Everyone always needs a way to clean their clothes. Those who may not own a washing machine or a dryer often have to rely on a laundromat. There are approximately 29,000 laundromats in the country, meaning that millions of Americans wash their clothes at these businesses every year.
Owning a Laundromat can be a highly successful business. Laundromats can generate between $50,000 to $1,000,000 per year and tend to have a high cash flow due to the nature of the business. So, if you are looking for a potentially lucrative business, starting a laundromat might be just the thing. So we put together this comprehensive guide on how to start a laundromat.
Starting a Laundromat: Step-By-Step Guide
Step 1:Attend a Laundromat Specific Training Program
One way to get a head start on a laundromat business is to first attend a laundromat-specific training program. There are several free course and training programs online that will teach you everything you need to know about how to run a commercial laundromat, from the proper way to clean clothes, what kinds of equipment you need, how to repair and maintain washers/dryers, and management techniques that are crucial for running the business.
You would be surprised that laundering is a more complex science than you would think. You need to know what chemicals are used for cleaning and how to clean specific types of textiles in the most efficient way. Depending on where you take it, courses can range from free to $1,000+.
Step 2:Decide on Business Entity
The next step is to decide what kind of business entity you want to be. In general, the best kind of legal business organization for a laundromat is probably a limited liability corporation (LLC). An LLC is a good choice because it will limit the liability that you personally can incur from your business.
Laundromats have several potential liabilities, including equipment damage, workplace accidents, and trademarks/copyright infringements. Forming an LLC will ensure that the corporation is a distinct entity from you personally. So, if something goes wrong, your personal assets (such as your home and car) will be protected in the case your default on any debt
Also, an LLC will give you a better tax rate. You can opt for either pass-through taxing or S corp taxing. Pass-through taxing is generally a better option for businesses that operate on smaller profit margins, such as a laundromat.
Step 3:Write Your Business Plan
The next step is to write your business plan and iron out specific details. One of the major things you will need to decide is what kind of services you will offer. For example, will you offer only self-service washing and drying, or will you also offer wash and fold services or dry cleaning services?
The range of services you offer will affect what kind of equipment and training you will need to get. Your business plan needs to be a full roadmap for your business with all relevant details. Important things to cover in your business plan include:
- Location of laundromat
- Type of machines (coin or card?)
- Competition and market research
- Target market
- Pricing strategy
- Costs forecast
- Milestones for development
- Extra services or amenities
Step 4:Pick a Location
Next, you need to pick a location. In general, you want the laundromat to be within walking distance or a short driving distance of residential areas. The closer to where people live, the better. You should also look for a front-spacing spot on a busy street with lots of foot and vehicle traffic.
Other factors relevant to the location include parking availability, curb appeal, and proximity of other stores (e.d. Gas stations, convenience stores, grocery stores, etc.) You also need to consider the size of the establishment. In general, 1,000 sq. ft. of space can hold about 20-35 washer and dryer units, spending on how they are arranged.
Step 5:Apply for Licenses
Once you find the space you want, you need to get the right permits to run your business. Exact licensing requirements depends on your municipality, but you will most likely need:
- Business license
- Fire permit
- Air and water pollution control permit
- Impact fees
- Sewer connection fees
- Wastewater permit
We recommend getting the permits and fees sorted out as early as possible. The sooner you get them done, the less likely you are to face legal trouble in the future.
Step 6:Get Used or New Equipment
Next, you need to figure out equipment such as washers, driers, etc. If you bought a previously existing laundromat, then it will likely already have the equipment. If you do not have any equipment, then you need to figure out if you should buy new or used equipment.
All other things being equal, it is probably better for your business to buy new equipment. New equipment is more expensive, to the tune of $500-$700 per top-loading commercial washing machine, and between $2,000-$6,000 for front-loading commercial washing machines. Stacked dryers can cost between $3,000-$5,000 per machine. Equipment costs will be a large chunk of any financing or startup loans that you get.
New equipment is more expensive but you will have all the paperwork and service history, new equipment often has warranties, you can get experts to help you set it up when you buy, and you can be sure that there are no pre-existing issues with the machine. Used equipment is cheaper, but it can be very hard to find used machines that do not have some problems with them.
You also need to choose the kind of water heater. Tankless heaters provide a more or less unlimited style of hot water, are more efficient, and do not leak as much. But they are more expensive than tanked water heaters in terms of purchasing and installation costs.
Step 7: Purchase Business Insurance
Business insurance is necessary as it can cover you from liability. For example, if someone hurts themselves using your laundromat equipment, business insurance can protect you if you have to pay fines.
You will also need to get property insurance and workers comp insurance in case any employees are hurt on the job. Business insurance for a laundromat will run you anywhere between $1,000-$3,000 per year when you factor in liability insurance, property insurance, and workers comp insurance.
Step 8:Decide on an Accounting System
You will need a point-of-sale (POS) system to take payments from customers, schedule orders/drop-offs, manage employee payments, and more. A POS system can be as simple as just a cash register, but most laundromats nowadays need some kind of digital interface.
Here are some well known POS and accounting systems designed specifically for laundromats:
- Cents POS
- Wash & Fold Software
These POS systems have digital and physical hardware for keeping track of orders, taking payments, managing employees, scheduling hardware repairs, and more. They are highly customizable and can be tailored to your specific business model, whether it’s solely coin-operated laundry, drycleaning services, per-pound services, etc.
Step 9: Coin-Based or Card-Based Payments?
There are two major options for paying for services; coin-based or card-based electronic payments. Coin-based machines are the classic option and still very popular but card machines are also becoming more common.
We recommend trying a “hybrid” model with both coin-operated and card-operated machines. That way people who have cash and people who have cards can use your machines. Fewer people carry cash with them nowadays so card-based laundromats are often a good choice.
There are several services that can help you convert coin-based machines to accept debit and credit card payments, such as FastCard and LaundryCard, If you have coin-operated machines, then you also need to get a machine for exchanging bills for coins.
Step 10:Decide Whether You Want to Franchise
You have the option of buying a laundromat franchise rather than starting one from scratch. Starting a franchise can be a good idea because you get access to startup capital and they can loan you some of the costs for getting a building and equipment.
A franchise can also provide support and guidance in the form of an already established brand.
Franchising can cost a minimum of $100,000 for laundromats but can cost up to $1 million, depending on the franchise. You also may have to pay franchise fees, which can amount to a flat fee or a percentage of your profits.
Step 11. Make a Website
Pretty much every business nowadays has a website, so your laundromat should have one too. Laundromat websites should basically be brochures for your services.
They should tell customers how many machines you have, hours of operation, how much your machines cost, what kinds of amenities you may have (e.g. vending machines, free WiFi, complimentary coffee, etc.) locations, and customer reviews.
You should also consider having a “contact” page with a business phone number and email so you can communicate with customers.
Step 12. Market Your Business
Like any business, marketing is incredibly important if you want to expand and grow in the future. We have already covered a website, which should be a major marketing avenue, but there are lots of other ways to market a laundromat.
You could offer promotions to customers such as reduced prices or free loads of laundry, or you can give out coupons and start a rewards program for loyal customers. Many laundromats use a “punch-card” system where every certain number of purchases is rewarded with free laundry services.
Another very lucrative marketing opportunity is to partner with local hotels, motels, and college dorms. People staying in these places tend to need laundromat services more than other people. For instance, you can offer a slight discount to people staying at the hotel down the street or give a discount to college students who live on campus.
Step 13. Hire Employees (If Needed)
One of the good things about running a laundromat is that you generally do not need to hire a lot of employees, so wages will only take up a small portion of your expenses.
Laundromats that primarily use self-service coin or card-operated machines may only need 1-2 employees around at any given time to handle customer inquiries, inspect machines, and keep an eye on the general state of things. Laundromats that offer more specific and targeted services like dry cleaning or per-pound laundry might require more employees on hand.
In fact, many laundromat owners often do not need to regularly actually be at the laundromat. You can hire a team of employees to handle things for you, so you can focus on running your business instead of spending all your time in the store.
How Much Does it Cost to Start a Laundromat?
Laundromats typically have high start-up costs because you need to buy both equipment and space. Typical startup costs run around $200,000 but can go up to over $1,000,000 depending on how large the space is and where it is located. In addition to a start-up budget, you will also need to set aside money for operation costs and repairs.
Unless you have a lot of money lying around saved up or you can borrow money from family or friends, you will likely have to rely on a business loan to get a laundromat up and running.
In general, a Small Business Administration (SBA) Loan would be best for something like a laundromat. SBA loans are usually guaranteed by the SBA for up to 85% of the loan’s value, meaning that the SBA will cover up to 85% of the loan if you default. This guarantee makes it much easier for small businesses to get startup loans.
SBA loans can also amount up to $5.5 million and typically have a repayment period of 25 years. Generally, these loans have much lower interest rates than you would find at a bank too.
For laundromats specifically, you would most likely want to look at SBA 504/CDC loans, These loans are meant specifically to help businesses buy things like commercial real estate, which you will definitely need for a laundromat.
Existing vs New Laundromat
You have the option of either starting a brand new laundromat or buying an existing one. Both options have pros and cons.
Generally speaking, it is cheaper to buy an existing laundromat. Existing laundromats already have some kind of cash flow established and it’s normally easier to get financing to buy an existing laundromat than start one from scratch.
The main downside of buying an existing store is that it may not be exactly what you want and the sale price might be more than the real estate and machinery would imply, due to things like customer base, branding, business plans, design work, and more.
If you want to start a laundromat from scratch, then the main barrier is the startup costs for equipment, space, branding, marketing, etc. But on the flip side, everything will be to your exact specifications and you can make sure you have the most up-to-date equipment.
How Much Can You Make Running a Laundromat?
In terms of the average laundromat, the average laundromat makes anywhere between $450-$500 per day in revenue, including revenue from washers, dryers, and other income sources like vending machines or soap dispensers. Successful laundromats can pull in nearly $2,000 per day.
One way you can estimate the potential earnings of your laundromat is to compare it to similar operations. You can check out the pro forma for a laundromat that is for sale to get a rough idea of how much that operation makes per day.
Keep in mind that pro forma documents are based on self-reports and might exclude things like one-time large expenses. Thus, pro forma documents need to be verified before making any decisions based on them.
You can also get an estimate by doing some rough calculations. Laundromat activity is measured in “turns” per day where one turn is one use of a machine. Simply figure out the price per turn for each machine and multiply by the average number of turns per day. The average laundromat does about 3 turns per day.
Is Owning a Laundromat Worth it?
So, is owning a laundromat worth it? If you can shoulder the startup and upfront costs, then yes, owning a laundromat can be an extremely lucrative business idea. Laundromats are an essential service that will always be in demand, and the pay-to-use nature of laundromat services means they have the potential to generate high cash flow.
One of the best parts about owning a laundromat is that, once things are up and running, you can step back and let things handle themselves while you focus on marketing your business and expanding.
So if you are tired of your day job and want to make money providing a useful service to people then starting a laundromat is a viable option.
Ruben has been doing online marketing for the last 4 years. Prior to that, he spent 15 years managing different brick-and-mortar businesses, in the home improvement and logistics industries. Overall, he has 20 years of business experience under his belt. Recently, he added SEO, affiliate marketing, and link building to his business skills.