What is the real info on, the amount of failures new laundromats.

[Coinwash]

What is the real info on, the amount of failures of new laundromats.


This Question has been brought to the for front.

Now how can we answer this? Store that failed and are failing, are usually up for sale.

Could they have been mislead? (and by whom)

What are the down sides of the business

Why did they fail, poor business practice,location,not enough money to start or just jumping in with no knowledge of the business what so ever.

What are your throughts on this subject?

Fired away.......

[Winston]

Customers ask me all the time if a laundromat is a good "investment". I tell them that if they "invest" in a laundromat, they will lose their money. A laundromat is not something you invest in... you either work IN the mat or ON the mat (or both). To clarify: Working in the mat means you are the attendant. Working on the mat means you work to constantly maintain and improve the laundromat... repair equipment, buy supplies, handle the money, bills and payroll, supervise employees. It is also my view that unless you are willing to learn to repair every piece of equipment in your store, you will have a hard time making money.

Like most things in life if you put nothing into it, you get nothing out of it. If you put lots of your own time and effort into your laundromat, you will probably be successful.

[amartlock]

Like the way you put it Winston. I've only owned my mat for 3 months, I knew it would be a lot more work than what most people think, in fact, it's more like a second job (that doesn't pay very well until debt is paid off) than anything else. I've had several customers ask me whether it's a good investment and now I know exactly how to phrase my answer. Luckily, I enjoy being down there on my off time learning to repair the equipment so I don't mind the "second job".

[Walter]

There are many ways of approaching this question. Here are my thoughts for what they're worth. I'll give a narrow answer, and focus only on new laundromats as built & sold by laundromat developers on spec.

While this may be a generalization, it's hard for most owners of new laundromats to make it, beause the mats are priced in a way that you have to "hit a home run" to make the selling price worth it. Hit a "triple" you're in some trouble, hit a"double" you're in big trouble.

For many new laundromats, new owners are enticed in on 50% down. As a consequence, the owner is paying a very steep note and also praying that the store will do the 5 TPD as projected by the developer. It's a well worn axiom in the industry that it takes 3 churns of the store before the store finally sells for what it's worth. In these scenarios, the first 2 buyers get burned big time, and the brokerage house winds up with 3 commissions. Unfortunately, some of the large store developers work backwards - they start with the selling price they want to get, and then work up their projections to match. Don't ask me how I know this...

Again, there are exceptions to this rule, but by and large, buying new from a laundromat developer has the odds stacked against you.

Walter

[pete f]

I thought I was the cynical one. Maybe that is the wrong word. I have heard more on troubles, not really failures, then good, on new stores. However, the new stores that did well were done by people who really had their head to the grindstone, many of them doing much of the work themselves. CLA has stated they help educate the new investor, this may be true. I have never been to their seminar, so I can't knock them. As posted on their board recently, the "bad" mats seem to stem from distribs that are good salesmen. These are the same distribs who are members of CLA, so the censorship ends at some point when the check clears. Not that all distribs are bad, most are very good, but the worst ones have the best seminars. I know of a local distrib who has built the most new mats in the area, and also has the worst "failure " rate. Not that all the stores have gone under, but they don't seem to be doing that great. As we have seen posted on boards, people get in deep, then want to know what to do. I am sure there are some great locations that can be made into new stores out there, but it is much like picking stocks, or worse, trading futures. The ones on the inside get the best deals, and leave the rest for newbies to cut their teeth on. If it sounds to good to be true, it probably is not a good investment.
For 500k or so, the some what going price for a new store, there are alot of franchise opportunity out there in that price range that are more proven. The easy money and no work is the attraction here? If you have the mindset Winston talked about, you can do OK and make a decent return for your labor. I like the flexible hours, yet am on call 24/7, so their is pro and con. It is not for everyone, though I have met many from this board and can say the biz is for real people.

[Walter]

Pete,

Thanks for your comments. I agree that the word "cynic" is the first that comes to mind, but I think a better word is "realist." The information I provided was based on conversations with a well-traveled member of the industry who organized and participated in these "seminars" for 10 years. He explained to me ruefully, in great detail, how these seminars were organized and the likely outcomes.

In these situations, what usually happens are "soft failures," in which the original owner tries hard for a year or two before throwing in the towel and then reselling the store. For the outsider, it's hard to detect that a failure has happened - the store stays open, the equipment has not been repossessed, etc.

I posted this to help insure that newcomers are extremely careful before getting into these spec stores. Some mats do work out wonderfully well, and of course, there are many ethical developers. It's hard, however, to see someone lose a big chunk of their life savings on one of these deals...

To my mind, it's like playing in Vegas, but instead of the odds being stacked in the casino's favor 51%-49%, it's more like 65%-35%. Yes, 35% will do well and will generally be pleased with their purchase, but think of the other 65%.

Walter

[pete f]

Those are the numbers I feel are realistic as well. Even "used" stores have certain "better than others" rate but at least you have a chance of trying to figure out what you are paying for.