SUN CITY WEST, Ariz. — There are many reasons why one might sell a laundromat. Illness, retirement, owner relocation, or even the owner’s death could be behind it. Or the seller is doing great and just wants to sell so they can buy or build a bigger mat.
Whatever the reason, let’s examine what you can do to make your mat ready to sell for the best price and at the least cost to you. I covered the benefits of early planning in Part 1, and addressed the possible roles of attorneys, brokers and suppliers in the sale process in Part 2. Let’s conclude:
PROMISSORY NOTES
Since laundromats can sell for hundreds of thousands of dollars, if not more, many people find it hard to obtain financing, shutting out a good percentage of buyers. If you advertise your sale as “Buyer will Finance,” you’ll get more potential buyers for your mat with your “bulletproof” promissory notes.
A well-conceived promissory note can allow the buyer to purchase and finance your mat from future proceeds, but things don’t always play out as planned.
You already know that if a buyer puts down, say, 50% on your business, they can pay off the remaining 50% from the business. This is why you don’t want to sell to just anyone who comes along. You want someone who has the funds as well as the skills needed to keep the laundromat profitable so they can maintain the income to pay you.
Your attorney can structure the notes so there is a short grace period, penalties are assessed if payment is late, and create the notes as “secured promissory” so you have the right to seize the collateral to recover an amount unpaid.
You’ll earn interest on the note payments just like a bank does on any loan. The interest rate is negotiable, of course. With more years comes greater exposure risk to you, so naturally, the rate would be higher in that case. It’s a win-win deal, if structured properly.
WHAT ABOUT THE LEASE?
Many laundromats are leased. One of the first things you should do is make sure your lease length is for as many years as you can reasonably afford, and the lease assignment clause should provide the ability to assign it to a new buyer. (This should have been negotiated by you way back when you originally signed your lease. This is also why you should never wait until you only have a couple of years left on your lease to renegotiate.)
I know someone who waited until his lease’s final year to renegotiate. The landlord tripled his rent and the laundromat owner was forced to walk away with nothing to sell.
Reasonable landlords will agree to two very important things—number of years and a fair-minded assignment clause—but you’ll almost surely have to pay more rent in return. It could be worth it. Some landlords may even want a lump sum from the sale, which could still be worth it if the landlord doesn’t get too greedy.
Otherwise, a landlord may refuse to accept any new buyers. Then you have nothing to sell. That’s how important the assignment clause and a long-term lease can be!
TRAINING THE BUYER
It’s reasonable for you to agree to orient your buyer how to best operate the laundromat after you sell, especially if they’ve never owned a mat before.
Your negotiations in this can be the trigger point if they are on the fence about taking the plunge. It’s a scary feeling for many buyers to spend so much money. You agreeing to help them after the sale can help ease their mind, and increase their chances for success.
You can set this up so you are physically in the store with the buyer for one or two weeks following the sale, and you can agree to phone consultations for a longer time beyond that.
I wish you all the best the next time you’re preparing to put your store up for sale.
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].
