The Six Questions You REALLY MUST Ask Before You Buy a Laundromat. You will find the below template a valuable tool to follow when making initial inquiry calls to various Brokers and/or Sellers of laundromat businesses. Our 40 years of experience in making these same inquiry calls has allowed us to offer you a simple outline of what we deem to be the most important initial questions a prospective laundromat owner should be asking. While this template should not be used as a definitive due diligence or ultimate verification of the facts of the particular laundromat you are inquiring about, it will help you determine a preliminary sense of comfort or lack thereof with the contact source (Broker or Seller) and the information you will need to help you determine if the store is worth more of your valuable time to follow up on. Question 1: Give me the basics Getting a preliminary store profile Date: Store trade name: Store address: Listing Price $ Source of profile info: Ad source Brokerage firm Name Agent name and contact: Ph.# E-mail:
Question 2: Tell me more about your laundromat. Getting a basic store description Age of store (how long has it been open?) How long has current owner been there? Type of shopping center: stand alone small strip center major anchored Operating Hours: Automatic door locks? Yes / No Fully attended or partly attended by employees? Total hours worked by employees each day: Does owner do own machine repairs? Does owner collect the cash from store? Machines operate by cash or card system: Wash and Fold services on site? Over the counter retail sales on site? Insights into the importance and relevance of the above: 1. How long the business has been in that location gives you an idea of how established it is. A laundromat established less than 18 mos. ago may still be growing or under an extended promotional period, which may include below market vend pricing. Once promotional period has ended there may be a change in revenue. One that is 2 years or older is likely well established and income is predictable. 2. Knowing the current owner has had the business for longer than 2+ years indicates they did not buy the business only to realize that it was not profitable and are now trying to get out quick and turn their problems over to you. I am always wary of an owner who wants to get out after only a short time.
3. Knowing the number of open hours is helpful in determining if employee coverage is adequate depending on amount of services offered on site (we will address this in #4). Also, if the business is equipped with automatic door locks, you know that the store will unlock automatically at a set time every morning with or without an employee present (typically used for full self -service operations). However, someone always needs to be there at closing time to secure the doors. 4. You will want to know how many hours per day the current operation has employees (attendants) present. This will help you identify if the employee payroll expense claimed by the Seller is being under reported. This expense is addressed later in this profile form under Store Expenses. When Wash and Fold or Over the Counter retail sales is a part of the business, you can expect an attendant will have to be present during most if not all open hours. Card operated washers and dryers also require more attendant hours than coin operated because of customer s need of more assistance in operating the more complicated system. 5. Does the current owner do his own repairs? If he does most of his own repairs, you may need to add some machine repair labor expense to the equation. Hiring outside labor for repairs can add $200 - $500 to the expenses unless you intend to learn the repair aspect and do them yourself. 6. Asking if the current owner is collecting the money himself is always a great question. If the existing owner controls the keys to the vault exclusively, there is likely no employee theft of washer and dryer revenue. If he uses or has used an employee to collect the money from machines, there is a highly likely some degree of theft. You should never count on additional revenue coming your way when you take over and get control of the keys, however you will need to budget for $2,000 -$3,000 to replace the money boxes on day one with all new keys in your possession. Immediately thereafter you will know the extent of any theft that may have occurred before you took over. Note: Brokers do not always have these answers during the first inquiry call. That s okay; this is your opportunity to ask the Broker to get clarification from the Seller and report back to you.
Question 3: What equipment comes with the store? Getting some specifics about equipment, vend prices and age of machines. Top load washers / Vend price Age 20lb washers / Vend price Age 30lb washers / Vend price Age 40lb washers / Vend price Age 50lb washers / Vend price Age 60lb washers / Vend price Age 80lb washers / Vend price Age Dryers / Vend price for minutes. Age Snack machine Soda machine Soap machine Game machines Other Relevance of the above info: 1. At this stage of inquiry, it is helpful to gather the specifics of what list of equipment comes with the store. Age of equipment gives some insight into realistic repairs expenses associated with keeping them in working order. Equipment older than 5 years is typically outside of any manufacturer s warranty and repairs will be somewhat higher than newer machines. Repair parts expense reported by a Seller of less than $200 per month on 5+ year old equipment is likely to low. Depending on the level of traffic (use) the store experiences, parts expense can range from $200 - $500 per month. 2. Vend prices should be recorded as a comparison to nearby competitors. If/when visiting the site, you will want to see if the subject business is the high price leader in the area or
below the market. Gives some preliminary insight into any possible upside to vend pricing in the market area. Question 4: What kind of lease do you have? Learn about the most important piece of the business Current lease expiration date: Years left: Current rent $ NNN/CAM amount $ Rent increase amount every year: Additional option periods included: Option period rent will be $ Importance of the Store Lease: 1. Equal to the verification of store revenue and expenses, the lease is the most important piece of the business. The length and terms of the lease will determine greatly the present and future value of the laundromat business. Knowing the number of years you will have the right to operate in the space and the cost is of major importance. Most buyers want to be assured they have no less than 10 yrs remaining on the lease with defined rents spelled out throughout the entire term, including any option periods. 2. NNN/CAM (Triple Net, Common Area Maintenance) are often added to the base rent amount as additional rent. These are the expenses the Landlord incurs to maintain and repair the common areas of the building site as well as his insurance for the building and property taxes. This is what is called a NNN Lease, the most common lease you will encounter, where the landlord s expenses of the property ownership are passed through to the tenants. It is important to find out the current amount of the NNN/CAM charges in order to determine all of the business expenses that are lease related. 3. Make sure to inquire about the increases in the base rent. Most leases will have scheduled increases throughout the term and you should know how often this will take place and the amount of increase you can anticipate.
4. Ask if the Option Periods rent amounts are defined, or already determined in the lease. Often, option periods are left to be negotiated prior to the end of the initial term. If the option period rent is not defined, this should be a contingency of you taking ownership in order to insure your future rent is going to allow the business to remain profitable. Undefined Options should be viewed to be No option at all until defined and agreed as acceptable. Note: The lease can be up to 30+ pages and should be reviewed by a competent Commercial Lease Attorney and/or a 3 rd party laundromat lease expert to make sure there are no issues that could negatively affect your future ability to assign and transfer the lease or affect the business during your ownership. Question 5: What s your revenue? Understanding where the business revenue is coming from. Monthly Annual Sales (check one): Breakdown of revenue: Washer and dryer $ Vending $ Wash and Fold $ Other Total Sales $ Description $
Question 6: What kinds of expenses do you have? Make sure there are not expenses that are being omitted. Monthly Annual Expenses (check one): Rent $ NNN/CAM (common area maintenance, R.E. taxes, Ins. This is part of the lease charges paid w/ monthly rent) Utilities Water/Sewer Gas Electric Insurance $ (business ins.) Trash collection Vending product (products sold in store) Repair parts Repair labor Employee Labor (including employer taxes, Workers Comp Ins.) Payroll Services Telephone Internet/Wi-Fi Alarm system Drain cleaning Pest Control HVAC Service (and/or camera system) _
Water Heating Service _ (include inspection permit) Business Lic. Permits Cleaning Supplies _ Restroom Supplies Business Property Tax Other Total Expenses _ Description Revenue less expenses = Net income $ Regarding Revenue and Expenses: These 2 sections are designed to help you understand the breakdown of where the business revenue is coming from and make sure there are not expenses that are being omitted from what typical expenses are associated with operating a laundromat. This is not part of an ultimate due diligence or income and expense verification process. It is simply designed for you to use during your preliminary investigation into a laundromat of interest currently listed for sale. It is very common that people who are new to looking at this business are not yet completely aware of the right questions to ask or simply forget some of them during their inquiry conversation. These sections often contain questions that a Broker cannot answer immediately, but allow you to gain as much preliminary information during an initial inquiry to determine if the subject store is worth spending more time on. If the initial interview of the Broker or Seller shows promise, you can defer further questions and answers to follow up calls once the Broker has conferred w/ the Seller. Important: This sheet is designed for gaining as much detailed preliminary information about a laundromat for sale as possible. It is important that any offer to purchase a laundromat business include a due diligence contingency that allows you to thoroughly inspect and verify the actual business records and documents prior to consummating a purchase of a laundromat business.