ATLANTA — Thinking about investing in your first laundromat can be exciting but it’s important to have a sense of what you’re getting yourself into before committing to buy or build.
During a Coin Laundry Association education session titled “Everything You Need to Know About Your First Laundromat,” a trio of store owners with varied backgrounds shared their experiences to prep anyone just getting into the business for what they might expect themselves.
Texas multi-store owner Rob Maes moderated the panel that included store owners Omer Khan from Georgia, Stephen Gramaglia from New York and Amy Doody from Maryland.
To open the conversation, each was asked why they got into the business. Khan says it was in his blood; he was 3 years old when his father bought his first laundry and he began helping once he was old enough. The two of them own a handful of stores together today.
While working for a well-known commercial lender, Gramaglia had 21 years of experience helping entrepreneurs get into the business and expand and grow.
“I probably have visited a thousand laundromats in all those years for that unique perspective of seeing what everybody was doing,” he says.
He hadn’t intended to become an owner himself but when the opportunity to take a location and build a store presented itself, he took it.
Doody, a former middle school math teacher of 15 years, decided to look for a new business opportunity once her children were old enough. She chose laundromat ownership because she realized she “needed to be in an industry with people where I was helping people, working with people out in the community.”
Everybody has a different path to the industry, Gramaglia says, and there are different ways one can acquire a store. But financial positioning is key to having success once there.
“Getting into the business, you have to make sure you have solid financials,” he says. “It’s one of the biggest, you know, pitfalls that we’ve seen and I’ve seen, from lending money over all the years, is the people that don’t have a solid financial base are the ones that have trouble.”
Financial security is a must, and that’s not just your down payment or cash investment, your working capital, your security deposits, your closing costs, Gramaglia says. Make sure that you have excess funds or the ability to get them so that you don’t have to feel like you’ve got to make money or even break even on day one.
“I mean, there’s a whole list of things that you’re going to need to pay for before you’re potentially making any money,” he says.
Doody used seller financing to acquire her store: “So when we were working the deal and talking to the bank on one side, on the other side I called and said, ‘Hey, do you guys want to hold the note?’ I mean it’s pretty low risk for the seller, because you know what happens. If you don’t make your payments, they take it back.”
Khan says he and his father were able to use assets from other businesses as cash down to acquire a laundromat.
“That’s a great point,” Gramaglia adds. “If you have a relationship, you have other businesses, you have relationship with a bank or lending company, leverage those relationships, because they will work with you if you have experience with them.”
A BUSINESS PLAN ASSISTS LENDERS
Creating a business plan also improves one’s chances of gaining project financing, particularly when working with lenders not intimately familiar with the laundry business.
“They want to see how you’re going to capitalize it,” Gramaglia explains. “They’re going to want to know how you’re going to run it, they’re going to want to know all about the business. You’re going to have to teach a bank about the laundry business, and a business plan is kind of how you do that.”
“A business plan for me anyway—and I did one when I got in the business—is more of a process than a product,” Maes adds. “That’s the beauty of the business plan is it forces you to think about all those little details that may be critical to your success.”
If dealing with a lender that’s well-acquainted with laundromats and the industry, Gramaglia says, it will be interested in the state of your financials, the prospective store location, its competition and its demographics.
Check back Tuesday for Part 2: Finding the right location, and deciding whether to lease or buy
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].