Good store, Good income, No Competition!

[Walter]

Friends,

I need some advice. I'm looking closely at buying a second (existing) mat, but here's the problem:

When I bought my first mat in another town, there were two competitors close by with mats in pretty good condition. As a result, I figured that the potential competition had already been 'discounted' and reflected in the revenues of the mat I bought. So far, this has proved to be right - business has been very steady month-to-month, year-to-year.

This next potential mat purchase makes me nervous because there is no competiton nearby. The mat's in a working class neighborhood, and about 2 miles away to the north and south, new shopping centers have drained many customers from the old shopping centers in the middle of town, but this old mat keeps humming along.

The thing is, the demographics for supporting another mat aren't very good: relatively low Renter to Home-owner ratio, no big Hispanic base, etc. Basically, the reason the mat does well is that it's the only one in the area. As a result, I don't think anyone would rationally build a new mat in the center of town where this mat is located and wind up splitting revenues with me. (But "rational" doesn't necessarily mean much in the real world!)

I've talked with the local distributors, and none CLAIM to have any plans to develop a new store in this area. Also, the local planning board has issued no permits at this time for a new laundromat.

Another point: the store could use a significant upgrade. If I buy it, I'm thinking of doing the upgrade ($75k) to further discourage anyone else from starting up a new store.

Has anyone been through a similar situation? Good store, good income, no competition. The mat's expensive to buy, but the price is in keeping with the multiples. How would you analyze this situation?

Thanks,

Walter

[mike]

Does the vendor know something you don't ?

You are right to be concerned about a new mat, especially as a new owner will NOT realize that expensive new malls are not the place for him.

Can you wait for the purchase until you see whether the new malls can rent all their stores ? (upon re-reading your post, it appears these malls are already open ?)

A laundromat is the last store a new mall will take as a tenant, ie,
they will only rent to us if all the "better" stores don't :-)

[Walter]

Mike,

Some clarification: the new malls have been open for about a 1.5 years each and have been very succesful. My sense is that customer loss in the center of town has stablized as these new centers are fully rented out...

To fill out the picture some more: the mat I'm interested in is near the center of town which has a couple of small, outdated malls situated in neighborhoods of modest homes and a few apartments.

Walter

[Kitty]

IF you are looking at a lonely old Laundromat that is the only game in town, I am sure the fact that demographics don't warrant another would ultimately keep a prospective competitor from building new in a relatively stagnant area that you have pictured for us.

Although we have seen new stores enter areas that did not warrant a new presence, most investors would not invest in an area that has little to offer. Unless this lonely store is exceeding its capacity most of the time, its doubtful you need to worry about a new store popping up. You should of course see how much land and/or buildings suitable for a mat is available in this area and how reasonably priced they are. The information may let you rest easier.

Also look into the water/sewer situation, this may be another reason no others will be enticed to invest.
Good luck!
Kitty

[WTLaundry]

I agree, don't think someone won't put one in. We were the only mat in town for almost 30 years. One other started up and failed quickly. We had just enough gross income for one store in town. Suddenly 2 years ago 2 new mats opened up within 1/4 mile of us and now we are trying to split the income 3 ways. I'm down to half the gross of what I was doing and with the increase in expenses, I'm not making it.

They must have looked at my weekend business was standing room only when they decided to put in theirs and didn't look at the big picture. The second to go in also is the local distributor for Dexter and didn't tell the first new one he was putting in his own store until he sold him all the equipment.

[pete f]

I have a store that has a locked down market, they are hard to find.
I would search out answers to a couple questions..

Water AND sewer impact fees for a new mat

available rental or lease space priced reasonable in the right zoning for a new mat

these should help guide you along. I did not look at either one when I bought my first mat, I just got lucky.