Make Offer Or Keep Looking?

[ricson]

Hi, I would like to thank you in advance for any input you could give me on this mat.

1300 sq ft
Clean mat, needs paint and floor work, located in small strip mall with 4 stores?
On a busy street with good parking and good visibility.
Asking $105,000, it started at $150,000 13 months ago.
Open Monday – Friday 7-9 Saturday and Sunday 6:30-9.
Fully attended with WDF. Which owner says is 25% of the business.
Owner has owned it since 1993.
Mat is 15 minutes from home

There’s no lease, owner has not renegotiated because he’s not sure what he’s going to do.
Rent is 15,400 now
I will have to negotiate a new lease, not sure how the landlord will be to deal with.
An acceptable lease clause will be included if an offer is made.
I been in the mat many times and have met all 5 employees, all are elderly and are very helpful and keep the place very clean.

There are 2 other mats in town, 1 is 1700 sq ft, decent equipment, not very clean does WDF, also does a large commercial business. This mat is about 3 miles away. I’m not worried about this mat.
The 2nd I’m more worried about, it is about 1/2 mile away. Also about 1700 sq ft. This mat was just sold, it is very dirty and most equipment not running. Doesn’t seem to have many customers at this point. New owner says they will be painting and installing new equipment, not sure what they are replacing and if it is new or used . This mat is also in small strip mall with ample parking and good visibility. As of right now it is unattended, not sure if it will stay that way.

Gas, electric, water, sewer and laundry supplies are lower in 04 than 03 because owner says he paid in December 03 for tax purposes?
2001 equipment repairs are high because he purchased 5 new dryers.
I tried to do water analysis myself, but numbers came out lower I believe. I did it the way the IRS would, 44,606.75 washers only. Coinwash members way I got 49,036.80 washers only. Does this seem right?

Water use gallons
6/09/05 291,000
3/08/05 303,000
12/09/04 281,000
9/09/04 280,000
6/08/04 287,000
3/09/04 273,000
12/12/03 279,000
9/09/03 261,000
6/10/03 279,000
3/11/03 280,000

Population 13,079 in 2000 up 1.3% from 1990
Households 5,125 in 2000 up 4.2% from 1990
Median household income 40,263 in 2000 up 27.8% from 1990
Owner occupied 3,026 in 2000 up 2% from 1990
Renter occupied 2,081 in 2000 up 7.7% from 1990

Owner says he will backup all the numbers with tax returns. I really like this mat, I think it may have more potential, but do you feel the mat ½ mile down the road will really hurt this mat?
Will someone please tell me what it’s worth or is it worth it at all?
If it’s worth making an offer, how do you feel about the type and age of equipment?

Thanks for all you help,
Rick

[IPSOTECH]

First let me say that you have done your homework!!!!. Great info. The store looks nice but some of the equipment is rather dated Gen3 Wascos while great washers are not worth much now a days. I would say about 65k as it stands is all its worth. No way thats worth 150k and 100k is a little steep. Now if it had new equipment then maybe but its only making 20k net.

Since you are only 15 minutes away you may want to consider making it self service and get rid of the employees (if the setup of the place permits). The reason is I see 43k in payroll and other related expenses (which seems rather high) and you say that 25% of the income come from drop off. So if the place without dropoff makes about 110k*.75 =82.5k. Now remove almost all of the payroll expense except for cleanup costs that leaves you with 30k+ more in your pocket just for getting rid of the drop off and that makes more sense, and you don't have to worry about employee issues. Right now they aren't making enough money in drop off to pay for the labor it takes to do the laundry.

My 2 cents.

[Kitty]

Remember to take the Fluff out of the WDF proceeds.


The WDF revenue which you have said the owner has stated is 25% of the overall annual income. You need to remember that only a certain percentage of this income goes into the coin boxes and that is all you are concerned with. Do not over pay on the additional amount. You may or may not continue with that portion of the business?


At first glance does the water usage look awfully high for that mix of machines and that amount of money? I did not do an anyalysis I just too a quick peek? Just seems high usage for 100K a year store and 20+ washers unless its too early in am.

Happy day boys
Kitty

[mike]

I agree with what's been said.

I personally will never buy another mat without owning the property.

I KNOW that some places this is not possible, but still.

You mentioned getting a good lease as a condition of purchase,

that is well and good, but when you are calculating your return, make sure that you get all your purchase money (and rehab money) "out" during the lease term. (never accept "a rent to be agreed upon" as an acceptable term.

The mall only has a few other stores, I would try to purchase, or get an option to purchase the mall BEFORE buying this mat.

If you could do this, you can make a lowball offer for the mat, or just wait until it drops into your hands.

[ricson]

Thanks everyone for your input

Iv'e been reserching the mat business for about 6 months so i'm still new to this.This board is GREAT.

I considered self serve but the more time i've spent washing at this mat the more i realize just how importint a attendent really is. Not just for wdf but spills,quarters jamed,ect. and i was amazed how many little problems the customers seem to have and customers seem greatful that their is someone there to help. Plus the ladies seem relaxed and safe and have the attenent to chat with.

With 3 mats in town and 2000 renters would you think the wdf business could be increased, or the business in general. Are these good ratios.

Will the older wasco washers last a couple more years and are parts easly available for the equipment in the mat.

Should i be WORRIED about the mat that's under renovation 1/2 mile away.

Kitty when i did the water analysis i came up with under 50k for washers. I probably did it wrong.
Can the gas useage be used to back up the water use
to see what this mat really does. dryers are the only gas use. Heat, hot water are oil fired.

Does it seem fishy to you that gross is up in 2004 but gas & elec. water,sewer and laundry supplies are down.
Is it likey that much extra was paid in dec. 2003.

I would love to buy the realestate it's about 7500sqft.

MY BIGGEST CONCERN IS THE MAT THATS UNDER RENOVATION?

Thanks again for sharing your knowledge with me.

Rick

[pete f]

there is alot that can be done with this mat. 15 mins from home is a big plus.

[Kitty]

Pete's right there is a lot you can do with this mat, but like Mike ~I'd prefer to own the RE as well. But in this case doesn't seem to be an option. But, if you can get the price right then you may have something. So, therefore I suggest you sharpen your pencil.

Make sure you have at least 3 complete years of the utility bills and re-calculate the water analysis....I'll see if I have time to come up with something today for you...

PeterH....I know you have time sitting there at your desk!
Kitty

[ricson]

Ok I did a water analisys the way Kitty does, that I found in a earler thread and I came up with $74,800 for total coin reveneu for washers and dryers. I did another one the IRS way and came up with $66,900
Do these numbers seem in line with the water usage.
And $105,000 gross including wdf.

Can any one give me input on the demographics and the laundry services being offered in town already.

Going to meet with the owner tuesday. To take a closer look.

If I make a offer I would REALLY REALLY APPRECIATE anything that I should include in the offer to protect me as the buyer.



Thanks again,
Rick

[Kitty]

I never like a P& L that does not have line item for washers, dryers and WDF seperated. ANy laundryowner that does not seperate does not clearly want to know where the profit centers truly lie in the business, or simply does not want others to know what is what either and lumps the revenue centers together?

WDF, washers and Dryer revenue should be differentiated in a seperate line item. If this is a generated P&L from the owner I suspect he ran a a report just for you? See if the owner can generate a different report, one that is more detailed, showing washer, dryer and wdf income seperate as well as showing the percentage to income.

In the amount you calculated you must consider the amount of profit in the WDF service. You will need to add this amount to what you have calculated to your water analysis, therefore the figure the store owner gave you may be accurate. When I was working I figured the average profit margin was approx 63% in wdf at the prices we charged at the time. You will have to see what the charge versus cost will be and what the approx annual revenue will be on the WDF service in that store is/could be.

One big thing for this store would be to open longer on the weekends and you should capitalize on the WDF business. I would think that without a good lease this business is worth almost nothing. If you do not negotiate an EXCELELLENT lease ~ PASS

[pete f]

Ok I did a water analisys the way Kitty does, that I found in a earler thread and I came up with $74,800 for total coin reveneu for washers and dryers. I did another one the IRS way and came up with $66,900
Do these numbers seem in line with the water usage.
And $105,000 gross including wdf.

Can any one give me input on the demographics and the laundry services being offered in town already.

Going to meet with the owner tuesday. To take a closer look.

If I make a offer I would REALLY REALLY APPRECIATE anything that I should include in the offer to protect me as the buyer.



Thanks again,
Rick

Did you buy the mat?