Is bigger always better?

[silver56]

As I've done some due diligence on a number of 'mats around my area I've noticed that there are basically two kinds of 'mats: There's the large, 3,500-5,000+ square foot laundromats built in the last 10 years, with 50+ washers and dryer pockets that are currently selling for anywhere from $350k up to over $700k. Where net income is disclosed, the price implies ~3-4x. Fine.

Then there are more than a handful of smaller, strip-mall 'mats, some of which go for as little as $30k but generally less that $100k. With smaller square footage (2,000 sq ft or less) they obviously have a smaller number of extractors and dryer pockets (maybe around 20 each). Again, where net income is disclosed the pricing seems to be around 3-4x net.

The prices of these 'mats and the claimed income suggest a huge gulf between these two types of 'mats despite the smaller ones only having half the number of machines (i.e. the "income" per machine seems to be much lower at smaller 'mats).

The big difference I've seen between these mega 'mats and these strip mall ones is obviously the mega 'mats have been filled with front-load extractors and stack dryers of a certain brand, generally less than 10yrs old, given many were built by local distributors and sold to investors. Meanwhile, many of these strip mall 'mats I find are very much dominated by top-loaders and single-pocket tumblers, oftentimes with a mish-mash of brands of various ages, suggesting the owner had been "winging it".

I'm trying to understand whether the lower income of these smaller 'mats is more a function of customer behavior or simply mismanagement in an age where bigger, newer, well-run 'mats are becoming more prevalent. The demographics and locations of these 'mats are similar enough that I'm trying to figure out what the X-factor is here.

Are customers simply averse to smaller strip-mall 'mats? Do they simply prefer the room and comfort of a larger 'mat (i.e. a natural assumption that if I go to the bigger 'mat the chances of me waiting will be less, whether that's true or not)? Is it the equipment mix?

I realize that for many on here the idea of having a smaller 'mat that only nets maybe $20k a year raises the "why bother" factor but I just want to understand whether there's an untapped oppty here or if customer behavior is simply moving away from the small guys.

Thanks, Robert

[Howard]

I think you are talking about my why bother concept at the bottom of your post. That has nothing to do with the size of the mat, rather the return. Why would someone want to waste their time on a venture that returns so little with a high degree of risk that an operating business has? I ran one of those small mats you talk about or many years, but my net was greater than many of the huge mats. The bottom line is you have to look at each one, run the numbers, see what it makes and then see it if meets your return on capital (economic and human) that your require.

[silver56]

Howard - you are perceptive in my "why bother" comment because I was thinking of you when I wrote that!


As a potential newbie in this business I've increasingly wondered if the best way to get my feet wet is to try to turn around a smaller 'mat. I have a decent job that's hopefully safe for the next couple of years so not looking to make this my full-time job quite yet. As such, as I was looking at larger 'mats and reading comments on here it became clear that having a big, 3500+ square foot 'mat was not as "passive" as I thought.

Which is why I'm wondering whether these smaller 'mats are worth investing the time and energy to turn them around. If there's no natural bias against small 'mats on the part of customers, I could see some real potential in updating the equipment mix of many of these 'mats, which seem to be very top-loader heavy for some reason. The cost and investment to upgrade equipment in a smaller 'mat is obviously a lot less than trying to turn around a larger 'mat with 75+ pieces of equipment.

Also, as I mentioned, a lot of these smaller 'mats seem to be run by owners who have not put a lot of thought into things.

But if consumers are simply biased against smaller mom and pop 'mats and increasingly moving towards bigger ones then I don't want to waste my time and energy on a small one and would instead save a bit more and go for a bigger turnaround story.

Another reason for my inclination for a smaller 'mat is I could likely self-finance the purchase and equipment upgrade no problem but if I get into a bigger 'mat with equipment replacement needs then I'm looking at taking a lot more financial risk on something that, frankly, I have no experience with.

[jh]

I think the answer, again, highly depends on the market you are looking at. In my market, the rent is high and there's no big size private parking lot, so it's not a good idea to build a mega mat. With all other variables being equal, customers certainly prefer a bigger mat with more seats, tables, and aisle space. The question is whether or not you want to pay additional rent for the added convenience and use it as an advantage against competitors. In my store, customers sometimes do have problem with moving around carts during very busy days. Yet there's been little complaint as they can always manage to go through and they've got used to the fact that it happens during busy days only.

[Dr Phi11y]

Robert~

I agree with your sentiment about looking into small mat ownership. I also think taking on a smaller mat in the beginning is wise for a few reasons - less $$ investment so if it fails you have less financial risk, less machines to have to repair/upgrade/replace, and I also think you can see the fruits of your changes on a quicker scale in a smaller mat.

As a fellow newbie who is researching getting into the business as well, I'm glad to see others not enamored with mega-mats. Don't get me wrong, if there comes a day where I can take an existing one over that has been neglected, I'd definitely consider it. But I definitely don't picture myself ever dropping half a mil+ to build from scratch..

~Phil

[silver56]

Phil - well we are in the same boat! I do have aspirations to own bigger 'mats because I think if done right, the economies of scale can work...and despite the topic of this thread I do suspect that customers like the comforts of bigger shops. My very long-term plan would be to own a couple of larger 'mats so I can get out of Corporate America once and for all but still make good money.

That said, the idea of getting one's feet wet with something smaller seems to make sense. The thing that has me thinking it might be a profitable venture is that too many of the small 'mats I see are completely out-dated in terms of equipment mix. The top-loader is a dinosaur yet I go into many of these smaller 'mats for sale and that is the dominant washer available.

[petefritz]

The bigger they are the harder they fall. Own 3 small for the price of one spread the risk. With gas around $4 people are not going to drive very far to find a mat, and even when it was $2 people go to the closest mat that meets their needs, the mega mat box store concept has never really worked..only in super dense populated areas. But the spread sheets will woo many a cash rich "investor". " I bought it for a write off ".

[Sudds]

I purchased my small unattended mat first and re-habilitated it to where its at today. Not less than a year later I purchased the 5000 sq ft facility. Long story short, the 5000 sq ft facility is no more. Very long story so I'll save you the gorey details which range from a shady mat owner to the fact the job market in central Fl nosedived.

All told, I would have been further ahead just working on and with my small mat. The small mat is easy to run and maintain. The average amount of time that is spent working at the small mat is less than 10 hours per week.

The numbers remain steady and stabilized. Works for me. My advice to you is try your luck with a small mat due to the smaller investment risk and the ability for you to learn about your equipment, the business, and the people. You can go from there.

In case you are wondering, my mat mix is about an even split of top loaders and front loader washers and ADC double stack washers. Good luck....

[silver56]

Thanks for the thoughts...my resident expert in everything laundry (my Latino wife) contends that bigger is better because you just don't want to wait when you have to do laundry and going to a smaller 'mat increases the chances that you would have to wait. I think there's value in both sizes.

But financially, it is clearly a bigger risk. In fact, around Chicago there are a number of these mega-mats on the block and for a few of them I've seen asking prices drop quite substantially from where they started out at. So doesn't look like those initial "investors" are going to get the ROI they had planned on when they built the thing from scratch.

I'm hoping to "thread the needle" a bit and find a 'mat that's not too small but not too big, to start out. Eventually I want to own a larger 'mat(s) but will hopefully capitalize on someone else's mistake, buying it after they've done all the hard work and investment.

[MrMachine]

Originally Posted by silver56

Thanks for the thoughts...my resident expert in everything laundry (my Latino wife) contends that bigger is better because you just don't want to wait when you have to do laundry and going to a smaller 'mat increases the chances that you would have to wait. I think there's value in both sizes.

But financially, it is clearly a bigger risk. In fact, around Chicago there are a number of these mega-mats on the block and for a few of them I've seen asking prices drop quite substantially from where they started out at. So doesn't look like those initial "investors" are going to get the ROI they had planned on when they built the thing from scratch.

I'm hoping to "thread the needle" a bit and find a 'mat that's not too small but not too big, to start out. Eventually I want to own a larger 'mat(s) but will hopefully capitalize on someone else's mistake, buying it after they've done all the hard work and investment.

Nearly every mega mat I've seen has been forced to drop their prices since opening. I think this is because the distributors convince these "investors" to invest in a mega mat based on an above average market price and a certain number of turns a day.
When the reality sets in that the existing competitors are simply not going to roll over and die but instead all drop their prices, these new mega mat investors are forced to lower their prices as well.

Hence, nobody wins.

Newbies be warned. Entering this industry in the big cities is NOT childs play. It is now extremely competitive. I've been in this business for over 35 years with multiple mats. This is the toughest I've ever seen it. If I'm having a tough time with NO debt and decades of experience, how do you think you'll do?

Of course that are those newbies who think that they are smarter and will do better. Maybe yes, maybe no.