THINGS TO KNOW

Laundromats are purchased for a variety of reasons: a desire for business ownership, pride, self-employment opportunities, employment for a relative, estate planning, potential tax benefits, cash flow and equity gain are examples of these reasons. Businesses are sold because of illness, retirement, partnership disputes, relocation and a variety of other reasons that require a professional to find.

You should carefully consider your resources and your reasons for buying a Laundromat before you begin your investment journey. The Laundromat business is an “all cash” enterprise making absolutely accurate verification of income on an existing Laundromat difficult. Income and expense projection on new stores should not be taken as a guarantee of actual performance, but as a reference for comparison. Some of the following might be helpful in your decision to purchase.

SELECT THE BROKER

You should have confidence in the broker who is going to assist you in your investment. You have a right to insist on having the person of your choice representing your interests. Some Laundromat brokers refuse to “co-operate” with other licensed brokers and firms because the majority of work is done by the experienced agent.

MEET THE SELLER

The most often used verification of income is the statements of the seller. The listing agent receives from the Seller a statement of income and expenses and this information is used to prepare a setup or sales information sheet. A meeting with the Seller will give you an opportunity to access the Seller’s character and might also provide valuable information on the operation of the Laundromat.

UTILITY BILLS

Review the utility bills. Water bills are frequently used in a variety of formulas to give an indication of income. Make sure that you review at least one year’s bills since Sellers have been known to leave the water running in the back room to pump up their income numbers for this method of income verification. Under normal conditions, this method can be considered accurate to within 5-15% of the actual income of the Laundromat. Be cautious if anyone suggests utility bills can verify income alone: expenses are suggestive and not a guarantee.

BOOKS AND RECORDS

The written records and bank statements of the Seller can assist in income verification.

INCOME TAX RECORDS

The income tax forms of the Seller are private, but if extended the opportunity, review them, since few people over report income on tax forms.

STUDY THE CASH FLOW

The main factor of determining value for Laundromats is the actual cash flow benefiting the owner.

COLLECTION PERIOD

You may feel comfortable requesting a period of joint collection of the coin boxes. Since you cannot verify that the Seller did not “salt the mine,” use this as a method of learning how to collect the proceeds from a Laundromat, not as a method of income verification. All brokers in the Laundromat industry know the “salt the mine” trick of Sellers, so avoid the suggestion from anyone who suggests this is a method of income verification.

STORE SITE SURVEY

A professional salesperson will have a Site Survey form available so you can compare a potential purchase site against various locations known to be successful operations.