CHICAGO — Running a laundromat can’t be as “easy” as potential investors may believe it is, can it?
The laundromat business has been marketed as a near-passive investment—one where machines do the work, cash flows in, and owners can sit back and collect profits with little involvement.
First-time investors can be drawn to the promise of being an “absentee owner,” imagining a steady stream of income without the headaches of daily operations. But reality often tells a different story. While laundromats can be profitable and relatively low-maintenance, they are far from being “set it and forget it.”
Potentially, there are machine breakdowns, maintenance issues, theft, vandalism and customer complaints to deal with. It’s important to not underestimate the hands-on effort required of even the most basic, unattended self-service laundry.
American Coin-Op asked a small group of current and former store owners about their ownership experiences and if absentee ownership was part of their plan at the outset.
Q: Before you opened your first laundromat, how easy or difficult did you expect ownership to be? What influenced your expectation?
A first-time purchase often brings with it uncertainty of time and money that will be involved, says Californian Larry Larsen, whose 50 years of experience includes owning and operating more than 50 laundromats. In store operations, the number of keys and what they open can be surprising.
“Multiple keys to the same locks, keys to locks you can’t find, and realizing which key opens coin boxes or service locks, dryer lint screen doors, and those padlocks to the ladder on the roof can take more time than initially anticipated,” he says. “It’s not rocket science, but not as easy as popping corn.”
In most cases, Larsen says, the time involved and added expenses exceed the projections made before purchase.
“New mops, buckets, soap inventory, lease deposits, utility deposits, coin for the changers, and insurance payments often add a significant amount to ‘start-up’ costs,” he adds. “Expect to spend three times more in the first three months of laundromat ownership than you will later.”
James Radovic, who owns the Jupiter (Fla.) Laundry, says he thought laundry ownership would be easy, based on what he observed when visiting other stores while doing research.
Joe Jepsen, who owns several O-Town Coin Laundries in and around Ogden and Salt Lake City, Utah, got his start by building a laundry inside a large apartment property he owned.
“It was so easy (to manage) that I felt we should buy another stand-alone location. I found and purchased a ‘zombiemat,’ renovated and retooled it,” he says. “When we finally opened, we had no idea how wrong we were regarding the ease of operating a coin-op laundry.”
Q: Was it originally your plan to be a “hands-off” or “absentee” owner, and has that plan changed over time?
“Yes, I thought I would be a hands-off-type owner, and for the most part it has been this,” Radovic says. “But the bookwork needed to support the laundry caused it to be a significant job for me. I tried to farm out some of the tasks, but the cost of competent support became too expensive, so I just learned what I needed to do to make it work properly.”
“Up until we had three stores, we had planned on being unattended at all three,” Jepsen says. “The plan was to have one manager handle all the complaints via phone, and that manager was also to manage the nightly cleaning crew. This didn’t work how we had planned it to.”
Larsen says the general rule when he started in the business was that laundromat buyers were expected to provide hands-on management and labor to have operational success.
“In the last several years, a different type of owner has entered our business who has an expectation that, through the use of card systems and employee management, their time can be so reduced that their activity can be described as ‘absentee’ ownership.
“The reality is that fewer than 5% of current laundromats are actually operated as fully absentee. Keep in mind that someone has to read the paperwork, the lease, negotiate the agreement for insurance, collect the bills, deposit the bills, pay the bills and file the required IRS paperwork on a yearly basis.
“Absentee is more likely defined as ‘not needing to spend much time in the facility’ and not that someone else can do absolutely everything in your laundromat.”
“Without question, it’s never been easier to be distant, with card stores, video and audio, and even remote speakers,” says Jeffrey Barman, a former laundry equipment distributor executive and store owner from California. “But somebody still needs to be sure the store is either attended or cleaned, and eventually collect. Someone has to help customers, open stuck front loaders, and answer questions and complaints to keep your customers returning.
“So while you may not need to be present, you can only truly be absent if you can afford to pay, and trust, someone to allow your departure. And even so, be sure to visit as often as possible. When the alarm company calls you at 3 a.m. and you’re absent, what happens next?”
Q: In your first year of ownership, what was the biggest surprise or challenge you encountered?
“How quickly a laundromat can go from sparkling clean to looking like a bomb went off!” Jepsen exclaims. “I was also incredibly surprised how unwilling customers are to read instructive signage.”
“The wide variety of people who use a laundromat was a surprise,” says Larsen. “The low-income, poor, medium-income and occasional well-off user all blend together in the shared experience of self-service washing and drying. With the advent of more fluff and fold and pickup and delivery, the extended personal contact has diminished, but the self-service customers certainly are a display of sizes, shapes, colors and modes of dress exhibited during their laundromat visits.”
“My biggest surprise was how much time it took to keep the laundry properly staffed, how many times an attendant couldn’t work their shift, and the time it took to find someone to work or to work it myself once I retired,” Radovic says.
Check back Thursday for the conclusion…
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].
