How to Start a Laundromat

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Quick Reference

Laundromats have a unique business model, with customers doing most of the work themselves, while the laundromat supplies the machines they need. With issues like managing inventory almost entirely eliminated from the business, laundromats can create an intriguing business model. If you’re looking to open a business where your income will stay steady year-round, even during recessions, then it may be time to start saving up to open your own laundromat. 

Business Overview

Laundromats provide customers with the use of their washing machines and dryers. The machines may be coin-operated or card-operated, allowing laundromat attendants to focus on solving problems, rather than on taking payments and monitoring machine use. Some laundromats are located in freestanding buildings, while others may be located within apartments or college dormitories. No major laundromat chains or franchises dominate the industry which is great for individual entrepreneurs. To accommodate customers’ schedules, many laundromats open early in the morning and close late at night, though some are open 24 hours a day. 

Industry summary

According to IBIS World, laundromats in the United States brought in a total revenue of $5 billion in 2018. As of 2018, there were 22,260 laundromats in operation that employed 50,825 staff. Martin Ray Laundry Systems, Inc. states that the value of coin laundromats ranges from $50,000 to over $1 million. These laundromats also generate between $15,000 and $300,000 in cash flow every year. 

Industry trends

As disposable income has increased for many Americans, some Americans have purchased their own in-home laundry machines or have opted to use drop-off and pickup laundry services, creating competition (or opportunities) for laundromats. 

Digital payment systems are revolutionizing the laundromat industry. These digital systems offer more flexible pricing options and a more automated system, which means minimal oversight is required with these new options. Because laundromats can hire fewer staff to monitor the machines, that excess money can go toward other items like televisions, Wi-Fi, and other amenities that help to draw in customers – or profits for the owner. 

Who is the target market for your laundromat?

Most laundromats target adults who do not have washers and dryers in their homes or apartments. In some cases, a laundromat’s target audience may be college students. 

The laundromat’s location will partially determine its target audience. According to Martin Ray Laundromat Systems, Inc., 87% of a laundromat’s customers live within a mile of the business, and over 60% of the customers at an average laundromat are women. Laundromat customers tend to have lower incomes, with their average annual income being $28,000. 

Skills, experience, and education useful in running a laundromat

You don’t need a business degree to start a laundromat, but the following skills and experiences will be beneficial in helping you to get started. 

Experience with appliances. Whether purchasing or troubleshooting a washer or dryer, some experience with appliances is valuable in owning a laundromat. Laundromat owners call in technicians to fix major issues, but some knowledge of how appliances work and how to fix minor problems and perform routine maintenance can help to save money over the costs of hiring a professional. 

Problem-solving skillsLike any business, problems will arise in a laundromat, requiring an owner to have strong problem-solving skills and creativity. Whether it’s working with customers to fix a finicky machine or finding the best technician around who can get to the laundromat quickly, being able to improvise and come up with solutions to problems is a must-have skill. 

Customer service experience. Industry reports state that 90% of a laundromat’s customers become returning customers, so providing quality customer service is particularly important in the laundromat industry. When a laundromat owner understands how to listen to customer concerns and take steps to actively address those concerns so that the customer feels heard, it can result in a repeat customer who comes back every week to do laundry at that laundromat. 

Marketing skills. Marketing skills will be important, especially when the laundromat first opens and the owner needs to establish a customer base. While a professional marketer can always help, you can save money if you can do some marketing basics yourself. 

Business experience. Starting and running a laundromat does require some business experience or knowledge. Every laundromat owner needs to be able to manage supplies and inventory, decide on appropriate pricing, track a budget and income, and more. Many of these skills can be learned through business courses or through the help of a mentor.  

Financial Overview

Laundromats provide on-demand washing and drying services, so they rely heavily on having enough washers and dryers to accommodate their customers. Because this machinery is expensive, starting a laundromat requires a significant initial investment. Aside from this machinery, though, laundromats require relatively minimal additional supplies. 

Average costs to start a laundromat can easily range from $200,000 to $500,000.  The largest expense for a new laundromat is washers, dryers.  If the facility isn’t already set-up, a new owner will spend money on electrical, plumbing and the water heating system. 

How much can you potentially make owning a laundromat?

Owning a laundromat can be a profitable venture. According to Martin Ray Laundry Systems, Inc., laundromats generate approximately $5 billion in annual gross revenue and they produce between $15,000 and $300,000 in cash flow each year. Investing in a laundromat results in an average 20% to 35% return on investment, and 63% of laundromat investors consider their investment to be a full-time job. 

Steps to starting a Laundromat

Step 1. Write your Business plan

After coming up with an idea, the next step in starting any business should be to write a business plan.  Not only will a bank require you to have one, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

Related:
How to write a business plan
Free sample business plans

Step 2. Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from which include the sole proprietorship, partnership, corporation and LLC.  Each type of entity has its own pros and cons such as liability exposure, costs and administrative requirements. 

Related: Comparison of Business Entities

Step 3. Select your Location

The cost of leasing a property for a laundromat will vary according to its location, modifications that need to be made to the building, and the size of the space. Instead of leasing a space, some laundromat owners opt to purchase land and build a facility tailored to their business’ needs, though this can be a larger upfront expense. 

Laundromats are usually best located close to densely populated areas, with higher numbers of renters.  Additionally, locations close to college students are typically strong for laundromat usage.

Related: Choosing a business location

Step 4. Apply for Business Licenses and Permits

The types of business licenses, permits and registrations that will be required to start and operate a laundromat will vary within different towns, cities, and states.

Some of the common local, state and federal registrations a laundromat will need includes a sales tax permit, Employer Identification Number, Occupancy Permit among others. 

Related: Common business licenses, permits and registrations by state

Step 5. Find Financing

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a laundromat is another.  The cost to start a new laundromat can be quite high. Banks are typically going to want the borrower to have good credit and be able invest 15-25% of their money towards the total start-up costs. 

Related: Finding the money to start a business  

Step 6. Get your Marketing Ready

When starting up a laundromat, effective marketing is important in order to draw in customers and establish business. Marketing an existing laundromat can help to expand a customer base and increase profits. The cost of marketing varies depending on the type and scope of each marketing activity. Laundromats often use direct mailers, print advertising, and more, though additional strategies include targeted online ads, radio ads, and even posting flyers at popular local areas, within nearby apartment complexes, and in other spaces where the business’ target market spends time. 

To encourage repeat business from existing customers, consider implementing a loyalty program.

Related: Low-cost ideas to market a new business

 Step 7. Get Insurance Quotes

Laundromats require several different types of insurance in order to fully protect the business against risks. 

  • General liability insurance helps to cover expenses like medical bills or legal bills if a customer is ever injured in the laundromat. Both falls and burns are possible because of the presence of water and hot dryers in laundromats, so a comprehensive general liability insurance policy offers business owners needed protection. 
  • Commercial property insurance covers a laundromat’s lost or damaged equipment and/or building if a fire, storm, or other event damages the property. 
  • Workers comp insurance is required for any laundromat that hires staff. It covers expenses such as medical bills or an employee’s lost wages if that employee is veer injured while working. 

Policy costs vary depending on the value of a laundromat’s equipment, the number of people employed by the business, coverage limits, deductible sizes, and more. To find the best insurance option for a laundromat, request quotes from multiple companies and carefully compare them. 

Step 8. Hiring Employees

Depending on the size and hours of a laundromat, only one or two employees may be needed. According to PayScale, laundromat attendants earn an average of $9.59 per hour. Hiring employees brings about additional expenses, including paid time off, health insurance contributions, and workman’s compensation insurance. 

In addition to attendants, if you don’t have sufficient experience in fixing washers and dryers, either consider finding hiring someone with an appliance repair background or hiring a local repair company to fix machines when they go down.

Related: Hiring your first employee

Things to consider before starting a laundromat

While starting a laundromat requires significant initial funding, mainly to purchase washers and dryers, laundromats offer steady year-round income that doesn’t fluctuate much with the seasons, holidays, or other factors that affect other types of businesses. This type of business requires only minimal inventory management of dispensable laundry detergent and softener, which can also make it an appealing option to entrepreneurs looking for a non-retail business. 

Laundromats provide a service that many adults need, but it’s important to strategically locate a laundromat in an area where people do not have washers and dryers of their own. Finding a town with many apartments in a lower-income area is one good strategy, but existing laundromats can provide competition. Creating a new laundromat that has a bright, airy, comfortable environment complete with televisions, free Wi-Fi, and other appealing amenities can help to attract and build business. 

A clean and brightly lit laundromat is a very important aspect for someone deciding to use a laundromat long-term.  Ensure that your attendants are well trained and accountable to keeping the facility clean. 

In addition to offering machines for customers to use, many laundromats also offer dry-cleaning and full-service laundry services.  While the cost of equipment to start dry cleaning is quite high, many laundromats simply act as a drop-off point where a local dry cleaner picks the items up and dry cleans the clothing and collect a percentage of the sale.  Full-service laundry services are becoming more popular as time-strapped customers will gladly pay someone else to do the laundry for them. 

One of the major perks of owning a laundromat is that the business is flexible. Because customers do their own laundry, training employees is a fairly simple process. Once the laundromat is up and running, owners have scheduling flexibility and can even manage their laundromats in addition to other business pursuits. 

The downside to starting a laundromat is the financial investment required. But with a detailed business plan and an understanding of the local area and its needs, laundromat owners can secure funding to help with that initial startup phase. 

Resources:
Coin Laundry Association

Additionally, Amazon has several good books for starting a laundromat such as:
Success in the Laundromat Business: A how-to guide for beginners
Laundromat Business Startup: How to Start, Run & Grow a Successful Washateria Business
Laundromat Ownership Step-by-Step: A Realistic Guide to Operating and Growing Laundromats (free on Kindle Unlimited)