This article discusses the following:
- Buying an existing laundromat
- Starting a new laundromat
- Buying into a franchise
- Common costs you will encounter
- Utilities and fees
Opening a laundromat can be a lucrative and appealing enterprise for many small business owners. After all, a self-service laundry facility is something that almost runs itself once you get it off the ground, and it generates passive income. If you’re considering a laundromat business, you’re probably wondering what your upfront costs would be.
The good news is that investing in a laundromat is frequently a sound business move. It’s one of the few businesses that can make money, no matter what shape the economy is in.
While the laundry business typically generates a generous cash flow, there are multiple things to consider before jumping in, such as startup costs and recurring operational expenses. Once you have an idea of what those costs are, you’ll be able to determine the best course of action that will help you become the owner of a successful laundromat.
How much will it cost me to open a laundromat?
If you’re considering owning your own laundromat, you’ll want to start with a basic business plan that will help you understand what your initial investment will be. We’ll get into the specific costs and requirements below, but in general, your initial costs are likely to be close to $200,000 but can range to over a million dollars depending on the location.
There are essentially three ways to get into the laundromat business: Buying an existing laundromat, building a laundromat business from the ground up, or purchasing a franchise.
Buying an Existing Laundromat
Maybe the biggest advantage to buying an existing laundromat business is that the previous owner will be able to provide you financial statements. These can show you monthly gross and net income so that you can get a sense of the profit margins and calculate what your return on investment will be.
Another advantage of purchasing an existing business is that it comes with a built-in customer base. As long as the laundromat has a solid reputation, you may be able to reduce the amount you spend on marketing and advertising. Plus, income should be fairly steady versus a startup where customers would grow over time.
A final advantage of purchasing an existing laundromat is that you will be able to approach the business with fresh eyes and potentially improve on what the previous business owner had accomplished. For example, you might decide to upgrade the laundry equipment, add vending machines, or provide TVs and other forms of entertainment. If the business is already successful, you won’t have to do any of these things, but any improvements are likely to have a positive ROI.
Starting a New Laundromat Business
Building a new laundromat business from the ground up has an entirely different set of considerations. You’d have to find a commercial property, determine how large your facility will be, and how much equipment you need. Startup costs if you go this route typically range from $200,000 to $500,000 but can be higher depending on the location.
Buying into a Franchise
Some laundromat owners prefer buying into a franchise. Startup costs can range from $75,000 to $300,000, but you will end up paying fees for the duration of your business. On the plus side, buying into a franchise gives you name recognition, business support, and a turnkey business model.
Here’s a detailed look at some of the biggest costs you will face running a laundromat:
Business location and property
When considering where to own a laundromat, consider the location first, as some areas are more expensive, others may already have a cluster of laundromats, while other areas may have just a few or require people to drive instead of walk to the nearest location.
If you are starting a laundromat, in some locations it will be easier to rent existing space, while in other places, you may want to purchase property and either remodel an existing building or build from the ground up. The rent versus build question is significant, as building requires significant capital upfront.
Some commercial property owners will also build or remodel to suit the purpose of their tenant’s business and work it into the lease amount. This option would cut the cost of a building out for you, but you’d still need to buy equipment for your laundry business.
There are so many variables at play that it’s challenging to put a solid figure on exactly how much you’ll need for your laundromat’s physical location.
Whichever route you choose, opt for a prime location where residents need laundry services. This might be near apartments, public housing, or other demographic areas where people aren’t likely to have a washer or dryer in their homes.
Commercial-grade equipment including washers, dryers, and change machines
Laundromats use commercial-grade washers and dryers to clean clothes. This is another considerable expense you’ll likely have to open your business. The price for a top-loading washer begins around $1,000 per machine, whereas front-loading washing machines might sell for several thousand dollars each. Most laundromat business owners will usually only have a couple of them. Stacked commercial dryers can cost around $6,000 per unit.
When you consider that multiple units of washers and dryers are needed for a self-service laundry facility, it can cost upwards of $150,000 or more to stock a new laundromat business. If you want to accommodate a very large number of customers, you may need to invest even more.
But there’s another thing to think about. Traditionally, most laundromat equipment is coin-operated. Many newer laundromats have credit or debit card readers enabled for their machines. These systems can cost tens of thousands of dollars but can reduce your need for a full-time employee.
Other laundromat business owners choose to have a coin-dispensing machine where a customer puts in a bill, and the machine dispenses change. This type of machine can cost from several hundred to several thousand dollars.
Other equipment to consider, whether you run a coin laundromat or one that accepts credit cards, includes:
- A commercial water heating system that can handle large volumes (cost can run several thousand to tens of thousands of dollars)
- Laundry carts and tables (cost around $150 to $700 apiece)
- Fabric softener and laundry detergent dispensing machines ($1,500 on average plus the cost of the detergents)
- Chairs for customers to sit on (modular seating with six chairs per unit costs around $1,000)
- Office supplies to run your business, such as a computer, change counter and wrappers, accounting software, etc. ($3,000 to $5,000)
The previous items are vital for the success of your business. But there are other items that you may want to consider to attract more customers. These include:
- Refreshment vending machines
- Television and wi-fi connections
- Security system to protect your business
These can add $10,000 to your startup costs for a new laundromat business. But the additional amenities might be well worth it and help you get a leg up on your competition.
Laundromats require multiple plumbing connections and accommodations and water line hookups.
The building where your business will operate will also need to be able to handle the electrical load of numerous machines running at once.
If the dryers in your laundromat are gas-operated, you’ll need to take that into account and include it in your utility infrastructure estimates.
The cost for this will vary, depending on how much work is involved.
Operational expenses, utilities, and customer service
Most experts agree that every new business owner should have enough cash on hand to cover three to six months of operating expenses. Operational expenses for a laundromat include utility bills, rent or commercial mortgage payments, property taxes, repairs and maintenance expenses, supplies, and payroll.
One of the biggest operational expenses you can count on when you have a laundromat is fairly hefty utility bills. Laundromat businesses often incur expensive water, electric, and gas charges.
When you think about it, washing machines and dryers run practically non-stop in this type of business (at least, that’s the goal!) Some utility companies also charge connection fees or municipal fees on top of their regular monthly charges. The fees can add $200 to several thousand dollars in additional costs for companies in the laundry industry and will be part of your ongoing expenses.
In some cities, the charges are based on how much of the commodity you’re using. This might be another thing you’ll want to investigate when you’re considering the costs of your laundromat business. It could significantly impact how much you end up paying for the services.
While most laundromats are nearly entirely self-service, some laundry businesses have an assistant that helps maintain the washateria while also providing laundry services to customers who request it. If you plan to hire someone to offer these services, you’ll want to ensure that you have enough cash on hand to cover their salary for a few months.
As previously mentioned, you’ll also want to factor in repairs, taxes, and supplies.
A high priority for new small business owners is getting the word out. After all, you want to attract customers to your business.
Plan to allocate some of your startup funding towards marketing and advertising costs. Print ads in newspapers or radio ads are the traditional ways of advertising, but also consider billboards or more modern marketing methods, such as having a website, claiming a Google My Business spot, using geofencing, and hiring a dedicated social media marketing manager.
While you have more control of your marketing expenses, remember that it can help propel you to success more quickly. All in all, plan for about $10,000 to $20,000 for your first six months of business, including a website.
Insurance for your laundromat is another high-priority item. You’ll want something to protect your investment, and your lender will also likely require that you purchase business insurance.
Every business owner faces some risk, particularly when opening their doors to the general public. A customer could have an accident on your property, your business could experience a fire, or a storm can damage your commercial building’s roof.
Commercial insurance is a must to help you recover financially during any eventuality. Business insurance costs range an average of around $1,000 to $2,000 a year, depending on the specifics of your coverage.
Legal fees and Licenses
With every type of small business, there are legal fees to think about. These include getting a business license, permits, structuring your business, accountant fees, and more.
The requirements for licenses and permits vary from state to state and even city to city. These types of expenses could run from a couple of hundred dollars to upwards of $1,000.
Cost Recap for Opening a Laundromat
- Business location and property: $200,000 and up
- Commercial-grade equipment and washers and dryers: $150,000 and up
- Utility infrastructure: Varies, depending on what is needed
- Operational expenses and utilities: Varies, but plan on a few to several thousand dollars each month and have a reserve to cover six months worth
- Marketing expenses: $10,000 to $20,000 first six months (including a website)
- Commercial insurance: $1,000 to $2,000 per year
- Legal Fees: $1,000 or more
- Optional amenities: up to $10,000
The Bottom Line: How to Get Financing to Open Your Laundromat
Realistically, the cost to open a laundromat is a sizeable investment, no matter how you slice it. At a minimum, you can probably expect $200,000 or more whether you are buying an existing business or starting your own.
Once you’ve figured out how much you’ll need to open your laundromat business, you’ll need to fund your business.
There are many types of small business loans that can be used to finance your new laundromat business. Some business owners use a combination of personal savings and credit options along with commercial loans to get their business up and running.
A specialty small business loan provider like Biz2Credit is your best option to get the funding you need.
Having provided more than $7 billion in small business financing to more than 225,000 entrepreneurs across many industries, Biz2Credit understands the needs of small business owners.
Take Gauntlett Eldemire, for example. Gauntlett sought the help of Biz2Credit to expand his laundromat business, and now after having a successful working relationship with Biz2Credit for many years, Gauntlett today owns three laundry businesses.
Whether it’s a commercial real estate loan, an equipment loan, or a working capital or term loan, we can walk you through our seamless process to get the funding you need to help your business succeed.