Looking to buy, is $85000 a fair price?

[Anonymous]

I am thinking of purchasing a Laundromat. This full service Laundromat has served the neighborhood for many years, and it has been owned and operated by the present owner since March, 2004.

The business is located in, what appears to be, a desirable neighborhood. The 2000 census reported that this neighborhood had a 16.8% increase in population during the previous decade, and the population consists of 56% minorities. The surrounding housing has many older apartment buildings with a large number of two-flats and three-flats. The laundromat does have a “mixture” of competition (some newer laundromats, some older). Several off street parking spaces are available for customers behind the business (approximately ten spaces). Metered parking (about four) are also available and located on the side of the business.

Total area of the store is approximately 1700 square feet. Drop-off laundry (wash,dry, and fold) service is available and priced at $ .60 per pound and represents about 28% of the sales volume. Business hours are 7:00 a.m. to 10:00 p.m. (Monday thru Friday) and 6:00 a.m. to 10:00 p.m. (Saturday and Sunday).

The rent is $2634.45 per month, with a rent increase of 5% every year through the year 2014. CAM is approximately $177 per month, and the monthly amount is adjusted as the actual costs are obtained. A security deposit of $6400 is now required.

The business is attended with three employees which divide the hours amongst them at $6.00 per hour.

The following equipment is included with the purchase price:
13 SQ top loaders - $1.00
7 SQ 20-pound front loaders - $2.25
4 SQ 25-pound front loaders - $2.25
1 Milnor 35-pound front loader washer - $2.75
14 SQ 30-pound dryers - $.25/8 minutes
2 SQ 50-pound dryers - $.25/8 minutes
1 Vend-Rite laundry product vender, 8 selections - $.50
3 Empire State candy and snack venders, 28 selections – (new in April, 2004) - $.50
1 Standard $1-$5-$10-$20 changer (new in April, 2004)
1 Detecto 60-pound scale

Operating Results are listed below as monthly and are as such:
Washers and dryers: $6500
Drop-off laundry and pick-up and delivery service: $2500
Total Gross Sales: $9000/monthly

Expenses:
Electric: $300
Garbage service: $50
Gas: $400
Insurance: $50
Licenses: $10.60
Payroll: $2782
Premises cost: Rent: $2634.46
Real Estate tax and maintenance ext.: $177
Repairs and maintenance: $400
Supplies and vending machine purchases: $100
Telephone: $30
Water and sewer: $300

Net operating income: $1765.94/monthly


I did visit the laundromat and even did my own laundry! I was there for about an hour and tried to observe the store as it operated. I noticed six of thirteen washers had “out of order” signs, and trying to be discreet, was not able to look at all of them. I also noticed four dryers had “out of order” signs on them. All the washers looked old except for four front loaders. Two that I used, unfortunately, sounded like a freight train coming through the store. All the dryers looked old also. The store, itself, needed to be completely remodeled (very old paneling on the walls).

The asking price of this laundromat is $85,000. My question is, with all the given information, is this a fair price? too high? too low?

Sorry about the length of this note. I wanted you to have as much information about the laundromat as possible. I have never owned a laundromat before. Any feedback would be greatly appreciated.

[Kitty]

1st problem before reading more thoroughly is utility rates are way off

[Anonymous]

Hi Kitty, I would guess, you are thinking they are a bit low. These were expenses given to me by a broker. I have not seen any utility bills yet. With the expenses and sales that I have, I wanted to get some feedback from professionals, like yourself, that don't have a vested interest in this sale. So I can have a better understanding of what I am getting myself in to, any more feedback would be much appreciated.

Thank you,

Strat

[Kitty]

I never read through the stuff after I saw the utility rates. The amount of revenue stated the utility rates will be much higher. Get the figures and type them in and we'll have another look.

Kitty

[anonymous]

the thing you have to look at is how old are machines and what do you need to replace, and even more inportant is the plan on how to get more business in what can you do to be at 20k month, i had a store that size doing that much a month but i had bigger machines, get rid of those toploaders. if they owned a long time are the sales better or worse in the past. how much compitition. you need long lease and have them sign a no compete clause , so they dont open mat up the street. 85k is very cheap , even thought the numbers dont work for what you have, prices are cheap also. Make sure they dont count drop-off twice in sales (count drop off from register, but you have to take out what your putting in machines to do drop or your counting it twice. if all looks good 85k is nothing in todays market, you could put all new machines in then increase sales then sell thats what i do. good luck

[pete f]

The lease is going to bite in the long run. Right now it is to high precentage wize.
HOWEVER... this mat is full of old stuff and is a likely candidate fora retool. About $100k would re-equip the place, and likely boost revenue, save utility. You have to invest heavy to get the revenue up to a ratio that make the rent less than 20% of gross. Could be worth it, maybe not. Also, need at least 2 changers. I ignored the w/d/f becuase I deal in self serve only. Try to firgure if it is a prime location.

[Anonymous]

I never read through the stuff after I saw the utility rates. The amount of revenue stated the utility rates will be much higher. Get the figures and type them in and we'll have another look.

Kitty

I finally received the utility bills, here they are:
Billed every 2 months
***********************
Feb 4 2004 Reading 747
Apr 9 2004 Reading 774
65 Days 27.000
Water 260.82
Sewer 216.48
Total 477.30
***********************
Apr 9 2004 Reading 774
Jun 8 2004 Reading 797
60 Days 23.000
Water 222.18
Sewer 184.41
Total 406.59
***********************
Jun 8 2004 Reading 797
Aug 6 2004 Reading 822
59 Days 25.000
Water 241.50
Sewer 200.45
Total 441.95
***********************
Aug 6 2004 Reading 822
Oct 7 2004 Reading 847
62 Days 25.000
Water 241.50
Sewer 200.45
Total 441.95
***********************
Oct 7 2004 Reading 847
Dec 8 2004 Reading 890
62 Days 43.000
Water 415.38
Sewer 344.77
Total 760.15
***********************

I hope I've given you the right information. Please let me know if you need anything else. I really appreciate your help in this matter.

Thanks

Strat

[Mevolution2002]

The lease is going to bite in the long run. Right now it is to high precentage wize.
HOWEVER... this mat is full of old stuff and is a likely candidate fora retool. About $100k would re-equip the place, and likely boost revenue, save utility. You have to invest heavy to get the revenue up to a ratio that make the rent less than 20% of gross. Could be worth it, maybe not. Also, need at least 2 changers. I ignored the w/d/f becuase I deal in self serve only. Try to firgure if it is a prime location.
Good pointers...

[pete f]

I finally received the utility bills, here they are:
Billed every 2 months
***********************
Feb 4 2004 Reading 747
Apr 9 2004 Reading 774
65 Days 27.000
Water 260.82
Sewer 216.48
Total 477.30
***********************
Apr 9 2004 Reading 774
Jun 8 2004 Reading 797
60 Days 23.000
Water 222.18
Sewer 184.41
Total 406.59
***********************
Jun 8 2004 Reading 797
Aug 6 2004 Reading 822
59 Days 25.000
Water 241.50
Sewer 200.45
Total 441.95
***********************
Aug 6 2004 Reading 822
Oct 7 2004 Reading 847
62 Days 25.000
Water 241.50
Sewer 200.45
Total 441.95
***********************
Oct 7 2004 Reading 847
Dec 8 2004 Reading 890
62 Days 43.000
Water 415.38
Sewer 344.77
Total 760.15
***********************

I hope I've given you the right information. Please let me know if you need anything else. I really appreciate your help in this matter.

Thanks

Strat


This has to be cubic feet? not gallons? I do not know the conversion, I deal in gallons...

[IPSOTECH]

There are 748 gallons in one hundred cubic feet.
Multiply the number of HCF by 748 gallons to determine the number of gallons used.

[Anonymous]

I found a web site that converts from Cubic feet to Gallons http://www.metric-conversions.org/volume/cubic-feet-to-gallons.htm
Here is the conversion for each month:
**********************************
Feb 4 2004 to Apr 9 2004
Cubic feet 27000
Gallons 201974
Total Bill 477.30
**********************************
Apr 9 2004 to Jun 8 2004
Cubic feet 23000
Gallons 172051
Total Bill 406.59
**********************************
June 8 to Aug 6 2004
Cubic feet 25000
Gallons 187012
Total Bill 441.95
**********************************
Aug 6 2004 to Oct 7 2004
Cubic feet 25000
Gallons 187012
Total Bill 441.95
**********************************
Oct 7 2004 to Dec 8 2004
Cubic feet 43000
Gallons 321662
Total Bill 760.15
**********************************

Thanks for your help......

Strat

[Kitty]

Seemed to be a big jump in OCt-Dec in the water usage.

Based on the amount reported monthly of 9K the seller is saying there is an average of 5.5 tpd. However, this would be only in the Oct- Dec based on the usage of 321K gallons. Based on the prior water usage the revenue would be much less.

[pete f]

Based on the water usage I would say the owner is giving fair revenue numbers.

[Kitty]

The water usage listed is for 60 day periods with an average of 110K gallons per month. Based on this amount of usage the total gross would be 6800K per month. WDF at 60 cents a lb would not include much profit to add to that total revenue.

Even using the sellers stated income of 9000k and the
7200 estimated expenses there are some discrepancies or items not listed. I doubt there would be much left over and definately not 1800 month.

Usually the utility rates run between 20-25% of gross revenue, using the 9K the utilities should be somewhere near 1980 per month, a difference of about 900 a month. The payroll does not include 7.65% that is required by Social Security nor other payroll liabilities (state unemployment taxes, or workmans comp expenses, etc ). Add another 350 a month to the expenses to account for this. The WDF servce is a delivery service too? If so, there will be gas expense, vehicle repairs, insurance expense to consider that will also need to be added to the expense list and that may run 300 or more a month.

If the revenue is over estimated and the expenses are under estimated as I am seeing then there is nothing left over and quite possible a monthly loss. Why is the current owner selling? Could it be they are losing monthly as I predict?

It sounds as if the fronts you used have a very short life span left ahead before the bearings need replacement, and everything else is very old. You said there was other competitors, Id take a look at their vend prices. I bet this location is very price driven. If you consider this location for a retool and want to sink a bunch of money into it, I wouldn't consider anything near 85K for this business.

[Anonymous]

I would like to take this opportunity to thank Kitty, Pete F, and all the members of Coinwash.com bulletin board who responded to my inquiry. With all the information that I have and the information that everyone has provided, I think I will pass on purchasing this Laundromat. I am sure other opportunities will come up.

I didn’t want to go thru this every time I found a Laundromat that I was thinking of purchasing. Everyone here should not be doing the calculations for me. So I found an IRS document, which I think is very useful for beginners like myself: http://www.irs.gov/pub/irs-mssp/laundry.pdf This document gives guidelines on how to calculate water usage for each machine from the water bills. I know this formula would not be the same for each mat, but at least it gives a general idea.

This document talks more about water usage and washers in general. It talked very briefly about dryers and how much money they produce. If any one has general guidelines on calculating dryer usage in a mat, please reply to this post.

I would love to hear some feedback on the link I provided above and any other information that would help a beginner determine the type of business a Laundromat is doing.

Thanks again for all your help….

Strat

[Kitty]

Your welcome Strat.

Usually a good estimate for dryer income is 40% of gross washer receipt.

[Anonymous]

My dryer income has been running a bit over 50% of my wash income.

Maybe that's just because my tops are at $1 and not bringing in as much as they should!

[MichaelCa]

runchman, you're o.k. with 50% dryer revenue. (but work on getting it higher ! -not lower)

I'm doing 55% , and i know other owners doing the same.... also, a couple forward-thinking distr. have mentioned to me they feel that is the direction things are headed in.

The days of under 50% are dying.