Recognizing Unscrupulous Laundromat Consultants
Websites and influencer posts are filled with a variety of laundromat experts, consultants and advisors. Some want to sell you an educational program, a seminar, an investment club and others just want you to send them money for their advice. Some are worth the money, others are just interested in scamming you.
How do you recognize the unscrupulous laundromat consultants? If you’re new to the business, you want to rely on a skilled professional to give solid suggestions and direction. How do you know who to trust? One way is to look for the dead giveaways in their sales pitches to encourage you to part with your money in return for their advice.
In another article, I’ll elaborate on the questions you should ask of a consultant before you part with your money. To get started, here are a few examples of statements that any true professional would never express to a client unless they were intent on deceit:
- Laundromats have a 95% success rate. Anyone who cites this phrase is trying to put their hand in your pocket or just plain incompetent. This phrase, even though used by at least one factory, is deceitful because failure requires “going out of business and shutting down.” If you buy a laundromat for a million dollars and discover it’s not providing the income expected and you sell it to another newbie for $600,000.00 a year later, this is still considered a successful business. Selling your laundromat, despite how much money you lost in owning it, instead of closing it down means the store is still considered a success. All true professionals know this and to use this definition of success to encourage an investment is unprincipled.
- Laundromats are sold on the basis of multiples. Multiples are not applicable to any laundromat business operating in rented space. Multiples are used in real estate investments, but have almost no use in establishing the value of a laundromat. The future income potential is limited by length of time and the variety of rental increases. A store netting $120,000 per year with only an eight- year remaining lease and twenty-year old equipment cannot be valued the same as a store netting $120,000 per year with twenty years left on their lease and filled with three-year old equipment. A multiple would imply that both are equally valued in a competitive market. The use of multiples was fostered by dodgy laundromat salesmen years ago who realized that many investors have previously owned real estate investments and multiples have a clear understanding when used in buying and selling apartment complexes. By using a familiar term, it catches the newbie off guard. You must analyze each potential laundromat investment with caution and not the simplistic application of a multiple.
- This laundromat has great parking. At least 50% of existing laundromats, and many under construction have fair to poor parking. If the parking is in the rear of the building, requires crossing a traffic lane or can be used by other long-term parking tenants you don’t have great parking. Here’s a rule of thumb you can rely upon. To have great parking you need one parking space that has direct access in front of your entrances for every three hundred square feet of rented area. A three thousand square foot laundromat should have ten spaces, not counting handicap spaces, available for direct unloading and loading of clothes, kids, soaps and bleaches by your customer. The problem is that 3000 square feet is probably fifty feet wide by sixty feet deep. With an automobile parking space of nine feet wide, you can only have a little over five spaces in front of your store. This is why corner units and free-standing buildings are where stores with great parking need to be located. Every professional knows this information. Did your advisor tell you? You can’t increase business if your customers can’t park.
Hopefully this article has pointed you in the direction of being careful in the selection of who is advising you about the laundromat business. Lots of inexperienced, ruthless and incompetent advisors, both male and females, promoting themselves on YouTube and websites.
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