Opening a Laundromat: Step-By-Step

Table of Contents

• Profits and Revenue
• Potential Profitability
• Operational and Start Up Costs
• Verifying Financials
• How to Finance
• Laundromat Equipment Leasing
• The Business Plan
• Laundromat Permits
• Understanding Market Research and Strategies

When opening a laundromat, there is a lot to consider. It’s not a straightforward process of finding a location and buying a few machines, you need to plan every single step. Think about budgeting and financing, how much money do you need? And what will you spend it on? You need to think about location, the type of building and the permits required. What is the demand like in your chosen area? You’ll need to put together a detailed business plan for factors such as the services you will be offering, staffing and marketing. There is a big checklist to work through, but done correctly you’ll be on your way to running a successful business. In this blog, we’ve broken it all down into steps to help give you a clear idea of the process. We will give you an overview of everything you need to know when opening a laundromat.

Profits and Revenue

Laundromat Income

Before we talk about costs, let’s discuss just how much a laundromat business can make. Of course, how much of an income you generate will vary depending on factors such as location, footfall and customer preferences, but on average, around $150,000 can be made each year from a single laundry store in the US. The return on investment (ROI) is also very high, ranging from 20% to 30% which is much higher than businesses in industries such as real estate. This high ROI is what makes the industry so attractive to potential investors and business owners, it’s a business that can really pay off over time. For a more detailed deep dive into profits and revenue, check out our earlier blog post

Potential Profitability

For laundromat business owners, there are a few different revenue streams and paths to go down to maximise profitability besides the core self-service model. Let’s cover some of the main opportunities. 

Wash-and-Fold: One of the most popular additions is a wash-and-fold service where customers can drop off their laundry and collect it later on after it has been cleaned and folded by you. Depending on the location and quality of service, businesses will typically chargebetween $1.45 to $2.96 per pound on average. It’s a service that potential customers find convenient and useful! Saving them time from having to clean and fold themselves. 

Dry Cleaning: A dry cleaning service is great for customers who have items such as formal wear, suits and wedding dresses that need to be professionally cleaned. It can take a lot of time to clean and press delicate clothing at home, so heading to a dry cleaners is always the best option! Depending on the type of clothing and process required, a customer will spend anywhere between $25 to $50 each time.

Pickup and Delivery: In this day and age, we all love convenience. Life has gotten busy and if we can find ways to save more time for ourselves, we will! Pickup and delivery (P&D) services have become a staple for many laundromats. Customers can get their laundry picked up from home, cleaned and then delivered straight back to their doorsteps. It’s quick, easy and requires very little work from the customer. How much a business owner charges for this service depends on the amount of laundry and distance of the delivery, so you can expect to charge around $25 to $50.

Some other additions to consider include alterations, shoe laundry and even repair services. It’s all about understanding your market and seeing which revenue streams would be the most beneficial to your business.

Operational and Start Up Costs

No business can open its doors without money. When it comes to a laundromat which requires lots of different machines and equipment stations, costs can ramp up very quickly. A key piece of advice? Put together a clear budget that will support you throughout the process, laying out the amount of money that can be spent for each area of your business. Having a budget is a good way to make sure that you can afford everything you need to get your new laundromat up and running, and will help you plan for any potential financial obstacles. Let’s take a look at start-up costs.

Start-up Costs

Property: Think about how you will get hold of a building that you can turn into your new laundromat. Will you buy, lease or build? Leasing is a slightly more wallet-friendly option and the upfront costs will be lower. Depending on the type of leasing agreement that you choose to sign, you’ll pay rent every month for a set period of time, avoiding the need to pay a big chunk of money straight away. Buying a laundromat outright is a more expensive choice, but it does mean the store is fully owned by you. A new laundromat will cost anywhere from $50,000 to over $1 million depending on location and size so for some new business owners, it may be more cost friendly to lease. You also have the third option of building a new store from scratch which is more of a long-term investment. You’ll need to cover costs such as licences and permits, building structure, maintenance costs and utility costs that come with that such as electricity and plumbing. It’s a project that can take a lot of time and money, but will be very rewarding once finished. 

Equipment: The next initial cost contributes towards the back bone of your business, your equipment such as washers and dryers. This is an area where you’ll spend a good portion of your budget. Depending on the size of your store and the services you’ll offer will help you decide on the types of washers that you’d like to invest in. If you have less space, top-loading washers are ideal and they’ll also use less water and electricity which is good for your utility bills. Another popular type of machine for laundromats are front-loading washers which are also quite water and energy efficient. Besides these machines, you’ll also need to invest in an industry specific point-of-sale system such as CleanCloud. CleanCloud is a software for laundromat and dry clean owners to manage their day to day operations such as order management, payments and marketing. It’s an essential tool for any business owner in the laundry industry and takes away any time consuming manual tasks. We offer a range of different plans at different price points, making sure that our system works for any budget.

Operational Costs

Utility Bills: The main resources used by a laundromat is water and electricity, and they use a lot of it. Paying for your utilities can be a big monthly cost, so it’s worth investing in energy-efficient machines to help lower your bills. On average, bills can range between $2,000 to $4,000 a month, so when planning the budget, make sure you put some money aside for these regular payments. 

Staff: If your store is not fully self-serve and you require hiring staff to help run the business, you’ll need to plan for employee wages, training and any benefits that you’d like to offer. Usually a laundromat attendant will be paid on an hourly basis and they’ll need to have the skills to cover tasks such as customer service, handing payments and cleaning or maintenance. You may decide that you also need to hire a manager to help keep all operations under control and in check. Those applying for this type of position will expect a higher salary which is another cost to keep in mind. 

Inventory: It’s important to keep your store stocked up! And that includes the likes of vending machines where customers can purchase laundry products or drinks and snacks. Prices for items like this will vary depending on quantity and the brands that you choose to order, but it’s a nice factor to include so your customers have something extra available to them while using your services.

Verifying Financials

Verifying Financials

Once you have an idea on the different start-up costs to cover and the different ways to increase revenue, you’ll need to verify finances and assess profitability. These methods are more suited if you are taking ownership of a laundry business which currently has an owner.

Checking Statements and Records

When you are looking to assess how profitable a current business is, you can ask the owner to take a look at previous tax returns and financial statements. This will give you a great insight into the overall financial landscape of the business viewing factors such as expenses and revenue trends. Has the income been relatively balanced throughout the year? Or has there been noticeable dips during specific months and seasons? A good tip, even when you feel confident with the statements that you have seen, it’s a good idea to verify the data just to be sure. 

Profit Margins and Cash Flow

One other way to manage business financing is by reviewing the 3 core documents which are a balance sheet, profit & loss statement and the cash flow statement (CFS). Each of these will give you a better understanding on how the laundromat generates its income and how the money is spent. With a CFS you’ll find 3 main factors: activities linked with operating, financing and investing. Having this information provides any potential investors with an idea on how financially successful a business is and how it can support itself.

How to Finance

How to Finance

When opening a laundromat and taking these first few steps mentioned so far in the blog, you should now have an idea on what needs covering financially. But now you need to answer this key question: How will you gather all the funding you need to make this new business a success? Let’s go into more detail.

As a business owner in the laundromat industry, one of your biggest decisions will be based on financing. You’ll need to make sure that you have all the funding you need to cover costs for property, equipment, staffing and more. It’s important to understand the different options that are available to you so that you can manage your spending without losing out on money in the long run. The way you navigate this will depend on your overall business plan, what your financial situation looks like and, how quickly you want to get your new laundry business up and running. 

Bank Loans

Most people prefer to apply for a traditional bank loan when looking for extra funding. Once approved, the bank will provide you with the money you need for different investments. As a laundromat owner, this may be for purchasing a new building or in-store equipment. Keep in mind that a good credit score is important when applying for a bank loan. The higher the score, the more chance you have of securing the funds. During the process, you may also need to present your business plan so that you can outline your goals and show exactly what you need the money for.

SBA Loans

An SBA Loan also stands for Small Business Administration. These loans are ideal for small businesses and are a good alternative if you are looking for something more favourable. These types of agreements guarantee a small portion of a loan, which reduces the risk for lenders. They often come with lower interest rates and longer repayment periods which is very beneficial for owners. 

Laundromat Equipment Leasing

Laundromat Equipment Leasing

One of the main factors you’ll be looking to cover cost wise are your machines. You’ll want reliable washers and dryers installed in your store and depending on demand, you need to make sure you have enough of them. This can be expensive if you choose to buy outright which is why many business owners opt to lease as an alternative. It’s a popular choice as it’s much more budget friendly, having the ability to pay in instalments rather than one big upfront payment. When you lease equipment, you can also be flexible with the types of machines that you own. For example, when your lease comes to an end, you can upgrade to newer models and renew the monthly payments. It’s a great way of obtaining the more up to date machines rather than sticking to older versions if you did buy outright. 

Lease Agreements

To help you get an understanding into the different leasing options available, let’s take a look at a couple of popular choices. The first option is known as an operating lease. These are more short-term and are designed so that the lessee (you as the business owner) has the right to use the equipment, but will not be given full ownership. Once the lease is finished, you’ll return the machines and start a new lease on a different machine. You’ll need to make sure that you still keep the equipment in good condition, but often these leases will come with cover for maintenance if needed. 

The second option is called a capital lease which is more long-term. If you are aiming to keep a machine for a long period of time, this lease will be more suited for you. With this agreement, the lessee could either be given full ownership of the machine once the contract has finished or, a payment will have to be made at the end of the contract to take ownership of the asset. This is different to an operating lease, where the machine will be returned and switched for something new at the end of the contract period. 

Check Terms and Conditions

Before you agree to a lease, it’s always important to check through the terms and conditions. Every agreement has them and it’s good to make sure you know exactly what you are signing up for. In terms of leasing, these conditions will cover factors such as the payment amount and schedule, duration of the contract and any other fees that you may need to pay for the likes of maintenance and servicing. You’ll also find some information on what to expect if payments have been missed or if you’ve faced any issues with the equipment that you are leasing. 

The Business Plan

The Business Plan

So far, we’ve covered the profitability of a laundromat, the different costs that will need to be covered, finances and how to obtain equipment in a way that doesn’t cost you huge amounts of money. All of this has led us up to the all important business plan. When you are opening a laundromat, having a business plan will be a document that you’ll be referring back to throughout the entire start-up and operational process. It’s the backbone of your business where you’ll outline the overall business goal, finances and budget, operational logistics and even a marketing plan to help you get more people using your services. Let’s break down the key components.

Market Analysis

So that you can set the right goals for your business, you need to understand the market. Do some research and look into similar services in your area. Who are the main competitors? And what are they offering which makes them such a popular choice for locals? You may find that they are offering the same self-serve or WDF options as you, so maybe you could come out on top by offering lower prices or extending opening hours so that you are more accessible for customers. Find out what your customer base prefers in a laundry service and see if you can meet theirs needs. Pickup and delivery is a super convenient service for most people, so that could be one of your long-term goals to set up P&D and deliver professionally cleaned laundry straight to your customers doorstep. Other goals may include hiring a set amount of employees after your first year, trying out a new marketing method to attract new customers or, installing new equipment in your store such as vending machines or folding stations. It’s all about understanding customer preferences and planning goals which work for you and your business.

Operations

Next, think about the daily operations of your store. Referring back to our section on equipment financing, here would be a good place to think about your services and plan what equipment and machines you will need. Think about the types of washers and dryers and combine this with the space in your laundromat. Will you need machines which are stacked? Or do you have enough space to have your machines all in one row? If you are offering a wash, dry, fold service, you’ll also want to invest in some folding stations where your staff can neatly fold laundry once it’s been cleaned. 

Besides equipment, here is where you’ll also consider staffing. You’ll need to plan the number of employees needed, their roles and responsibilities. The main roles for a laundromat include laundry attendants who focus on helping customers and assisting with laundry, providing the best customer services. A manager who is slightly more skilled to look over the daily operations as well as your base staff. Then you’ll have a maintenance member who focuses on maintaining the equipment in-store and fixing any issues. You may also need to hire a customer service representative who will focus on customer complaints and queries that a usual attendant may not be able to handle. 

Finances

Next are your financial projections. Here you’ll plan a breakdown of what you expect for income and expenses. To help you work this out, think about the number of machines you’ll have in-store, the pricing for a wash and dry and how many customers you expect. Make sure you also include any additional services if you offer them. This will help you estimate your revenue. When you outline your expenses, you’ll need to cover costs for mortgage or rent payments, utility bills such as water and electricity, employee payroll, laundry supplies and costs for maintenance and agreed loans. Once you’ve got an idea on revenue and expenses, you can pull together a cash flow projection. 

A cash flow projection is designed to give you a monthly view of your finances, helping you determine if you’ll have enough income to cover the initial investment, making sure your new laundromat is worth the work and money in the long run.

Marketing Plan

And then you’ll need to plan an essential marketing strategy. To achieve business success, you need a loyal customer base with a plan in place to increase the amount of people walking through those doors. We will go more in depth with marketing strategies shortly, but in a simple roundup, you need to understand your target market and use different methods to increase your footfall. This can include digital techniques such as social media and email marketing, promoting positive reviews on your website and even setting up a loyalty program to incentivize your customers to continue using your laundry services. Different methods will cost you money depending on how in-depth you want to go, so make sure you include these costs in your business expenses.

Laundromat Permits

Laundromat Permits

Another process to follow when opening a laundromat, is obtaining all the necessary licences and permits. This is an important step that needs to be taken in order to operate your business legally and safely. 

Business Licenses and Registration

Every laundromat business owner needs to obtain a business license. This will ensure that you can legally offer laundry services to the public. There are a few different options to pick here, so make sure you do some research to find a business license that works for you including visiting the state or local SBA office. A common option is setting your business up as a limited liability company (LLC) as this tends to provide good legal protection. When arranging your business license with the SBA, they’ll typically pull together health permits, sales tax and city planning permits all into one place. Let’s break each of these down:

Sales Tax

This type of permit is required so that you can charge sales tax on your different services as well as any laundry products that you may sell separately such as fabric softener or stain remover. 

Health and Safety Permit

You will need to get in touch with your local health department to arrange a health and safety inspection of your business. Once passed, you’ll be given the necessary permits for this aspect of your business. You may also need to hand over any relevant paperwork and pay additional fees. 

Sign Permits

In order to put up any signage for your laundry business, you’ll need to obtain a sign permit. Acquiring this type of permit will ensure that your sign meets local regulations for factors such as size, placement and even lighting. This is an important permit to have, as having a sign for your store will allow customers to easily notice you especially if you are a new business. 

Fire Department Permit

Moving on from the three core permits that may be included with your business license, you’ll also need a permit for fire safety. You’ll need to put a plan in place that will cover emergency exits, fire procedures and any fire extinguisher locations to make sure you are prepared for an emergency situation. For a full list of fire regulations in the US, you can check out this link here.

Utility Permits

To make sure you have all the correct connections for utilities such as water, gas and electric, you’ll need to obtain a utility permit. For a laundromat, having access to each of these is critical, so you’ll want to make sure you get a permit to cover these factors as soon as possible. This will also cover your business sewage connections.

Understanding Market Research and Strategies

Understanding Market Research & Strategies

You should now have a better understanding of the different logistics and considerations to think of when opening a laundromat. In this last section, we are going to discuss a more creative side to the business, marketing! This is a process in business which is very important and will take up a good part of your business plan to help you meet your overall goals. Running a laundromat isn’t just about machines and services, you need to make sure that you can attract customers and retain them. Here is how you achieve this with some different marketing strategies.

Local Advertising

Using traditional methods of marketing in your local community is a great way to promote your services and attract customers. Create physical flyers and place them in a stand in your store front for people to grab and go. Flyers are quick and easy for customers to look through, and they can also be passed around to friends and family. A popular option is posting ads in the local newspaper highlighting your business and opening hours. Alternatively your ads could promote a special offer or maybe you are hosting an event for your store which the locals are invited to. To encourage loyalty with your customer base, keep an eye out for any community events which you could attend to spread the word about your business but also get to know people on a personal level. A potential customer may be more inclined to try your laundry services if they know and trust you. 

Digital Marketing

Nowadays, going digital really is the way forward. The majority of people will have access to a smartphone, the internet and social media, so it’s a smart investment to give your business an online presence. To start, create a website which is user-friendly and holds all the key information about your store such as a list of services, pricing, location and contact information. If you offer an online P&D service, you can use your website to embed an online booking tool where customers can schedule orders remotely or from home. 

Social media is a beneficial tool for all types of industries, especially smaller businesses such as laundromats. Set up accounts for platforms such as Facebook and Instagram to engage with customers and share pictures of your store, information about your services and any updates or upcoming events. You could also use your website and social media platforms to promote positive customer reviews, these are great to encourage new people to visit your laundromat. When it comes to reviews, you can use platforms such as Google or Yelp to get feedback. These sites are easy to use and can be linked anywhere online for people to easily access.

Loyalty and Referral Programs

To help build customer loyalty, you can set up a loyalty program where customers can build up points after each time they use your services. These points can be used on special offerings such as a free wash, dry, fold or discount off of a laundry order. One other way to attract new customers is by referral incentives. This works by offering a customer a discount if they refer a new client to your store. It builds your customer base, and also rewards your current one. 

Conclusion

And that concludes our step-by-step guide to opening a laundromat! We’ve covered the key steps to consider and it’s fair to say that there’s a lot more to it than just operating some washing machines in a laundry space. It’s a process that requires careful planning, budgeting, and understanding your target market to really get your laundry business up and running. Whether it’s picking the right strategic location for your store, offering the right services that meet the demand, or making sure you’ve got all of the correct equipment, every decision plays a role in achieving long-term success. By spending time focusing on all the steps that have been mentioned in this blog today, you’ll be on your way to running your very own laundry business in no time.

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