Interested In Getting In The Business

[JHBLUM]

I LIVE IN NYC AND I AM INTERESTED IN BUYING OR BUILDING A LAUNDRY MATT IN THE OUTER BOROS' IS IT BETTER TO BUY OR BUILD YOUR OWN MAT? MY FRIEND IS A LARGE DISTRIBUTOR IN THE BUSINESS AND SAYS ITS BETTER TO BUILD!!! ANY ONE HAVE ANY THOUGHTS

[Anonymous]

Your friend obviously is slightly biased (maybe right maybe wrong) as his business is selling new equipment. It would be against his best interest to say buying is better.

There is another thread on the board about this issue, but I'll quickly give you my 2 cents.

Building can have a very high reward, albeit at a very high level of risk. When you build you are only paying for assets and are not paying for goodwill (the value of a business above asset cost). Thus, if you do well you will have a lower investment base than if you bought. The only problem is that if build it and they will come really worked no one would ever buy an existing mat.

Buying gives you immediate access to a proven cash stream. There is much lower risk as you have a fairly good idea what this cash stream is. Hopefully you can find a mat that is somewhat rundown whereby with some additional investment you can significantly boost revenue. That is how I entered the business. If the old owner knew how much I improved the business she would probably kill herself for selling. Now keep in mind when I bought it there was some equipment that was over 35 years old. So it was only natural the place had no place to go but up.

Hope that helps - and glad to see you made the transition from the other board.

[BWJR]

Your friend is more of a business man than he is a friend. You build a new store, and he gets a $100,000.00 to $250,000.00 sale, which carries a huge commission. My unbiased vote is to look for an existing Mat with a good customer base and equipment that is less than 8 years old. When you find a few locations we can tell you how to evaluate the real worth of the Mat.

Again, do your homework and you'll be fine.

Best of Luck,

BWJR

[ajay]

in your case, since you'r e new to the business, better to build (I think he means buy . a lot less risk..but building new is all fun and glory but is very risky. Unless ofcourse, you're are sitting on cash and are looking to invest - It really depends.

Your distributor, being in this business, may also know of a decent location, location, location for a building. In that case, it would be better to build. if you do go that route, do become member of CLA and they will assist you much. There are mixed feeling about the association, but they are formed to help you. So collectively, you should be able to base your decision.


ajay

[Kitty]

Please tell me how many 8 year old mats sell that have much potential at all? And who wants to pay for "potential" Most profitable mats are not for sale, or if they are the price is seriously inflated. Newer mats for sale, will be either 1 over priced, or 1 over priced. The differences will be that one may be profitable to a great extent, while the other may not be profitable at all. The one that is profitable and for sale, with a huge pricetag my end up not being profitable for the next owner.

[BWJR]

Kitty,

They are out there. I bought one 8 years ago and made out very well. I sold it because I wanted to cut back and spend more time with my family. I am sure there are others like myself that sell their Mat for the same reason. You just have to keep looking. When i bought my Mat it was about 6 years old, I increased the volume and profit and sold it to a guy who is very happy with what he got. I keep in touch with him and the Mat continues to grow in volume. His profit growth will be directly related to his management skills, which i am sure he will do fine. In regards to the price tag, myself as the seller and the buyer negoiated the price and both of us felt comfortable with the compromise. The deal in my eyes is only successful if both the buyer and the seller are satisfied.

BWJR

[pete f]

There may not be any 8 yr old mats for sale in your area. There certainly are none in mine. I might find an 8 yr old remodeled one, but even those are scarce. We as a group have very different markets we operate in. It is hard to say buy an 8 yr old mat. It may be not an option. It is hard to say don't rent, buy the building. It may not be an option. It may be better to build then buy in some areas I realize, and I am the never build king. Like any succesful business, you have to figure, and meet, a niche in your market.
And an urban market vs a rural market are very different. Even urban markets are different from each other, as do rural.
I guess the best way to get into the biz is look and search, figure and calculate. If a new store makes sense, Ok, if buying a dump and remodel is an the option, you do that. You have to get real about the money and time it will take to make the store sucessful.

[Anonymous]

Pete - well said, and that's why this is a business, you are not just buying a bank CD. If you know your market (I have to disagree with others) paying for potential can make sense. Sure you over pay for what you buy, BUT if you can turn it around and do really well then what you are paying for is the opportunity to make good money. When I bought my place the old owner was very happy that she found someone as "Stupid" as me to pay her what I did. If she saw the numbers today she would be kicking her self for being so "Stupid" and selling for so little. There are no right answers, every situation is unique.

[Kitty]

You guys are correct. Any deal needs to be scrutinized, but many stores that sell in the early years are doing so because the profitability is lacking, at least in my area.

Question, why do so many of you not like to build from scratch? Other than the unproven track record, why? Wouldn't it be fair to say that building from scratch in an area, that was researched thoroughly would be a better bargain? I mean, everything would be new, you would not pay for "potential" nor "good will" and the reward (if the main criteria of a viable mat was met) would be far greater than paying for a proven track record in an older store?

[mike]

Kitty,

Many people don't like to build from scratch because:

It takes so freakin long to get up and running (9 months for me, twice)

Headaches with inspectors of all departments, some of which you have never heard of !

Cost overruns on contractors

Slow start-up of the business.

looking for (and training) staff.

and many others that I have purged from my memory on the advice of my psychiatrist :-)

Having said that, I have never purchased a ready made store, they are few and far between in my neighbourhood. And they weren't what I wanted. I wanted something better !

[ajay]

I'm all for building new, but there's risk involved. With an established business, there's less risk. Having said that, one store owner I know, built 4000sqft laundromat in one area where I would never consider building such store. The demographics didn't make sense and he wouldn't get the return so quickly. After digging a little more in the owner's head, I learned he's loaded($$). While he wiped small stores immediately, he eliminated any future competition in that area as well. He was in it for minimum of 20 years, his lease said so.

The decision to buy or build, really depends on you and your financial situation. As for me, right now I'm buying existing. When I'm able to take more risk, I will build new. It's not only my dream but my father's to own a new mat with no landlord.

ajay

[Anonymous]

Kitty you may have an advantage in building in that you have been in the business for some time and know your local area. For most people entering the business it is foolish to assume that you can pick a new location and do well as there are many seasoned people out there looking at the same area. If there is not a laundromat there then there is "probably" a reason why. Can it be done, sure - but it is a high risk venture and you had best have deep pockets just incase, otherwise someone else may pick up a one year old store for cents on the dollar. Use your knowledge, just be careful.

[Kitty]

I am just curious to see why others shy away from building new. I have no plans as of yet to do anything, but am not eliminating the possibility of finding a decent location and a good deal on land. But, there is a ton of cost involved when building new, I'm sure

[pete f]

Originally posted by Kitty
You guys are correct. Any deal needs to be scrutinized, but many stores that sell in the early years are doing so because the profitability is lacking, at least in my area.

----------------------------------------------------------------------------
Why would you want to build new after just writting that sentence? If new stores in your area do not make any money, then what is the point of doing the same thing? I know new stores in my area do not make any money. I am not out to re invent the wheel.

-------------------------------------------------------------------------------
Originally posted by Kitty
Question, why do so many of you not like to build from scratch? Other than the unproven track record, why? Wouldn't it be fair to say that building from scratch in an area, that was researched thoroughly would be a better bargain? I mean, everything would be new, you would not pay for "potential" nor "good will" and the reward (if the main criteria of a viable mat was met) would be far greater than paying for a proven track record in an older store?

Here is an example. I know a new store built for $400,000+, leased area he researched very well, according to him. I know a guy who bought an existing store (leased area) for $40k and spent 100k on a total refit, new wirring, plumbing, everything.
His store makes a great cash flow on his investment, the new store is still in the red and likley will be for some time, as your sentence up top eludes.
Most used stores can be bought for a fraction of what the buildout fees would be on a new store. The good will is really free.

[Anonymous]

Pete your market is very strange if "used" store sell for less than the buildout cost of new stores. Why would anyone sell a going concern for less than the cost to build as there is value in a going concern as we have discussed above. If you can find such a fool, then jump on it and buy it but those deals are few and far between. That is why many people build - they don't want to pay for the goodwill.

[pete f]

I think the reason is buildout costs so much now, and impact fees in some areas are huge. Not everyone knows this, and price is determined by cash flow, not nessaraly the start up costs of a new one. So a run down mat can be less than new, but still need to redo the mechanical, and most of the time electrical sides.
I know a store for sale for 50k, cash flows around 15k. The impact fees alone are around 40k if build new in that spot. Add another 50k for buildout and it looks like a deal. But it is not worth 90k. Why does a 5 year old car loose 1/2 its value? It still runs, so it should be worth the same a new one? Sort of that same thing. A 20 yr old mat has lost value if not mainatined and updated.

[Coinwash]

For one Grand father claw in place.

Customer base in place.

It would be great to build a new Laundromat and even own the land. What about your return, I have seen this happen.
Then I have gotten a great deal. (THINK)
But for the beginners with not a lot of bucks
Preexisting usually give you a running start.
This does not mean it won’t work for you???

[Kitty]

Missed my point.......

New stores in my general vicinity came into an area that was well established. The main store I worked for still in exsistence, has been there for over 35 years, Older mat, however, great location, parking customer service oriented. Not near running to capacity of machines. Two new stores in 5 years built, one two blocks away, the other about 2.5 miles, just off the major HWY. The first one built, was for sale after 2 years. I did the water analysis off of both stores mid year. Neither captured a decent market share. The first one took the gravy money, 20%. Store one gross sales were 1200 week, the other 400K investment, was less than 1K a week. We never felt a thing from the other. My point is, both stores opened in an area that clearly did not warrant one, thus the reasons for the sale of the 1st built one.

I would not even consider a new mat in my general vicinity.

The only reason to open new would be because of need, or for someone who thinks they can capture most of the market share because of lack of attention to the current stores.
This was not the case in my general vicinity, when these new stores came in.

Personally, I know what will warrant a new mat, and what areas would not, but it is evident in many markets that there are business people that do not have a freaking clue as to whom they are marketing to and what that market expects. Thus, many new stores are built, the customers were never captured, and there is reasons for that. Lots of times, that new store will never make it, as it was put in the wrong spot, spent too much money and the original owner must dump it to another unsuspecting fool.

There are plenty of business people who can afford to build new, and I can see it to be an advantage if the market says GO.

[Fred50]

Kitty,

You are right that there are people with $$ and less than a clue getting into the business now. It is unfortunate for all of us. However, there is a silver lining to this dark cloud - there may be some nicely built stores available for bargain prices in a few years!

Mats (especially new ones) don't usually go away. They sometimes sell for less and less until it reaches a point where someone can make a go with it.

There is a dealer in my area that seems to make a living building stores where they aren't needed and takes the same store back and resells it several times!!

[Anonymous]

Mark, that's a "Fowl" comment! Ha Ha Ha.

I have looked at three stores that were for sale in my neck of the woods over the course of the last three years, and all three of them are no longer in existance. They failed and are gone - no more mat there, so there are places were existing mats just vanish - but I agree that is the exception that makes the rule.


Pete - most of what you say is true, but your analysis with a used car is faulty in that a car is a depreciating asset that does not generate income while a laundromat (even though the physical equipment wears out) is a current and future stream of revenue and as such cannot be compared to a used car.

Kitty - I still think you should check into the new "used" store in your area. If you can pick it up for cents on the dollar you should be able to compete very effectively. You know the things they are doing wrong and why they are not making money - like being closed when they should not be. Think about it and what you could generate there not what they are generating - it might make more sense than you think at first pass.

[JBTcajun]

In my very small area the existing stores do not meet my or the costamers needs. There is no way I would purcase a month 2 month store. Nor would I like to buy its conpanion store and retool it. My hope is that I capture the business and they decide not to retool. If they do I will still have the bigger, cleaner, and better located store. Who would retool on a month 2 month and the one they own is 2 small by itself. I would have loved finding an existing situation that would work for me, when you transfer things and financing changes makes what is now profitable not necessarily profitable when ownership changes take effect. I will be vending my 20/lb fronts close to the price of their tops and It will cost me less to do so. There are times building new works, plus u get it the way u wanted it.
JBTcajun

[BWJR]

If you are careful and do your homework, buying an existing mat is the way to go. Up front money is less, risk is less and the tax write- offs are the same for the most part. An existing mat brings along with it a customer base and a new mat has none to speak of. Improving and adding to an existing mat will give you much more return on your dollar and your pay-off time will in most cases about half of what it would be with a new store. Again I agree that there are exceptions to the rule, and every area is different. Many new stores and I mean the big ones are too big for the area, because the owner didn't plan too well. I have seen this happen over the last five years very frequently. The owner opens a 3000-4000 sq ft. building and puts in $250,000.00 worth of equipment with all kind of opening costs. The mat does not return at the rate that he or she anticipated and in about 2 or 3 years it is sold at a loss. Sometimes it takes 2 or 3 sales of the business before the expenses and debt service can be supported by the volume and profit of the business. A Guy I know sold interest in 2 McDonald franchises and opened two state of the art Laundries. Both were over 3000 sq feet. His cost for both were over $750,000.00. He was sold a bill of Sale by a Wasco Distributor and given a lot of misleading info. He was from North Jersey and didn't know this particular area. In less than a year he sold both business to a guy for about $500,000.00. The current owner is still struggling with these expenses vs. income. One of the big mats he sub-divided and made more than half of it a convenience store. Again this is just one instance, but it certainly is a costly one, and one that needs to be kept in mind when deciding whether to build or not.

BWJR

[Kitty]

Its fun searching through the old threads and reading though the topics of our discussions and see who we have shared our thoughts and arguments with.

My former employer has the market share at each of his locations. He has lost some percentage at the main location a main location when the first competitor came in. He does not calculate a loss in the business as significant as what he might should. He considers his business still thriving as his revenue is still near the same level as it has been over all the years prior to competition. He has had increases in vend priced to maintain this revenue level. He has lost market share I cannot determine how much because he has increased the vend pricing twice over the years and I am sure the competitor has as well. I am figuring the competitor is earning approximately 125K a year from the water analysis I last did. I think the new Laundromat brought new business to the market place, other than taken 500.00 -750.00 in revenue a week from BD I don't see how they took any more than that.

Now, this mat did not have a good location or any marketing skills at that. INHO they did everything wrong. Here is a Zinger, they are closed on Sundays.... but they are still open after I suppose it is a good three years now. So I suppose they should make it now. They have a great WDF system, they do undercut BD service. They have the Clear wrap system, which I have to say is clearly the better and cleaner system. Much much better from the consumer stand point?


Well Guess what.... BD is getting hit with another new competitor in yet another market, unfortunately it is not me. I was beaten to the punch. But, what really sucks is an idiot or what IMHO is an idiot is going to ruing a really great location. I think I am going to take this thread and follow through on the development on this new site...because if it develops the way I am told we will all have something to talk about. I'm going to stop with the first set of picks and the ground layout of the strip the Laundromat is set for the corner of the strip. That's right I said corner. Jon will post pics shortly....

Updates soon...


Kitty :)

[pete f]

Is this a new ground up store?
I see one mistake already.

[Coinwash]

Ok let's hear it Pete.

Lets see if we agree ;)

[Kitty]

ME TOO ME TOO ME TO

what do see

Remember this is a retail shop center, got a couple more pics Im gonna post now too. lets what these show

[Kitty]

Picture Number 1 is basically retail space w/ plumb in back for bathroom
Picture 2 is the corner where laundry is scheduled to go
Picture 3 General retail with plumbing in back for bathroom
Picture 4 plumbing drain line
Picture 5 electrical and plumbing for what I assume washers
there are only 2 of these.

What I do not see is any floor drains... and I'd think there should be more drains period for a laundromat anyway? But this is my first one to really watch.

[pete f]

Ok let's hear it Pete.

Lets see if we agree ;)


I will assume the white pipes in the box is the drain line? If it is the main water feed then they really made a mistake not to upgrade to CPVC. If a drain, it should be vented past the P-trap. Not having that means every machine will have to be P-traped. This can create problems, ie suds back up. Also, cleanout? see picture of the way my plumber set up the drain for the washers.
If the pipe in the box is for the bathroom of something then no problem..maybe it is for the toilet?

[Coinwash]

We agree I hope it is for there toilet;)
Kitty please explain what You’re doing "007".
We are watching this Laundromat being built from a far

We won't say where unless Kitty wants too.

[Kitty]

I will assume the white pipes in the box is the drain line? If it is the main water feed then they really made a mistake not to upgrade to CPVC. If a drain, it should be vented past the P-trap. Not having that means every machine will have to be P-traped. This can create problems, ie suds back up. Also, cleanout? see picture of the way my plumber set up the drain for the washers.
If the pipe in the box is for the bathroom of something then no problem..maybe it is for the toilet?


Hey Pete,

From what I gather, the drain in the box is for the bathroom, and the drain with the electrical would be the drain line for the washers. Now, in my neck of the woods we use pits....I may go take a picture of the old stomping grounds to give you all an idea of what I mean.....

But untill then, Ill explain my former establishment has a drain line on the floor with a pit trough covering the drain. The drain is slightly at a downhill slope and is has a lip on it through to the pit. All washers then drain directly into the pit. Suds may puff up in the back of the machines in the pit but never had too many issues with over flow....

As far as this particular store, time will tell with how they proceed. Interested with what they will be doing, how they will do it. Time will tell