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View Full Version : Remodeling effect on Gross/Net


JuniperoSerra
07-14-2008, 05:23 AM
Long winded..., please stick with me!

I'm considering buying my first mat. The mat nets about $5.5k/month with the owners acting as attendants 6 hrs/day. It grosses about 12k/month, averages 200hcf of water.

Currently, the place is basically a dump. It's in a completely hispanic neighborhood, and the owners don't speak spanish. Also, I've observed that they sort of avoid eye contact with customers and generally "hide" from them.

About half the washers in the store are broken, with only tape over them to indicate as such. The walls have grafitti, the floor is old and broken up in places, there is no where to sit, nothing to drink, nothing to eat. There is a bathroom, but it's a dump too. All signage is in english, and generally innaccurate. There is no spanish signage, yet 95% of the customer base only speak spanish. The place is relatively clean though. (But for some reason the owners don't know how to paint?, or fix a machine?, strange)

When I go to this laundry there is usually one customer here for every five I see at the place down the street. The place down the street (about 4 blocks away) has good street visibility, which this one does not. The one down the street really is a well managed card store, great lighting, good machine mix, lots of windows, small play area for kids, nice places to sit. It is further though from the apartment complexes that mostly it draws customers from.

My plan: I want to buy this place, have attendants most of the time (after 10 or 11am). They will speak spanish. All signs in the place will be both english and spanish, and the name itself spanish. (I'm bilingual, first language english) Replace flooring, paint over graffitti, add seating, replace all washers except existing large-ish washers. Add street visible signage.

What I am really curious about is those of you who have remodeled in the past, what type of change in your gross have you seen? I'm going to take a big hit to net by putting in paid attendants, if I can't get that back by improving the store, I'm not sure the investment will be worth it.

The other store has a permanent advantage in it's visibility from the street, and it's large windows. This location has no windows basically, and there isn't really a good way to put them in as it's sort of "boxed in" in the complex. Only one door faces the parking lot. (There is plenty of parking though)

Walter
07-14-2008, 11:57 AM
JS,

1. How much, and how (all-cash, note, etc.) do you anticipate paying for the store?

2. How big a total investment do you estimate to refurbish & put in new machines?

3. Will this store realistically require attendants full-time, not part-time, to eliminate graffitti & vandalism?

4. Does the competing card store have ample parking?
5. Do most customers in the neighborhood walk or drive?

6. Is your parking ample for your customer flow, or do you share cramped parking with other stores, etc.?

7. Any possibility of adding some large windows, even though they might not have much of a view?

8. What are the relative sizes of the two stores, and their sight-lines?

9. Figure the gross of the other store - even counting customers during a weekend, or reading their water meter, etc., and make a realistic assessment of what percentage you could reclaim...

10. Can you get a long-term, low rent lease (including CAM charges) that is 20% of gross or less?

It's your money, and your risk-reward ratio is personal to you, but on the surface this one seems like an uphill battle, with maybe a very big investment and added expense of attendants, etc. resulting in a low ROI...

If you'd like, PM me... I'm familiar with many stores in and and around the SF Bay & Sacramento, Stockton, etc. I may know of this store...

Walter

JuniperoSerra
07-14-2008, 08:36 PM
1. How much, and how (all-cash, note, etc.) do you anticipate paying for the store?

160k, 80k owner carry note @ 7% 5 years.

2. How big a total investment do you estimate to refurbish & put in new machines?

$75-100k total. 20k in floor/bathroom, rest in machines. There are some 35# SQ's, but they seem to not be getting a lot of use. I'm thinking of replacing all tops with a mix of soft-mount fl's, and higher efficiency top loads, plus putting in some of the newer large machines (Wasco's seem to be doing really well at the competitor)

3. Will this store realistically require attendants full-time, not part-time, to eliminate graffitti & vandalism?

I have to assume that for the purposes of buying the business. However, I don't actually think this is the case. If you tried that right now with the poor condition I don't think it would work, but after updating it might be okay up until kids get out of school. It was run unattended at one time. Right now the owners are making about $13k/yr from a small store in the laundry. I think for that reason they leave it open.

4. Does the competing card store have ample parking?

Yes, and the parking is a little better in terms of close-ness, though this one has more parking. That store was running about about 50% capacity, and its parking lot was about 75% full. So, maybe at absolute peak (if that exists) this store has better parking.

5. Do most customers in the neighborhood walk or drive?
Half and half. There is a huge complex across the street that quite a few people walk across from.

6. Is your parking ample for your customer flow, or do you share cramped parking with other stores, etc.?

There is plenty of extra parking. However, right in front of the entrance there is not much in the way of parking, so people have to walk about 25-40 extra feet compared to competitors store.

7. Any possibility of adding some large windows, even though they might not have much of a view?

One place yes, but it would be a five foot strip and then a retaining wall for a view. Not compelling, but at least natural night. I thought about putting the seating area there.

8. What are the relative sizes of the two stores, and their sight-lines?

Both are about the same size. 2000 sqft. This one is in a strip, competitor is free standing. Not sure what you mean by sight lines?, you can't see one from the other if that's what you mean. 4 short blocks, opposite sides of the street.

9. Figure the gross of the other store - even counting customers during a weekend, or reading their water meter, etc., and make a realistic assessment of what percentage you could reclaim...

Good idea, I'll check there meter. They are doing a *ton* of business. This store was the original one in the area, and at one time you can see they were doing gang-busters. They have machines stuffed and dryers in places where they really shouldn't be. (Like a hallway) Now they are down to 2 tpd, the store is really over-sized.

10. Can you get a long-term, low rent lease (including CAM charges) that is 20% of gross or less?

Have to check my numbers at home, but I think the rent is 25-26% including CAM, and I wouldn't close the transaction without a 15 yr lease.

> It's your money, and your risk-reward ratio is personal to you, but on the surface
> this one seems like an uphill battle, with maybe a very big investment and added
> expense of attendants, etc. resulting in a low ROI...

Yes, that's my primary concern honestly. Unattended this would gush cash. My thinking is to put in the attendants and then add W&F. I've seen that do very well in a similar neighborhood that I was looking at recently. Lots of hispanic men are here on their own, and culturally they don't wash clothes. If W&F after sustained advertising doesn't do well, then go unattended.

mike
07-14-2008, 10:21 PM
Can you buy the other store ?

JuniperoSerra
07-15-2008, 03:57 AM
It's not for sale and if it was I probably could not afford it.

Joshp615
07-15-2008, 08:45 AM
It sounds to me that the owner can't afford to clean up the store or repair the equipment. When I come across stores like this, typically the store is not making money. I would be very careful.
From my experiences, remodelling the store will not bring you much return. You will get big returns by replacing the equipment with bigger new equipment. Trade the toploaders in for 40#'s.

pete f
07-15-2008, 03:15 PM
Big Remodels can make self service go up around 30% or more if the business is out there..

JuniperoSerra
07-15-2008, 06:27 PM
Thanks for the input guys. I'm thinking of looking around a little while more. Walters input about the sight-lines in a PM gave me pause. Basically, this store if the volumes don't go up will just be break even attended. You can't see into the store at all from the street..., so I don't think this will ever work out unattended in that neighborhood. (Too much risk)

The business is definitely there. Running the numbers on the water makes me pretty sure it's making money. Right now it's owned by two partners that bought this store back before the big store opened up and took most of their business away. My guess is they paid a bundle for it, and just now finished paying off their note and want it off their back. (They bought in 2002) The partners are fighting over money apparently... right now I think they are clearing 50-60k, which between two people working all the time isn't much better than minimum wage in CA.