Coin Laundry: A Worthwhile Investment?

Laundromats can be a good investment, but like any business, they come with their own set of pros and cons. They can be highly profitable, recession-resistant, and flexible, making them attractive to entrepreneurs. However, as with any business investment, there are risks to consider before diving in.

- Great return on investment (ROI)

- Minimal inventory requirements

- Not seasonal or weather-dependent

- No franchise fees

- Minimal employee management

- Recession-resistant

- Flexibility

- Simplicity

- Potential for multiple locations and expansion

- A great community

On the other hand, here are some of the cons to consider:

- The investment can be substantial

- It's competitive

- You have to be a jack-of-all-trades

- Operating costs keep rising

- Customers can be a handful

High success rates

Laundromats have a surprisingly high rate of success – approximately 95% of laundromats succeed over a five-year period.

Laundromats also have a surprisingly high return on investment, averaging 20-35% in the first year. Moreover, once the location and commercial laundry equipment are set, laundromats are relatively easy to get up and running without the extended lead time required by retail, restaurant, or other service businesses before turning a profit.

Laundromats tend to be profitable even in an economic downturn. During a recession, more people will turn to self-service laundry rather than outsourced laundry or dry cleaning. At the same time, people may not be willing to invest in purchasing or repairing home laundry machines when money is tight, relying instead on local laundromats.

With washers and dryers that can accept cash, cards and mobile payment through a laundry payment app, laundromats have a quick payment cycle; significantly shorter than the 30-60 day cycle found within many other industries.

The payment cycle can make or break a small business startup – according to Business Insider, 82% of small businesses fail due to cash flow problems. A pay-as-you-go operation like a laundromat eliminates the uncertainty of an extended payment cycle, as well as the need to invest resources in invoicing, billing, and accounts receivable.

Recession-resistant

Laundromats are often considered a safe or recession-resistant business option. No matter what happens, clean clothes are a necessity of life. With restricted space and smaller apartments, along with rising electricity prices, people prefer to do their laundry at laundromats rather than at home. Instead of spending money on a washing machine, people choose to go to a nearby laundromat. Therefore, the laundromat is an evergreen business idea.

The laundry industry isn't impacted by economic recessions as much as some industries, like hospitality, tourism, and real estate. During the COVID-19 quarantine, for example, laundromats remained open while other small businesses had to close.

Laundromats have been quite literally woven into American culture for nearly 100 years, dating back to the Great Depression. The American laundry service industry was wrought in the Great Depression. Fast forward to recent history: COVID-19 left adjacent consumer services to wither while the national laundry industry boasted room to grow. According to the U.S. Bureau of Labor Statistics (BLS), the number of coin-operated establishments went from 9,548 in the first quarter of 2020, to 9,710 in the first quarter of 2022.

Minimal inventory requirements

Laundromats can be a great investment opportunity for entrepreneurs, offering a unique blend of stability and profitability. One of the biggest draws of owning a laundromat is the minimal inventory requirements. Unlike traditional retail businesses, laundromats have very little physical inventory, which makes management much easier. This means minimal ordering, rotating, or discarding products, and you won't have to deal with preparing and storing large amounts of expensive inventory ahead of time. This results in easier management and lower upfront costs.

Laundromats are also not dependent on seasons or weather conditions. People always need to do their laundry, so there is little seasonal fluctuation to manage. Additionally, laundromats are generally not franchised, which eliminates pricey franchise fees and specific franchise rules, giving you the freedom to build your business as you see fit.

No franchise fees

Laundromats are not usually franchised, which means you avoid pricey franchise fees. This also means you won't have to follow specific franchise rules, so you can build your business as you see fit.

While this gives you more freedom, it also means you don't have the support of a franchise, which can be a safety net for new business owners. You won't have access to a franchise's marketing, branding, and operations playbooks, which can make it more challenging to get your business off the ground.

Laundromats are also not impacted by economic recessions as much as some industries, like hospitality, tourism, and real estate. They are considered a stable industry and are resilient to economic downturns, consistently yielding steady returns.

Minimal employee management

Owning a laundromat can be a great investment opportunity, but it's not without its challenges. One of the pros of owning a laundromat is that it requires minimal employee management. Here are some paragraphs on the topic of minimal employee management in a laundromat:

Laundromats are often self-service operations, which means customers do their laundry themselves without the need for extensive staff assistance. This self-service model reduces the number of employees needed to run the business effectively. In a self-service laundromat, having at least one employee during business hours is essential for efficient operations, customer assistance, and maintaining cleanliness. This minimal staff requirement makes laundromats an attractive investment for those seeking businesses with low overhead and simplified employee management.

The level of employee management in a laundromat depends on the services offered. A self-service laundromat requires fewer attendants than one that provides additional services like wash-and-fold or pickup and delivery. The type of services you plan to offer will directly impact your staffing needs and management responsibilities. If you opt for a self-service model, your employees' primary roles will include cleaning, customer assistance, and machine monitoring.

Laundromat employees play a crucial role in ensuring positive customer experiences. They provide excellent customer assistance by helping clients operate machines, answering questions about pricing and operations, and providing change when needed. Their presence also enhances safety and security, deterring theft or vandalism and providing assistance to customers who may feel unsafe.

While laundromats can be operated with minimal staff, it's important to consider peak hours and ensure sufficient coverage during those busy periods. Cross-training employees in multiple roles can help optimize scheduling and reduce the impact of unexpected absences. Additionally, investing in scheduling software can help automate and optimize staffing during peak and off-peak hours.

When hiring laundromat staff, it's essential to look for candidates with strong interpersonal skills and a commitment to delivering excellent customer service. Reliability, adaptability, and problem-solving skills are also valuable qualities in laundromat employees. Their ability to handle multiple tasks, especially during peak hours, is crucial for efficient operations.

In summary, laundromats offer the advantage of minimal employee management, particularly if you opt for a self-service model. By understanding the services you plan to offer and the corresponding staffing needs, you can effectively manage your laundromat with a lean team, making it a lucrative and manageable investment opportunity.

Frequently asked questions