people.
With a new store, you must build that customer base from zero, Dixon says.
“You’ve got to be thinking about how to get your message to the people in your area,” he says. “You want to think very hard about within a 1-2 mile area, but you also want to think about miles three to five away from your store. How do I reach the people one to two miles from me in an urban setting? In a rural setting, it could be 15 miles.”
Which is Easier?
“It depends on what part of rehab you have to do,” Douglas says. “I prefer new, because you go by all the new codes. And you can build it the way you want to built it, the most efficient way.”
“It’s a case by case basis. A lot of times, in a retool situation, you get into working with the current business owner and negotiating and all that rigamarole that you have to go through to actually buy the business in the first place. Once you own the business, the retool would be easier, because there are (fewer) levers to pull, (fewer) variables to think about.
“But there are things about building a business that are easier as well, because you can build from that blank canvas.”