Looking to become an owner

[CaBiz]

I am looking at coin ops a a source of retirement income. I live in the central valley and need some experienced observations.I am looking at one particular operation locally. The coin count is about $2300 per week, but the financials for 2012 are showing only $1500/week. The first qtr of 2012 is about $1800/week, and growing. It appears as the counts becme more "realistic" on paper when the unit was listed for sale. The financials show minimal monthly expenses, rent, PGE, water, and insurance. No equipment, janitorial, labor, or security. The owner has no equipment maintenance records as he does all his own work. He also does his own floors which appear to be done once a year, no wax at all. The site has 43 washers, the 28 top loaders are 7 years old, the remainder are front loaders ranging in age from 1 to 14 years old. The dryers age is unknown, at least 15 years old. The net income for 2011 was $24K, YTD 2012 (3 months) is $12K.

I'm thinking that some of the equipment will need to be upgraded soon, and I would have additional monthly expenses for labor (fluff and fold), floors, security cameras, etc.

I think the area has the right demographics, there is one competitor less than a mile away, and it's located in a shopping center with a large ethnic supermarket as the anchor. Not sure how much growth is in the location.

Is there potential given this information?

Thanks

[Sudds]

Welcome CaBiz,

You didn't identify other pertinent information. How much time left on the lease? How much is the lease? Are you concerned about the repairs? Is the owner willing to show you how to do the repairs. The mat you identified seems to have more toploaders than you might be willing to have.

Competitor less than a mile away can't be discounted. Have you been to the competitors location to see how he's doing or spoken to the customers?

You might want to perform some additional due diligence.

[CanCanCase]

YTD net income is $12K? My first thought is that you're looking for retirement income... does that mean you're willing to work 40-hours per week yourself, or does that mean you want a passive income stream? Out of that $4K per month net, you've already identified that you'll need to pay for labor and M&R... If you're attended, that's what? 3 full-time staff members at minimum? Not knowing prevailing wage in your area, I'll guess that it's going to cost you around $10-$12 per hour to employ these folks for a total of 480 man-hours per month... There went your $4000 net revenue per month, and you haven't even paid for that shiny new surveillance camera system, a single new washer, or floor wax.

$4K per month net isn't bad if it's a true net. The seller may well be netting that, but he's not paying himself to do it. If you want to run the place single-handed as he is, then $4K is pretty good by my standards. If, on the other hand, you're expecting to live a "retired" life and generate even half of the stated monthly net, go find a more profitable operation to take over.

-Case

[couvsuds]

Originally Posted by CaBiz

The net income for 2011 was $24K, YTD 2012 (3 months) is $12K.

Depending on where the store is located, this could be true every year. The income at many laundromats fall off during the summer (not Case, of course), and some, maybe more, have their best months during the dirty first quarter part of the year. Not saying this is the case here, but it's possible. And as others have said, I'd want to know way more information. 43 washers pulling in less than 2 grand a week? That seems low. Seems like a lot of labor and service work ahead, too.

[Adamski]

Originally Posted by CaBiz

I am looking at coin ops a a source of retirement income. I live in the central valley and need some experienced observations.I am looking at one particular operation locally. The coin count is about $2300 per week, but the financials for 2012 are showing only $1500/week. The first qtr of 2012 is about $1800/week, and growing. It appears as the counts becme more "realistic" on paper when the unit was listed for sale. The financials show minimal monthly expenses, rent, PGE, water, and insurance. No equipment, janitorial, labor, or security. The owner has no equipment maintenance records as he does all his own work. He also does his own floors which appear to be done once a year, no wax at all. The site has 43 washers, the 28 top loaders are 7 years old, the remainder are front loaders ranging in age from 1 to 14 years old. The dryers age is unknown, at least 15 years old. The net income for 2011 was $24K, YTD 2012 (3 months) is $12K.

I'm thinking that some of the equipment will need to be upgraded soon, and I would have additional monthly expenses for labor (fluff and fold), floors, security cameras, etc.

I think the area has the right demographics, there is one competitor less than a mile away, and it's located in a shopping center with a large ethnic supermarket as the anchor. Not sure how much growth is in the location.

Is there potential given this information?

Thanks

CaBiz,

This sounds like a rehab project to me ... but only if it's in the right location and other factors are also favorable.

Here's your problem:

1. The numbers are not believable. A laundromat business has far more expenses then the few you listed.

2. The equipment mix is poor by today's standards.

3. Some of the equipment may be quite old (like the dryers?).

4. The local competition must be thoroughly evaluated.

Proceed with caution and investigate thoroughly.

[CaBiz]

Thanks for all the information. You pretty much verified what I was thinking. The search continues!!

[soapopera]

My two cents worth - - I did not see an asking price in your posts.

It may not matter what the selling price is if there is not enough business to support the store. But if the seller is wanting out, you may be able to buy the store cheap.
Generally, if the P&L reports can't be proven, the store is only worth the value of the machines.
So if you have enough reserves to buy the store for the cost of the equipment and make some important changes, you may be able to bring it up to a profitable level.
It depends on many factors, including your personal strengths.

I bought both of my stores 4+ years ago for the price of the equipment only, and sold one last year for a nice profit.