Rookie trying to get into Laundro bus.

[prjain123]

(reposting. Not sure if it went through 1st time around)

I am based in Dallas, TX. For the past few months, I've been dealing with a broker (of Continental-Girbau equipment) who has told me that he can build me a new laundro, all the way from construction to completion.

Not having done this in the past, and only planning to have this as a part time/secondary source of income, wanted to get feedback from the more experienced veterans out there.

* Broker wants me to install a 5500 sq ft laundro, with brand new equip. Equip cost is about $380K. Rent is about $10.00 sq ft (includes operating costs).

* broker claims 25K gross sales minimum per month.

I did a demographic report for the neighborhood in question. Within a 1 mile radius there are about 7400 households. 44% of these households have income <= 35K, and about 30% have income <= 25K. Majority are renters, and most apartments are built pre-1980s. Population is primarily Hispanic.

There are a few old run-down laundromats in that area. I estimated that if I get 25% of the business for households with income less than 35K, then I would be getting revenue from 7400*44%*25% = 814 households per week. If I assume each household spends avg. about $5.00 per visit, per week, then the monthly revenue would be $16280...which does not come close to the proposee 25K that broker refers to.

* I am not including any estimated revenues from vending machines.

* I am trying to determine how to analyze demographics reports the best, or what to look for in these reports. Broker has given me 1 mile, 3 mile and 5 mile demographics. I consider the 3 and 5 miles complete hog-wash. If any business is to be expected, it would be within 1 mile of the Laundro.

* I've spoken to another laundro owner who's gone with the same broker. His major complaint was the that brand new equip when installed, is still not operating. Keeps breaking down etc. Is delivered in parts. He also gets poor customer service from the equip owners (Continental-Girbau).

* I am trying to determine if I am getting myself into something that may be too much to handle, or may be the wrong choice of business. Any suggestions on what to watch out for?

[buddy]

Have you considered smaller MAT? May be 2000-2500 Sqft?

Also if you are starting fresh I would seriously look into Wascomat Washers. Customers love Wascomat and they have great service and are the market leader in Washers.

Building large laundromat will require substantial invesment and the rent on 5500 sqft would be roughly $4500/month at $10/sqft.

You should also look into the impact charges that your town may have. In some towns it is as much as $5000 per washer.

[prjain123]

this broker's theory is that we go in with a blockbuster attitude. Build it big enough and wipe out competition, plus leave no room for new comers.

- Eitherway, is my demographics analysis reasonable, or am I overlooking something major?

- Also, what do you mean by impact charges. The location where I am planning to install the LD already has an existing and old LD, that we will be digging out and replacing. I though these charges were put in place to deter new comers into the the LD business, but that they were not retroactive to existing locations.

[buddy]

If it is existing MAT then I guess you don't have to worry about Impact charges.

The bigger is not necessarily better. The dealer will always try to sell more equipments.

I have about 1700 SQFT Laundromat and it is very busy despite lot of competition. I have had two new laundromat opened up very close to mine. One is just few doors down and the other 6000 sqft Mega Mat just 1/2 mile away. Initially it impacted my business for about two months and now I got all my customers back plus some. People are complaining about both the new MATS. They don't like the machines, prices are too high etc etc.

My Wascomats are 11 years old and they just love it. They don't like the new machines that other two MATs have.

I visited the MEGA MAt and I have no idea how he is surviving. He doesn't get even half of the customers that I have.

Location is very important so is cleanliness and equipments. Customers usually are price concious. They like to see lot of water in the washers and they see it in Wascomat machines.

[prjain123]

thanks, for the info, buddy.

You sort of hit the nail on the head. I am trying to determine if this broker is trying to sell me too much equipment...and I was using demographics to make that decision. I have an excel spreadsheet where i can enter all kinds of numbers, and they all seem to indicate that the broker is giving me true numbers. However, without the experience, I am not quite able to conclude from it.

To rephrase my Q; If I were to have equipment as follows:

75LB Washer 2
40LB Washer 6
30LB Washer 16
18LB Washer 28
TopLd Washer 20
Dryers 36

then, what's the minimum household visits I would need to keep all machines humming, at least during the busiest hours?

In essence, if I really do not need a 5500 sq ft, then I ought not to, but I do not want to lose out on an opp. either...just because I am barely going into it.

[vohraajay]

I would look at family with income less than 25000 and distance of 3/4 mile or less- plus an average family spendings of $500/family/month. use little more conservative approach knowing there's competition in the area...what's the renters percentage?

[Lar Hylobates]

You would have to have some serious "umph" to make this your first venture. Anything is possible, but I would seriously KNOW a market before investing in a Top store.

Secondly, I wouldn't touch the Continental products!

LOL, of course I just bought 12 Dexter stack dryers (made by Continental??)

[prjain123]

Gibbon,
I am doing this with a partner, so we'd splitting our risks halfway (and the revenues as well).

I am pretty serious about getting this Continental equip, but really would like to know what anyone's experience has been regarding it's durability etc. Any true stories or personal experiences that you are aware of.

Ajay,
You are pretty close, ajay. I did my analysis to be within a 1 mile radius and an income range <= 25K. Futher, I have a breakdown of the number of members in a household, and I took some guesses as to which machines a particular household would use more often. Also, accounted for the competition.

Renters % is 79%. At the same time, 78% or all housing units (rented and owned homes) are pre-1980 built. I've driven through these neighborhoods, the houses look like they are 1000 sq ft at the most.

This location is in a pretty industrial part of town. Primarily Hispanic. In fact there is a mexican grocery store that is always busy, and a family dollar store within the same shopping center as this LD.

Still have not got the answer I am looking for. How can I best estimate how much equipment I need.

[buddy]

One of your preliminary study should include visiting your competitors. Find out how much they charge, look at their traffic patterns and their pit falls. Figure out what you could offer to customers to go to your place as opposed to theirs.

Talk to their customers and find out what they like/dislike about your competitor's mat.

If your competitors are rundown mats then where do existing customers go to do their laundry? Either they are still visiting those run down mats or they are driving little further to some other mats. If they are still going to those run down mats then you will be merely sharing customer base with your competitors.

One disadvantage you will have with a mega mat is that if you have to go to a price war agaist them, you will be lot more vulnerable than you competitors as you will much higher operating expenses. Their loans are probably paid off, they probably will have much lower rent and so on.

[pete f]

Gibbon my man, Dexter is made by Dexter, and sold to Continental

To prjain you may want to read my thread about the new mat.
I would take wat the broker tells you and maybe count on 1/2 of that for income. Also count on about 1/3 more to put ity in than he tells you. There has never been a person here who built a new mega mat and said he made any money. I always say buy an wcxisting mat and retool, remodel it, it is cheaper and safer investment in the long run. Once you learn the biz, and find out if it is for you or not, as there is quite a turnover, then you stake out and look for your dream location and build a new store with local knowlege and experiance. From what I have seen, you are a sheep waiting to be fleeced. This is a tough business, it is hands on and not get rich quick. You can not put your competitors out of business by building a bigger store. That is a big myth. A big super stotre serves the ego of the owner and the pockets of the equipment dealer in most cases. What works for Home Depot and Walmart Super Centers does not apply to the laundromat business. Buddy has the right ideas and your own numbers make sense. Send me 50k and get the pain started so you know what it feels like owning a huge mat. As for the size, look at all the other close laundromats around, and build one about 25% bigger then them if you really want a new mat.

[prjain123]

thanks for the note, pete. That is indeed very helpful. Helps me re-evaluate this mega-mat option.

In addition to checking existing mats, I will also consider down sizing from 5500 sq ft to 3500 sq ft or so. Less rent, less equipment, less risk.

[Lar Hylobates]

I walked into a mat about two years ago. It was for sale and I was there to evaluate it.

The mat was run down, owner had told me they were breaking even, but put in 12 new frontloaders and a couple of dryers.

I entered, saw a crummy mat with 12 "new" machines in front. These machines were probably 35 pounders and continental. All of the knobs and door handles were tattered and taped up or missing. It was clear that these machines were not up to the test of a commercial mat. I personally "leaned" on a few items with these machines and they too broke. That was the only time I have seen those machines in operation. The dryers were some foreign crap that was obviously the cheapest mail order crap money could buy. What does this tell you?

Beverly has all Continental. I have seen her store in a magazine, she says they are great.

[CharlieS]

Another Wow.

You are considering a huge investment and need to do lots of research.

Pete is right. You will be far better off to find an existing store, buy it, upgrade it, and learn the business. Then do your megamat.

Mega stores can be very profitable, in the right location. However, most take upwards of 2 years to hit breakeven, and can lost upwards of 100K in those two years. If you can handle this, it may be worth the effort.

The proposed mix is terrible for a mega-mat. It makes no sense in todays market to have a bottom heavy mix of tops and 18 pounders. The current shift is to bigger machines. Tops are very inefficient water users and will be outlawed for US production in 5 years. Go with a an equal number of 18 pounders, 30 pounders, 40 pounders, about 1/3 as many 50, and a couple of 70. 30 to 40 pounders will do as well as your 18s.

Don't get locked in to this Continental guy. Talk to every distributor, Wasco, Maytag, Dexter, IPSO, etc. Let them know you are in the market. Get more opinions. Join the CLA and make the next conference.

Charlie

[Beverly]

Yes, we have a Continentals and am pleased with them, even after 18 months. Unlike most of you folks, I'm mechanically challenged and sought durable machines with a minimum amount of technical skills needed. I know most of you tout Wascomats, but I have not encountered YET all the negative hype the rest of you have...Guess I'm lucky. If you're in the Los Angeles, do come visit our store. Incidentally, I think we may have the largest variety of washers (from TL-75#s).

[Anonymous]

CharlieS raises a good point and any newbie should pay attention - talk to all the distributors in your area. They are a wealth of information, remember that they sold or installed all of the stores in your marketplace and have some very good historical knowledge. Some are better than others, some are honest and some are crooks. Don't be too upfront with them, use them as a resource to learn from. Learn the type equipment each of them sells, learn what they say is good and bad about each type of equipment. Digest the information, then make your own educated decisions.

[CharlieS]

Beverly - I may be mechanically adept, but have no more desire to engage in unnecessary maintenance than you do!

I came very close to installing my new store as a Continental store. I looked over that equipment closely and had a very good distributor. I think its pretty good stuff, even though I've never owned any.

I ended up with a Wasco store, because I was able to find (in the Journal), a 3 year old store, with Wasco ES Gen 5, in great shape, that was closing. I bought everything for about 1/2 of new and saved about $75K in building out my store. It cost me about $1200 to ship. Especially since this store has only an 11 year lease, this was a deal I couldn't refuse. In the first year, I have only had to replace 4 belts (on 2 machines), clean a couple of drains with bra wires stuck in them, retighten the bolts, and clear some coin jams.

Now that I think about it, the belts were on 2 of my 3 185 models. I better order a set for that third machine, plus a set of spares on Monday.

However, two points I want to make. One - Beverly is correct, ease and frequency of maintenance should be considered, and two, if rebuilding or even building, consider trying to find a 3 or 4 year old store and make an offer on everything. Sell off what you don't need and keep what you want. You can save a bundle.

Charlie

[buddy]

I have no experience with Continental, but WASCO would be my first choice. 18 months is not nearly enough to judge the durability of an equipments. WASCOS keep going even after 20 years. My Wascomat machines are almost 12 years old and still they peform extremely well and look new.