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Four Ways to Derail the Dream
Owning a self-service laundry can be the “American Dream,” but it can also be the “American Nightmare” – if you don’t avoid some common mistakes.
I’ve been blessed to work with many clients who have built tremendous, life-changing businesses. I have also met with potential clients who have made costly mistakes resulting in devastating losses. Many times, a dream or a nightmare depends on the choices you make at the beginning – and sidestepping the four following pitfalls:
1. Failing to do your homework. Ignorance is not bliss – ignorance could cost you a lot of money. I love this industry and believe that it can be a great business for the right person, but many potential clients don’t understand the financial and time commitment necessary to be successful. They live a fantasy world of quarters magically overflowing out of the washers and dryers like slot machines in a casino.
One of the reasons I am actively involved with the Coin Laundry Association is because the CLA educates people about our industry and allows prospective owners to interact at local meetings with existing store owners. A prospective laundry owner should join the CLA and begin networking with existing owners who more clearly understand the industry.
Another source of industry education is the local equipment distributor. The local distributor can be a valuable resource for equipment costs, construction and development costs, operating expenses, industry trends, local market opportunities and many other issues critical to the success of a new laundry.
2. Securing a bad location. We’ve all heard that the key to any successful business is its location. This was never more accurate than with a self-service laundry. Securing a good location is critical to the success of a laundry. Unfortunately, I’ve personally met with many potential clients who have secured the wrong location because they had not “done their homework first.”
I’ve met with many potential clients who have purchased buildings or signed leases on properties that will never become coin laundries because the locations are not suitable for our business.
Bad locations can be bad for many reasons. Maybe the demographics can’t support a laundry. Perhaps the impact fees from the local municipalities are so costly that a laundry in the location doesn’t make sense. I remember meeting with one prospective client who had already signed a long-term lease for a “great” location only to discover that the impact fees were $20,000 per washer.
There are many reasons why a location is not suitable for a laundry. The key is meeting with a local laundry professional before you move forward on any potential laundry site.
3. Not understanding the lease before you sign it. It’s amazing to me how many people purchase existing laundries without thoroughly analyzing the lease. If you don’t own the building, the lease is your most important asset. It’s even more important than the equipment. The terms and the length of the lease are critical to the long-term viability of your business.
Surprisingly, I regularly meet with clients who have only two or three years left on their lease and don’t even realize it until they try to finance new equipment. The finance company turns them down because the finance terms can’t extend past the term of the lease. If you don’t have at least 10 years left on your lease, the value of your business drops dramatically.
It’s critical that a lease for a new site or for an existing business be reviewed by an experienced commercial real estate professional or an attorney. The days of handshake agreements are over. As an example, many second-generation building owners are not renewing leases that their parents had renewed forever. Why? Because the kids decide they want to own the laundry and operate it for themselves.
4. Underestimating what it will take to turn around a bad store. We’ve all heard that it’s best to buy low and sell high. With that thought in mind, new owners purchase old, rundown stores with the hopes of changing the image and rebuilding the business. I have worked with many clients to help them build successful laundries – many times increasing revenues by 100 percent to 400 percent.
However, occasionally, I meet with clients who think if they put a coat of paint on the walls and a new sign on the front, the customers will flock in. Understand that an existing laundry did not become rundown overnight and that the store has a perception within the community that must be changed. To change the perception, the new owner must make a commitment to upgrading the equipment and marketing the business.
With the right preparation, owning a laundry can be the “American Dream.” But, refuse to do your homework and you may wind up living the “American Nightmare.”
Author: Bryan Maxwell of Western State Design, Hayward, Calif., currently sits on the Coin Laundry Association’s Board of Directors.