THINGS YOU NEED TO DO DURING DUE DILIGENCE
The final sale paperwork for a Laundromat sale are provided by the brokers and the escrow agents in California. In some States services are provided by attorneys. In either case, it is important that you read all the paperwork and understand the terms and the terms of the lease, if your don't understand some terms or issues ask your attorney or advisor. The allocation of your purchase price of a Laundromat (allocation of equipment, fixtures, goodwell, personal property, leasehold value) are usually understood by most buyers, but if you have any concerns about tax consequences contact your CPA or advisor.
What I recommend to potential buyers are aspects of advanced due diligence:
1) Hire a professional property inspection service to verify code compliance, mold issues and mold issues, ADA compliance of the site and other property issues.
2) Hire a professional roof inspector. The roof and sealant around the venting should be inspected as to condition. Inside the Laundromat the ceiling tiles, especially near the swamp coolers, should be inspected for water stains.
3) Visit the City building department and obtain all permits, records and insure the Certificate of Occupancy is listed as a Laundromat. Ask if the building department might know of any new Laundromats that are in the planning phase.
4) Visit all Laundromats within a one mile radius and note vending prices, equipment brand, equipment condition, number, square footage of premises and their cleanliness and upkeep condition. Record a price survey for your area Laundromats.
5) Visit all the large apartment buildings within one mile and note all aspects of item four above.
6) Visit local police agency and ask for historical records of incidents and crimes in or about the premises.
7) Visit neighboring business and ask for information about the Laundromat, past traffic and problems.
8) Obtain a demographic study and review it for those items important to a successful Laundromat. If your don't understand the issues normally considerated to Laundromat success, ask your advisor or broker.
9) Speak to the repair person and staff of the business to gather information, equipment condition and indications of problems.
10) Check the neighborhood for any potential new stores being developed near your location. City building department, other owners and distributors are also good sources for this information. It could impact the value of the store you are about to purchase.
11) Verify with building or planning department that no changes to road or property development are planned.
12) Review the last three years of income and expenses, noting trends and sudden increases.
13) Do a water and utility bill analysis. Call Larry Larsen or your broker for help on utility bill analysis and demographic studies.
14) Hire an equipment repair person to offer an opinion of the condition of the installed equipment.
15) Ask an attorney, CPA or advisor about any aspect of the purchase agreement or terms you don't understand.
16) Ask an experienced Laundromat professional to assist in the evaluation process.
17) The floor should be inspected to ensure that the concrete is not lifting/sinking and the tile is not cracked, broken or excessively worn.
THINGS TO GATHER FOR A LAUNDROMAT REVIEW DURING YOUR DUE DILIGENCE
1) Lease (please ensure it is a signed copy).
2) Seller to provide drawings, building permits and warranty that all electrical and plumbing are up to code.
3) Seller to provide all manuals and programming instructions for equipment, safes and internet.
4) Seller to provide name and contact information or alarm company and details/codes for alarm company.
5) Seller to provide a list of all keys, number of keys and notification of who has copies of any keys.
6) Seller to provide contact information for any non-owned soda or vending machines.
7) Seller to warranty that all water service connected to the Laundromat water account is not provided to any other business or the common area.
8) Attachments and addendums, if any, to the lease (also signed).
9) Records of income and expenses for the past three years.
10)
Utility bills for the past three years.
11) Cost and copy of current business insurance.
12) Size of Laundromat in Square Feet. Verify the number provided on the lease with the actual premises.
13) Brand, number and the age of equipment. Serial numbers and a call to the manufacturers provide age.
14) Income tax, Schedule C forms of Laundromat for the past two or three years.
15) Reason provided by seller for selling his business.
16) All of the documents (or notes of conversations) provided to you by the seller or seller's broker as an inducement to enter into a purchase agreement.
17) Up to twenty (20) digital photographs (inside and out)
Here is an example of a Transfer Disclosure that should be used in every sale of a Laundromat to protect the seller from the claims of the buyer and the broker in future sales:
ADVANCED DUE DILIGENCE ADVICE
