Does anyone really make good money building a 'mat from scratch?

[silver56]

So suppose you find a good spot with good demographics, and good potential to get up and running at a decent clip...given all of the expense to do a build-out, buy equipment and get utilities set up, does the math really work on a new laundromat? Suppose you can only put 20% of the total cost down in your own cash. And suppose we are talking about a place with ~60 washers and 50 dryers.

[Howard]

20% down - someone else will probably make good money after you go belly up! You really need to consider 50% down to have any sort of decent cashflow. Also from what I hear Chicago can be a tough town for this business with lots of free dry.

[rbh]

Unless you have access to a cheaper source of capital for the other 80% (ie HELOC) beside the distributor or the bank, I think you'll find it difficult to make the numbers work with that little down. I'm sure some have done it, but if you are putting that little down, you are likely to not have the reserves to withstand the inevitable ups and downs of a new mat as you find your market.

[jh]

Originally Posted by silver56

So suppose you find a good spot with good demographics, and good potential to get up and running at a decent clip...given all of the expense to do a build-out, buy equipment and get utilities set up, does the math really work on a new laundromat? Suppose you can only put 20% of the total cost down in your own cash. And suppose we are talking about a place with ~60 washers and 50 dryers.

Short answer. Yes. I built my mat from scratch. I paid in full. My store would have still survived if I only put 20% down.
But, like others suggested, it is too risky. What if the revenue can not cover the expenses for the first couple of months? The landlord would threaten to terminate the lease. The employees would not show up until paid. The utility companies would shut down the services. What if there's a major roof leak and the landlord can not repair it right away? You would need a few thousands to hire someone to fix the roof and equipments then bill the landlord.

[CanCanCase]

Guys-

Why does everyone assume a laundromat is in a rented or leased premise? The OP mentioned nothing about landlords or rent.

That being said, the answer to the question is a resounding YES - with caveats.

I bought a building, gutted it (past the walls and down to below sea-level!) and then built our first store. I also admit to having gotten quite lucky in that other great opportunities came along at the same time, and I have the capital to back up the operation for a year or more when emergencies come up.

Part of the trick is choosing a great location in a market that's UNDERSERVED. So, first find the underserved market (which I don't believe Chicago to be!), then pick your great location. Give serious consideration to buying the property instead of leasing. Also, that 20% equity won't fly... 50% minimum, 100% preferred, and even then, have operating expenses for as long as possible in reserve.

Lastly, don't forget about marketing. If you put in a card system, you'll need to plan additional labor - above and beyond what the business plan calls for - to teach the old dogs (your customers) some new tricks. If you're planning to run coin, you'll need just as big a budget to advertise and promote your new store... Remember, "your" customers are already doing their laundry somewhere else right now. It takes active marketing and promotion to get them to change their habits once you build your store. "If you build it, they will come" does not apply here!

-Case

[Xiong]

own the property should be the way to go, leasing has too many unpredictable variables. the time (i.e. 20 years) it takes you to pay out your lease, you would have payoff the property and the property would have appreciated. land is the only thing that more cannot be made/manufactured

wannabees should listen up
don't do what some of us done!

whether you put down $0 or 100%, it can work if you got the right location. what is the "right" location, that's the most challenging variable.

[Adamski]

Silver,

I've spent some time looking around the South Chicago, East Chicago, Hammond areas. I saw a lot of free dry stores in South Chicago and their wash prices were lower than mine in many cases. Such an area is a good area to stay away from.

For a successful build, you need a location in a truely under-served market where you can dominate any existing competition and quickly become the High Price Leader. It may take years to find such a location but when you do, it will be well worth the effort.

The other advice I have specificly for you is - Think smaller but allow for future expansion. No laundromat ever needed 60 washers to handle the paying customers who came in during the first year. Your's won't either. You should be thinking more like 20 - 25 washers in the initial install. You can still put in the under-floor plumbing, conduit, sewer to where aditional washers MIGHT go in the future. This kind of "future preparation cost" is minimal.

[rbh]

The ultimate challenge becomes finding a mat in the 'right' market as others have said, but that is in a location you can live with in terms of distance from your house.

I spent 5 years looking at mats before I found one that fit the criteria I wanted, that being I could own the R/E, the market wasn't over served, and I could get there in less than 15 minutes. That last one was a biggie for me. I know some on here have more remote locations with an hour plus drive, but that's just not for me and if it were,would significantly add to the return I need on my investment to compensate for the endless hours spent in the car.

[MrMachine]

Originally Posted by Howard

20% down - someone else will probably make good money after you go belly up! You really need to consider 50% down to have any sort of decent cashflow. Also from what I hear Chicago can be a tough town for this business with lots of free dry.

Yeah I heard the same thing about Chicago, that it's overbuilt just like New York City and Southern California. That free drying thing is a sure sign of an area being overbuilt, otherwise why would any Mat owner need to do that?
If it's anything other than a grand opening promo it's a sign of desperation.

I suppose most of the big cities are over-saturated these days. After all, Illegal Immigration is sharply down these days due to lack of low labor jobs(something we don't hear about in the news). Illegals were some of our best customers because they don't buy washing machines. Plus new stores have been steadily built for the past 20 years. IMO, all the prime locations were taken years ago.

Your best bet Silver, is to find a run down dump and fix it up.

[silver56]

I sort of posed this question knowing the answer but just wanted to have a better idea of what makes a new 'mat work from building it from the ground up.

Chicago is a tough market and yeah, there is a lot of free dry here but I've seen plenty of busy 'mats that don't seem to rely on gimmicks or absurdly low pricing. I'm fortunate to know a lot of (latino) ladies whose job it is to do the laundry and they take it seriously and seem less concerned about cost and more about the aesthetics and other controllable attributes at a 'mat. My own "recon" suggests there are plenty of 'mats here in good locations that simply need new management and care.

Regardless, I'm very intrigued by this industry and totally appreciate everyone's candor on here!