17 Pros and Cons of Owning a Laundromat
I’ll admit. I take being able to clean our clothes at home for granted. Actually, I’ve never given it much thought after we bought our first home after renting for eight years. It’s nice not having to pack up dirty laundry and take it out to get cleaned.
I love having our own washer and dryer but there are millions of people that don’t have that luxury.
The laundromats that we used in the past had an adequate supply of washers and dryers without much personalized professional help.
When you think about it, this fact along makes them an interesting business opportunity, since it’s possible to run this type of business more as a side hustle.
I’m always up for learning about new income producing opportunities that can produce cash flow while limiting my time involved.
If you’re contemplating adding a new passive income stream, then here are the 17 pros and cons of owning a laundromat that you’ll want to consider.
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Pros of Owning a Laundromat
#1 Reliable passive income source
Owning a laundromat can be a nice, reliable stream of income. Reliable due to the fact that most people tend to wear their clothes more than once and will do their laundry regularly.
#2 Potential for extra sources of additional income
Sometimes it takes two or more hours for someone to complete their laundry so they’ll tend to have to wait on the premises. This provides laundromat owners a potential for additional revenue streams while providing extra value for their customers.
- food (snack machines)
- coffee, sodas, etc (vending machines)
#3 Minimal inventory needed
A laundromat doesn’t need much physical inventory unlike other businesses. This cuts down on the time that you need to spend on ordering and rotating supplies.
The main focus is keeping the washers and dryers running properly and making sure the laundry soap and snack machines stay stocked.
#4 Few customer complaints
As most laundromats are self service, the only time complaints are typically seen is when some of the equipment is not working properly or if the customer’s clothing becomes damaged.
Once the coins are processed then the transaction is complete. This cuts down on where returns must be processed or if a customer changes their minds about making a purchase.
#5 Not seasonal or weather-dependent
As some businesses are seasonal, laundromats are not. People always need to do their laundry so there’s not a lot of seasonal fluctuation to manage.
#6 Unlimited growth potential
Depending on the owner’s preference, laundromats can be operated in multiple different ways. One could want only one location providing service to the local neighborhood operating on a small scale.
Another may want a larger scale with multiple locations. This makes the growth potential of laundromats unlimited.
#7 Recession resistant
No matter what the stock market is doing (going up or down), consumers still need to clean their clothes. For this reason, laundromats are typically considered a recession resistant business.
#8 Excellent tax benefits
Laundromat owners are able to take advantage of depreciation due to the initial equipment purchases that are needed. Other example of deductible expenses are power, gas and water.
#9 High ROI
Overall as a whole, the laundry industry has a 25-35% return on investment (ROI). As most average new business start ups typically fail within the first 1-2 years, laundromats have a much higher survival rate at 5 years.
#10 Selling is easy
There’s becoming a higher demand to owning a laundromat these days. This makes it possible for current laundromat owners to sell their business whenever they’re ready without having to worry about finding a buyer.
Cons of Owning a Laundromat
#1 High competition
As with any business, owning a laundromat comes with its share of risks. One of them being a high amount of competition. As an owner, you’ll be competing against other area laundromats and depending on the location of your facility, and the demographics of the neighborhood, there may already be several laundromats in the area.
#2 High initial cost
One of the main disadvantages to owning a laundromat is the high initial cost. Cost estimates of owning one range from $150,000 to $300,000 depending on the size and location.
After a location is selected then one must choose whether to purchase or rent the building. You’d also need to consider purchasing new washing machines or upgrading the existing ones as well.
#3 Unpredictable demands
As a business owner that deals with the public, you will occasionally be faced with meeting unpredictable demands. Unless you have a manager onsite then you’ll be required to respond to any type of emergency or customer complaint day or night.
This is also true of someone owning any type of real estate such as a single family home or apartments.
#4 You might be responsible for clothing left unattended
One of the more common issues with laundromats involves customers that leave their clothing unattended. Sometimes this could be for hours or even several days.
Occasionally these customers may hold the laundromat owner responsible. It’s for this reason that owners must inform them that they’re to not leave items unattended and are not responsible for loss if that happens.
#5 Possibility of high capital expenses
In order to stay relevant, laundromats must keep their equipment up-to-date via upgrades in order to keep servicing the needs of their customers.
The average laundromat upgrades equipment every 14-15 years. Some owners choose to wait until machines break which can cause fewer customers to use their facilities.
#6 You must be mechanically inclined to maximize your profits
My dad owns a hardware store. He received the “know how to fix anything” gene at birth. I, on the other hand, didn’t get so lucky.
If you’re like me and aren’t mechanically inclined, then the laundromat business might not be for you.
When equipment breaks, it’s much cheaper for the owner to fix it versus hiring someone else to. So not only can the competition be high, but the sustainable costs can be as well.
#7 Self-serve laundromats operate with coins
Most laundromats require their customers use coins in order to use their equipment to wash a load of laundry.
Unless owners have a change machine on premises, they may end up losing customers.
A general rule of thumb is to have one change machine available for every 300 square feet of space in the building.
If you’re looking for an extra income source in a business that has few customer complaints is recession resistant with an unlimited potential for growth then owning a laundromat might be right for you.
As with any type of investment there are risks involved too. Consider these pros and cons of owning a laundromat to help you make the best decision.Join the Passive Investors Circle