How to Start a $24K/Month Laundromat Business (2021)

  • by Donna C. Arceneaux
  • 4 weeks ago
  • Blog
  • 1
Laundromat business from inside

Would you like to start a laundry business and make $24K/month for providing a place for people to clean their clothes and linens? The laundromat industry in the US is worth $5bn, with over 21,000 businesses in operation that employ over 50,000 people. Do I have your attention? If you do, then here are 20 steps to follow to start your laundromat!

We interviewed the owners of two different laundromat businesses. Both have great advice to share about how to start and run a laundromat business.

Jeff Orgill owns Rosie Wash Express Laundry in Los Angeles (LA), California. Justin Pike and Mike Cox formed a partnership to acquire Ferndale Laundry, located in Ferndale, Washington. Let’s get down to business!

Jeff’s background is in the film industry. One day, he decided he was tired of 

sitting at a desk editing all the time.

Our interview with Jeff is available here.

After reading about opportunities for passive income, he decided to own a laundromat. In 2017, he plunged into the cold water of entrepreneurship through a laundromat business sale near his home in LA, going from film editing to towel folding in about two years!

After 18 years in the military, Justin moved back to his hometown to purchase and run a laundromat with his business partner Mike. But that’s only part of the story: As a kid, Justin used to visit the very same laundromat to get coins to play video games! Justin’s interview is available here.

In this guide, you will learn how to start a laundromat from scratch. We’ll provide you with every detail you need to know to open your own laundry business.

Step 1: Learn about the industry.

Have you ever found yourself wondering how much money a laundromat makes? Or, is the average laundromat cost something I can afford? Established organizations provide the information you need. Keep reading.

The free industry overview by the Coin Laundry Association (CLA) is available here. Also, download their “2020 Laundry Industry Survey” and “Laundry Customer Profile” that presents the results of over 400 customer surveys.

For commercial laundry, the Textile Rental Services Association (TRSA) offers benchmarking reports. Don’t overlook the National Apartment Association (NAA) because they provide insight into the industry’s multi-housing segment.

Technology infiltrated the coin laundry business with software applications (apps), allowing many owners to accept payments and manage operations. IBISWorld provides detailed research reports on this topic.                     

Step 2: Pick a laundry business type.

Washers in a laundromat shop

Before you open a laundromat, sort through all the colors in the load. There’s more to it than a glass storefront with rows of laundry equipment behind it!

Consider these different kinds of laundromat businesses:

  • Coin laundry
  • Private laundromat equipment for multi-tenant buildings
  • Wash-and-fold service
  • Commercial laundry for uniforms, linens, and facilities
  • Additional services, such as pick up and delivery 

This video tells you what a day in the life of a laundromat is like. Information about owning a pickup and delivery business is available here.

Data for analyzing possibilities with multi-housing is on NAA’s website. TRSA provides market-specific information covering commercial laundry. Best get started with it!

Step 3: Build your skills.

Starting a laundromat business does not require any super-special skills, training, or education. Just shake the wrinkles out of a few of the skills you already have and stain your brain with a little knowledge.

A few capfuls of knowledge never hurt anyone! Consider this Business Fundamentals course offered by edX.org. The Small Business Association (SBA) Learning Center is another place to start! Learn even more from Udemy and SCORE.

Laundromat customer care

Satisfied customer in a laundromat shop

The level of care Jeff shows to customers helps him stand out from the competition, saying, 

I will talk to anybody that calls me and has a problem with their laundry.

Even though he wants to pull his hair out some days, he enjoys seeing customers return week after week. Sometimes, he even throws in a free wash!

His focus on a positive customer experience and going the extra mile is paying off because he currently has about 500 regular customers. New people come in every week.

Try this course on taking customer service to the next level.

Appliance repair

Community colleges may offer courses in appliance repair. RepairClinic.com offers a free wizard to isolate a problem with laundry equipment and guide you through repairs. CLA publishes a laundry equipment and services directory.

The most common repairs in a laundromat include:

  • Broken belt in a dryer
  • Door circuits 
  • Fuse
  • General machine breakdowns
  • Heating coil
  • Idler pulley in a dryer
  • Motor
  • Overheating due to a clogged vent (a fire hazard)
  • Roller in a dryer
  • Start switch
  • Temperature switch
  • Thermostat

Laundromat specific training

Training for laundromat business owners is available here. Check out TRSA’s commercial-laundry training resources and their certification programs here. Detergent companies offer advice, such as what Clorox offers here.

Step 4: Write a business plan.

Preparing a business plan for laundromat business

Iron out your vision, objectives, and strategy into a laundromat business plan that will help you accomplish things, such as securing financing or partnering with other businesses. It’s totally worth your time.

Templates

Here are some free business plan templates:

Resources

We’re not through yet! Here’s a list of additional resources:

Step 5: Name your business.

Jeff says “Coin Laundry” is “boring but descriptive.” Here’s some better advice. Load what you do into the name of your laundry business.

Both Rosie Wash Express Laundry and Ferndale Laundry include the word “laundry.” Try a laundromat name generator here.

Have a safe spelling.

Think about it: Customers need to spell the name of your business correctly to find it. The ability to pronounce it is essential!

Register alternate spellings to direct queries to your website. This helps you to capture all the web-based traffic you can, just like those screens that capture lint in a dryer!

Tag your location.

Naming your business with its location adds credibility. Ferndale Laundry is in Ferndale, Washington, giving the name of the laundromat business some weight. Simple, right?

Pick a dot-com website URL.

Having a dot-com for your virtual address also adds credibility. People trust dot-com sites, perceiving them as more mainstream and representative of an established, for-profit business. Search for one by clicking here.

Set up a business email account that includes it, such as contactus@yourdomainname.com. Alternatively, register a Google account for your laundromat business and use a Gmail address like ferndalelaundromat@gmail.com.

If your desired dot-com name is taken, make slight changes, such as adding a hyphen, to keep it.

Test your branding.

Right branding for business

Make sure your name ties in easily with the branding you envision for your coin laundromat. Rosie Wash Express Laundry brands with a red rose, of course! Test your name on Google Trends. Propose it to loved ones. Read this article about naming your business. Finally, register your name with the government.

Step 6: Decide on a business model.

Both laundromat owners purchased existing laundromat businesses. But this doesn’t have to be you. Let’s dig a little deeper.

Existing laundry business

Jeff bought the land, building, and existing laundry business for around $700,000. He decided against leasing because he did not want to pass on the unavoidable cost of rent increases to his customers. CLA offers “The Laundry Owner’s Guide to Leases.”

Justin bought Ferndale Laundry from a friend who already owned several laundromat businesses and could no longer manage the one in Ferndale.  In situations like these, “How to Value a Coin Laundry” can help.

Advantages of an existing laundromat

Existing laundry businesses present several cost-saving advantages, such as:

  • Exempt from the cost of hooking up to a city’s water and sewer.
  • Built-in customer base.
  • Power, water, utilities, and other costs are known in advance.

Disadvantages of an existing laundromat

Some of the disadvantages are:

  • Older equipment that might need replacing.
  • Aging infrastructure that might be dated or not up to code.
  • Inheriting the reputation of the previous business.

All of these factors can prevent you from realizing an immediate return on your initial investment right away.

Due diligence

Vet the business before buying. Do your due diligence. Check out this white paper called “Best Practices for Due Diligence from the Coin Laundry Association.”

Consider asking the following questions:

  • Is it not profitable?
  • Did all the machines break down?
  • Are they asking for a premium but leaving you with a lot of maintenance costs?
  • Is the person just tired and wanting to retire?                                               

Investigate water usage

Man checking water usage

Jeff used a hack he learned from a real estate broker. He checked the laundromat’s water meter, determined gallons per cycle and price, and then calculated the usage.

Investing in improvements

Jeff invested $300,000 in improvements, amounting to one million dollars initial spend on his Rosie Wash Express laundromat business.

Justin and Mike invested almost $500,000, which covered 56 washers and dryers, bulkheads, related infrastructure, computers, and software. 

New laundromat

The advantage of building a new laundromat is that it allows you to customize the facility’s layout and features. It involves the following steps:

  1. Select a site.
  2. Analyze the market.
  3. Design and build-out.
  4. Finance the business.
  5. Host a grand opening.

Disadvantages of a new laundromat

This approach has many disadvantages, including:

  • Paying the enormous fees cities charge to businesses that impact the sewage system.
  • Obtaining the required permits.
  • Estimating the future costs of running the laundromat without the benefit of comparable enterprises nearby.

Justin estimates that impact fees for Ferndale could have exceeded $300,000 for a new facility. Read more about water and sewer impact fees here.

Step 7: Select a location.

Man searching for the perfect location for business

Spending the time to find an ideal location is the best investment of your time as a future laundromat owner. Let me explain: The right setting is one of the top predictors of ensuring a good laundromat profit margin for your store or company.

Review local ordinances and zoning laws

Learn the ordinances and laws that govern where laundromat businesses may operate by searching the Municode Library

This article teaches you how to check zoning laws in your locale. Also, read about zoning challenges and trends. Guidance about commercial leasing is available here.

Compare and contrast

A real estate comparable provides information about recent sales in a local market. This information helps you understand what it costs to buy or lease a laundromat business in a specific area.

CLA offers a program that covers how to value a coin laundry store. Additionally, tools are available for finding comparable commercial properties, such as UpFlip’s established businesses and companies for sale.

How did Justin, Jeff, and Mike choose a location? Let’s take a closer look. Justin wanted to offer laundromat services in a convenient location in a city of fewer than 12,000 inhabitants. So, he put it downtown! Justin said, 

We wanted it close enough to grocery stores, pharmacies so that you can load up your machine, do your 22 to 29 minutes cycle, and be able to run another errand within close distance.

Jeff’s experience wasn’t as straightforward as Justin’s.

He says that finding a location for his laundromat business “was a long process” because LA is a competitive market that is “dense with laundromats” and “sometimes there’s two on the same block facing each other.”

He searched for a laundromat for sale near his home, a great way to spend more time with his family in traffic-choked LA. Consider what this could mean for you and your family? He found an existing laundromat ten minutes away.

Location importance

Jeff says, 

You gotta be somewhere where people need to do laundry.

CLA offers information about site selection here.

Consider a location near any of the following:

  • Apartment buildings
  • College students
  • Tourist areas
  • Hotels and motels
  • Large families

Is an older neighborhood a good place to open a laundromat?

Parts of town with aging buildings are good areas to target for a laundromat because building owners usually don’t invest in plumbing renovations to support in-unit laundry equipment. In gentrified neighborhoods, a few factors are at play that can make a massive impact on a laundromat’s success.

In-unit washers and dryers

Woman washing clothes using washer with dryer

Nowadays, many new multifamily housing developments include a washer and dryer in each unit. For more information about the apartment industry trends, check out research conducted by the NAA by clicking here.

Utility costs

Nationwide, the cost of water and sewage is on the rise. Read more here.

These factors have led to a nationwide decline in traditional neighborhood laundromats. Read an informative article on the topic here.

Step 8: Equipment and supplies

Jeff uses a combination of old and new equipment. About 25 percent of it was already in his laundromat at the time of purchase.

Before replacing the laundromat equipment, his staff “tinkered” to try to restart it when it failed. Jeff admits that “was kind of a disaster” and “looked bad” in front of customers.

New equipment 

Jeff emphasizes that new equipment helped him reduce overhead and costs, 

So when you get new equipment, you reduce all your costs, your bills, your utilities, it’s more efficient. So that alone paid for the loan on that stuff.

The new equipment also comes with a warranty. A white paper about replacing laundry equipment is available here.

Equipment and services directories

Buy the right laundry equipment for your store by referring to the laundry equipment and services directories available here.

Jeff purchased nine machines that cost $5,000 each. Smaller machines were selling for about $1,000, which he purchased on sale for about $900 each. Bigger machines cost $6,500, $8,000, and $10,000 each. Jeff also purchased a natural-gas-powered heating system.

The machines range from 30 to 80 pounds. To learn more, check out this handy formula for calculating the capacity of a machine by clicking here.

Step 9: Revenue

Monthly revenue of business

Jeff’s first-year revenue was $220,000.  His last tax return reports $270,000, and he anticipates exceeding $300,000 by year-end. His return on investment (ROI) is 36 percent, which is fantastic!

Sundays often bring in $800. Vending machines, a massage chair, and an automated teller machine (ATM) fetch about $1,500 a month.

Self-service

At Ferndale Laundry, most revenue comes from self-serve machines. Justin says, 

There’s little to no maintenance or cost to me because they’re doing all the work.

Sources of revenue for Ferndale Laundry, from highest to lowest, are as follows:

  • Self-service
  • Wash and fold
  • Delivery
  • Commercial contracts (which pay well but are hard to win and maintain)
  • Vending

Wash and fold services

Jeff expanded his business to include a fluff and fold laundry service. He says, 

It’s really taken off in the last maybe two or three months.

If you would like additional information, click here.

Vending

Justin and Mike contract with local vending companies, receiving a quarterly commission check that ranges from $40 to $200. They didn’t want the additional responsibility for managing expiration dates and restocking products.

Step 10: Expenses

Man using a calculator for business

The highest expenses for a laundromat are employee payroll and utilities. CLA offers helpful information here.

Payroll

Payroll is Rosie Wash Express Laundry’s most significant expense. Jeff has four part-time employees who all earn minimum wage.

Utility bills

Ferndale Laundry’s most significant expense is water, which includes the sewer and storm drain. It’s a considerable expense for Rosie Wash Express Laundry as well, using about 200,000 gallons of water per month. The cost is about $3,500 each billing cycle for his medium-sized establishment.

Tank vs. tankless water heaters

Jeff installed a tankless water heating system and said that it’s reduced his utility bill from $6,000 to $4,500 per month.

Ferndale Laundry uses a dual-tank-based water heating system. Justin says, 

If we had one big tank, we would have to have it inspected every year, and that would be a cost.

Think about that for a minute.

Ozone injections

Adding ozone to wash cycles improves the cleaning effect of cold water. It’s an attractive option to the laundromat business owner seeking to reduce water-heating costs.

Electricity and gas

A store’s electric bill can be over $500 per month.  A typical gas bill can range from $1,000 to $2,000 per month.

Maintenance and repair

To keep the machines running at Rosie Wash Express Laundry, Jeff keeps a repair technician on retainer for $350 per month. Other expenses include replacing parts, such as motors and door circuits.

Step 11: Integrate technology

Technological innovations are fueling a revival of the industry. Laundry apps are becoming increasingly popular, but what’s the bottom line?

Dexter Pay

According to its website, Dexter Pay is an app “that allows laundry customers to pay for their laundry and track cycle progress via their smartphone or mobile device.”

Speed Queen Value Center

Speed Queen is a popular laundromat equipment manufacturer that offers an app for cash users. Customers add physical cash to the value center machine, which uploads it to their payment app.

Delivery

Rosie Wash Express Laundry uses an app to manage its home delivery business, allowing customers to enter details and pay online. Delivery drivers receive GPS information to complete their routes.

Step 12: Build profit margins.

Man creating profit margin for business

The average profit margin for a laundromat is 25 percent. Increase this is by offering additional services, such as a wash and fold service. In truth, it’s how Rosie Wash Express Laundry achieved its impressive margin of 36 percent. 

Rewards

Rosie Wash Express Laundry implemented a rewards card program. After ten washes, customers receive a free wash and enter the quarterly raffle.  Jeff announces the winners on Facebook live, allowing him to interface with customers frequently.

Reinvestment

The owners of Ferndale Laundry reinvest all profits back into the business. Entrepreneur.com offers a helpful article on surviving your first year of business.

Step 13: Organize daily operations.

After the grand opening, you will need to handle day-to-day operations. Let’s begin.

Layout

Here’s the magic: A great layout increases revenues! An equipment manufacturer helped Justin and Mike with the layout for their coin laundry facility.

Coin collection

Coin collection is an unavoidable chore, but technology can help! Ferndale Laundry’s machines notify Justin and Mike when it’s time to empty a coin box. The partners deposit the coins at their bank or add them to the coin vault, where patrons get change for dollar bills.

Cleaning

Bulkheads must be cleaned every night because lint buildup will cause a sewer smell in the store and water to back up and spill all over the floor. It’s a dirty job, but somebody has to do it!

Lost items

Customers lose things! Sometimes, Justin or Mike open a bulkhead to search for lost items. As for lost socks, they just post them on the wall for customers to claim.

Delegating tasks

Jeff advises that establishing sound systems and delegating tasks to staff has helped him to be more hands-off, his ultimate goal. He realized that some things work better if he abstains from his involvement.

Challenges

Man facing challenges in business

In addition to owning the laundromat, Justin has a day job. Balancing these competing priorities probably would not be possible without Mike, his business partner. Another significant challenge is the daily accounting and management of money to make decisions, such as affording employees.

CLA offers a class titled “A Day in the Life of a Laundromat” that discusses everything needed to operate your self-service laundry. Register here.

Step 14: Create a marketing strategy

Jeff does his own marketing, saying he likes to “tinker” with it and advises researching and defining your target market and competitors. And then focus your efforts on improving your competitive edge.

Rosie Wash Express Laundry is located near many large families, an ideal demographic for a laundromat! CLA offers a comprehensive marketing workbook that’s available here. Best get started with it!

Digital marketing

Digital marketing includes email newsletters, social media, and search engine optimization (SEO). Learn more here.

Jeff uses Google My Business, which helped him get 13 new customers from one promotion! This service enables him to:

  • Track the number of visitors and impressions.
  • Determine where visitors saw his advertisement based on the code.
  • Know if a new customer is the result of a conversion from his marketing campaign.

So here’s the magic: Jeff estimates that 

each of those customers is worth probably anywhere from 600 to 1,000 a year if we keep them.

Facebook is how Ferndale Laundry puts itself on the digital marketing map, and it’s working well. Ferndale Laundry also shows up in Google’s search results with their “nice star ratings next to it.”

Printed materials

Print marketing includes business cards, flyers, brochures, t-shirts, and even uniforms! Try designing yours in Canva.

Justin runs advertisements in local newspapers, costing $75 to $150 per month. He also advertises through ValPack mailers, for which a five-month subscription costs about $300, reaching 10,000 residents.

Attracting customers

Consider offering extra amenities, such as Wi-Fi. CLA published a guide to help laundry owners through the basics of setting up a secure network, available here. Other ways to create a welcoming atmosphere include cleanliness, professionalism, a children’s area, and televisions.

Step 15: Legal considerations

Approval of business permit and license

Licenses, permits, and tax forms

Regardless of the legal structure, determine if your business may require any licenses, permits, or tax forms to operate legally. Use the SBA’s tool by clicking here. Also, you might be required to collect sales tax. Now go out and do it!

Sole proprietorship

A sole proprietorship is the easiest way to start a business. Still, this structure does not protect the owner’s personal assets. You must fill out a unique tax form called a Schedule C. Sole proprietors can join the American Independent Business Alliance.

Limited Liability Corporation (LLC)

LLC is a legal structure that protects the owner’s assets. It’s a hybrid of a partnership and a corporation and requires a particular document called an operating agreement.

Franchise

A franchise consists of a franchisor company and franchisee in a joint venture to sell the franchisor’s products and services. Excellent franchise opportunities exist in the coin laundry industry, including Maytag Commercial Laundry, Speed Queen, and Express Laundry Center. But don’t only take my word for it. Read more here.

Partnerships and corporations

Partnerships and corporations are additional legal structures to consider. Learn more about partnerships here and corporations here.

Justin and Mike are business partners for Ferndale Laundry, and their arrangement is working out. As he puts it, 

You have the ability to bounce ideas off of another person.

He adds, 

You reduce your risk… I’m only into it 50 percent, and he’s in it for the other 50 percent. So I’m reducing my risks and loss of income.

Step 16: Hire employees

Employee in a laundry shop

A laundromat has many moving parts. So, for practical and profitable reasons, it helps to have dependable, trustworthy employees. Take the next step by reading this section.

Compensation

Both Jeff and Justin have employees whom they pay hourly. Learn more about compensating employees by reading this article, “How to Create a Pay Structure That Promotes Team and Company Growth.”

Employer Identification Number

Obtain an Employer Identification Number (EIN) from the IRS for your company. Apply for one by clicking here or call 800-829-4933.

Tax filing and withholding

Federal and state tax filing requirements apply to new employers. You will need to keep records of employment taxes for at least four years, which involves particular forms and accounting for state taxes. But don’t worry, because the IRS publishes a handy guide for employers that is available here.

Unemployment insurance tax 

You will need to pay Unemployment Insurance Tax through the UI Program under the Social Security Tax for employers.

Federal employment and labor laws

Employers must display Workplace Posters.

Other requirements include:

  • Employment Eligibility Verification (Form I-9)
  • State’s New Hire Program
  • Worker’s Compensation Insurance
  • Disability insurance, as required by some states
  • Occupational Safety and Health Administration (OSHA)

Step 17: Add safety protocols

A whole laundry list of things can go wrong in a laundromat. Safety considerations include:

  • Heavy machinery with fast-moving parts.
  • Large quantities of water near high-voltage sources of electricity.
  • Equipment large enough for a person (like a child) to fall or climb into.
  • Rolling carts scattered everywhere.
  • Spills that can make people slip and fall.
  • Americans with Disabilities Act (ADA)-compliance for customers and staff.

The cost to open a laundromat must factor in creating and maintaining a safe environment for you, your staff, and your customers.  Most importantly, do not be negligent of safety because it can result in lawsuits!

Review the specific OSHA guidelines here. CLA also offers a guide on complying with the ADA here. Best get started with it!

Step 18: Purchase insurance

Insurance for business

During his first week of operations, Jeff witnessed a man fall down, crack his head on the floor, and start bleeding. Think about that for a minute.

Every laundromat owner needs property and liability insurance. Furthermore, if you plan to hire employees, then you may need Workers’ Compensation Insurance. To gain general knowledge about insurance for a small business, click here.

CLA offers insurance products that meet the specific needs of a coin-operated laundry business. You can learn more here. CLA’s insurance blog covers several useful topics. For the commercial business model, TRSA offers insurance products here. Best get started with it!

Step 19: Finalize finances

So, here’s the deal: Getting into the laundromat business isn’t cheap. It involves a brick-and-mortar facility full of expensive laundromat equipment! Keep reading.

Budget

Making a budget and sticking to it is even more important in business than in your personal life. Udemy offers inexpensive courses on budgeting that are worth checking out.

Accounting

Don’t just collect coins without accounting for them! Otherwise, your laundromat could end up in hot water! Record and keep track of income and expenses and run regular reports to understand how your laundromat business performs. Try accounting software, such as Xero or QuickBooks.

Funding

The SBA offers free courses on financing options and funding programs. Consider alternative sources of funding, like crowdfunding or a home equity loan.

Want to know how to open a laundromat with no money? Apply for grants or start from home. To explore further, take a look at this article by First Quarter Finance. Go solve it!

Pricing

Most laundromats set prices according to the capacity of the machine.

Prices at Ferndale Laundry range from about five dollars per load to over fifteen for a machine that can wash eight loads of laundry at once! Rosie Wash Express Laundry has a similar pricing scheme.

The Balance Small Business published two articles on this topic, which you can read here.

Money handling

Keep personal assets separate from your business. The bottom line is this: It helps with taxes, accounting, and protects personal funds and resources. Depending on your legal structure, separate accounts might be required.

Open a separate bank account for your business. Apply for a business credit card, which will help you acquire things (with buyer protection) and establish a credit history for your laundromat business.

Step 20: Explore passive income.

Passive income for laundromat business

Laundry is a chore done mostly by machines, but is it truly a passive income opportunity?

All owners realize that no matter what their laundromat business plans were at first, they need to be physically present more hours per week than anticipated.

Jeff says, 

It’s not very passive. That was a big surprise initially.

Justin acknowledges that he would need “employees to be here from start to finish.” 

A typical week for Jeff has him spending 10 to 20 hours either in his store or on a delivery route.

It’s a balancing act between supporting full-time staff and making the laundromat equipment as self-service as possible. And even though technology helps, it’s still a cash-based business.

Jeff wishes he would have followed his intuition during the first year to offer pickup and delivery, upgrade his website, and do other things. In his words, 

I would have just jumped in with both feet.

Conclusion

Like those crumpled bills you find in your jeans, pocket treasures of information are available to tell you how to own a laundromat. CLA provides a treasure trove of white papers here. Entrpreneur.com published a comprehensive guide for starting your own laundromat business, available here.

Question

To recap what you’ve learned about how to start a laundromat business, ask yourself if starting a laundromat is the right choice for you! 

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