How to Start a Laundromat Business

The coin laundry or laundromat, in its simple form, has been a reliable business model for a very long time and has proven its stability even in the times of economic upturns and downturns. People will always need laundry, and with the increase in city populations and smaller living spaces, there is an increasing need for communal and proper laundry facilities. The laundromat business is a surprisingly robust industry, with over 29,000 self-service laundry facilities in the United States generating billions of dollars annually. It’s a “recession-proof” business that is attractive to a broad range of demographic profiles, from renters and students to residents of apartments who lack in-unit laundry. 

In addition, the industry has evolved significantly beyond the simple coin machine, with modern-day laundromats offering amenities such as Wi-Fi, cafes, and specialty wash-and-fold services. This combination of consistent demand and diversification potential makes the question of how to start a laundromat business so exciting to so many potential business owners. In this article, we will cover every aspect of this kind of business, providing you with a comprehensive guide that will help you build a successful and profitable laundromat business from the ground up.

What is a Laundromat/Coin Laundromat Business?

A coin laundromat, self-service laundry, or laundromat is a shop where customers can use commercial washers and dryers on the premises to wash and dry their clothes. The primary service is providing users with access to dryers and washers in exchange for a fee, commonly in the form of coins, cards, or mobile payments.

In effect, a laundromat provides a safe, clean, and well-maintained space for people who lack their own laundry facilities or enjoy the time and capacity benefits of commercial washers and dryers. The model is characterized by high volume and low-margin transactions. People pay by load, and the money is made on the collective usage of all of the equipment. Furthermore, a successful laundromat is not just a laundry plant, but also a social meeting point that offers a convenient solution to a basic human need.

Types of Laundromat Business Models

As you plan to open a laundromat business, you will realize very quickly that there is more than one way of running it. Your model will depend on your finances, time, and the level of service you would like to provide.

1. Self-Service Laundromats

This is the traditional model in which customers are responsible for all the work with their laundry. They load, initiate, and move their clothes from one machine to another themselves. The model is liked since it has minimal staffing and, therefore, minimal labor costs.

• Pros: Lower overhead costs, the ability to operate with little or no staff, and the option for continuous operation are among the main advantages of this system.
• Cons: A sole revenue-generating activity will be the use of the machine, while there will be less opportunities for selling additional products or services.

2. Full-Service Laundry Shops

These stores, also commonly called wash-and-folds, offer a range of services beyond machine rental. Customers drop off their clothes and staff do the washing, drying, and folding for a per-pound fee. They can also offer dry cleaning or tailoring services.

• Pros: Can generate more revenue per client, can build stronger customer relationships, and offers more services to cater to different market niches.
• Cons: Higher labor cost, more complex operations, and must be more dynamically managed.

3. Commercial Laundry Services

This business model serves business-to-business (B2B) clients rather than individual customers. You’d be providing bulk laundry services to enterprises such as hotels, hospitals, restaurants, gyms, or beauty parlors.

• Pros: Offers a regular, predictable flow of revenue via contracts, and economies of scale can lead to higher profit margins.
• Cons: Requires industrial-grade, typically more expensive, equipment and a lot more initial investment.

Explore More: Clothing Business Ideas

Starting From Scratch vs. Buying an Existing Laundromat

The decision to manage the business in a new way or take over an existing route is an essential part of starting a laundromat business. Each has its own particular advantages and disadvantages.

Beginning a New Laundromat from the Ground Up

Pros:

• Customization: You have the opportunity to design it, choose the latest energy-saving equipment, and establish a unique brand from ground zero.
• Latest Technology: You can install modern machines with new payment systems, innovative features, and increased efficiency.
• Potential for Increased Profitability: With the latest, efficient machines, you can reduce energy costs and improve the customer experience, leading to increased long-term profitability.

Cons:

• More Front Capital: An entirely new build can cost anywhere from $200,000 to more than $1 million, depending on the location, size, and equipment.
• Slow: It can take 1-2 years to find a location, permits, equipment, and outfit the facility.
• Risk: There is no existing customer base, so you will have to build your reputation and business anew.

Buying an Established Laundromat

Pros:

• Proven Revenue & Customer Base: You are taking over a business that has a proven successful history, positive cash flow, and loyal customers. Additionally, it is also easier to get a loan for your business.
• Less Risky: You can reduce some of the risk by going through the business books, competition, and history before you make your purchase.
• Up and Running Immediately: As the business is already established, you can make money from day one.

Cons:

• Hidden Issues: The technology used in the company may be old, inefficient, or expensive to maintain. Besides, there could be a problem with the lease or an outdated business model.
• Outdated Infrastructure: The infrastructure and design may be old, thus, requiring more money to bring them to standard.
• Location Restraints: You have a firm hold on the place, which can either be a good or a bad thing for the future of your business.

How to Start a Laundromat Business With No Money / Minimal Capital( Easy Steps tof Follow)

It is a tremendous challenge to begin any business with no money, but it is not insurmountable to become involved in the laundromat business with limited capital. The secret lies in accessing financing, partnerships, and strategic planning.

• SBA Loans & Bank Financing: A sound business plan will help you to secure a small business bank loan or SBA-guaranteed loan. Banks are more likely to invest in laundromats due to their predictable cash flows and relatively lower risk.
• Financing Equipment: The majority of equipment manufacturers and distributors offer financing options, so you can purchase your washers and dryers through installments. This is a beneficial option to acquire the most expensive assets without having to dig deep into your pocket.
• Investor Partnerships: Find a silent or active business partner who will invest the money required in exchange for a share of profits. This could be a great alternative to reduce your own financial risk.
• Lease-to-Own: Certain property owners might provide a lease-to-own option, where a portion of your rent each month will be applied towards the purchase of the property in the future. This is a long-term solution to lower your initial capital investment.

Legal Requirements: Licenses, Permits, Regulations

Before you actually open your doors, you’ll need to deal with a maze of legal and regulatory requirements. This is a critical step in starting a laundromat business properly and avoiding headaches down the road.

1. Business Registration: You’ll need to register your business name and legal structure (e.g., LLC, Corporation, Sole Proprietorship) with your state and/or local authorities.
2. Federal & State Tax IDs: Obtain an Employee Identification Number (EIN) from the IRS, a business social security number. You will also need a state tax ID.
3. General Business License: A general business license is needed in most cities or counties to do business.
4. Specific Permits: Laundromats typically require a variety of specific permits, as they consume substantial amounts of water and gas. These could include:

• Fire Department Permit: For fire safety codes.
• Environmental Permit: For proper disposal of wastewater.
• Sewer/Wastewater Permit: Since you will be consuming a lot of water.

5. Zoning and Land Use: Ensure the area you choose is zoned for commercial use and that you can open a laundromat there.
6. Insurance: Obtain a good business insurance policy, which would include general liability, property, and workers’ compensation if you have employees.

Location: Best Places & What to Look For

Location is quite possibly the most crucial aspect for success if you are learning how to start a laundromat business. A good location can make an ordinary business profitable, and a poor one can sink a good company.

Best Locations to Locate a Laundromat

• Apartment Buildings & High-Density Residential Areas: Apartment residents do not typically have in-unit laundry and comprise your target customer base.
• High-Renter Neighborhoods: Renters tend to use laundromats more often than homeowners. Look for areas where the majority of the community rents their homes.
• Middle-to-Lower Income Communities: Everyone needs to do laundry, but people in these communities are likely to use a self-service laundromat quite often.
• University or College Proximity: Students are the target customer, specifically those who reside in dorms or apartment-type off-campus housing with no laundry facilities.

What to Look for in a Location

• High Visibility & Accessibility: The location has to be highly visible from the road and accessible by foot, car, or public transportation.
• Ample Parking: Due to the heavy nature of customers’ laundry, convenient parking is essential.
• Space & Layout: Ensure the space can accommodate all the machines you plan to install, with a clear and functional path for customers. Check if there are already plumbing and utility hookups to prevent build-out costs.
• Competition: Look at the competition in the market. If there are other laundromats in the neighborhood, how do you stand out? Perhaps you can offer a wash-and-fold service or possess a cleaner, newer building.

Equipment & Setup Costs

Equipment is the lifeblood of your business, and it is the most significant component of your upfront investment. Your choice of equipment will significantly impact your operational efficiency, profitability, and customer experience.

Key Equipment

• Washers & Dryers: Employ a mix of various sizes to accommodate different load sizes, from small to large capacity machines. Purchase new high-efficiency models that use less water and electricity to assist in lowering utility costs.
• Water Heater: A commercially rated water heater is required to provide hot water to your machines continuously.
• Payment Systems: Modern laundromats have moved past coin-operated machines. Consider using card readers or mobile payment systems to increase convenience and to enable digital revenue monitoring.
• Laundry Carts: You will need a sufficient number of carts for customers to carry away their clothes.
• Detergent Vending Machine: Most laundromats offer detergent, fabric softener, and dryer sheets for sale through a vending machine, providing convenience and an additional revenue stream.

Setup Costs

• Build-Out/Renovation: This category encompasses flooring, plumbing, electrical, lighting, and any other necessary construction work required to prepare the space for occupancy.
• Utility Connections: Running commercial-grade gas, water, and electricity lines can be incredibly costly.
• Security: Alarm systems and security cameras are necessary to protect your investment if you plan on operating 24/7.
• Signage: An attractive professional sign is essential to attracting customers.

Operations & Management

Effective operations and management are what will maintain your business as profitable and thriving. This is the hands-on aspect of opening a laundromat business and maintaining its success.

Daily Operations

• Cleaning & Maintenance: A clean laundromat = a profitable laundromat. Develop a strict cleaning schedule for machines, floors, folding tables, and bathrooms.
• Equipment Maintenance: Preventive maintenance is crucial to avoid expensive and frustrating breakdowns. Develop a regular schedule of belt, hose, and filter checks.
• Cash/Card Management: Regular collection of coin machine currency and monitoring of electronic payment for security and accounting.
• Customer Service: In an unattended laundromat, you will require a procedure for handling customer complaints, questions, or issues with machines.

Management & Staffing

• Unattended vs. Attended: Your staffing level will depend on your business model. An unattended laundromat is cheaper to run, but you must be available on call for problems.
• Scheduling: If you have staff, maintain a solid schedule to ensure the laundromat is well-staffed during peak-demand times.
• Pricing Strategy: Regularly review your prices to ensure that they’re in line with your local laundromats but high enough to cover your expenses and generate a good level of profit.

Marketing, Customer Acquisition & Retention

Even a steady-demand business needs a proper marketing strategy to attract new customers and have them come back. You cannot simply set up a laundromat and expect to prosper. This is a vital part of the equation for starting a laundromat business that will thrive.

• Local SEO & Online Presence: List your business on Google Maps, Yelp, and other review sites. Encourage customers to write reviews. This is vital for those searching for “laundromat near me.”
• Social Media: Creating an account on social media platforms such as Facebook and Instagram will allow you to publish news, offers, and interact with your audience.
• Grand Opening Promotions: A mildly priced short-term promotion on wash cycles or wash-and-fold service is an excellent tool to create a customer base and garner enthusiasm.
• Loyalty Programs: Have a loyalty card or an application that rewards regular customers with discounts or free washes. It is one of the most efficient customer retention tactics.
• Flyers & Local Ads: Hand out flyers at local apartment buildings, community centers, and small businesses in your area to deliver your message directly to your target audience.

Financial Projections & Profitability

Understanding the numbers is the secret to having a successful laundromat business. You need to know how much you spend, estimate how much you are going to earn, and calculate how much you can gain.

Revenue Streams

• Usage of Machines: The bulk of your revenue comes from customers who pay for using your washers and dryers.
• Value-Added Services: Additional revenue comes from wash-and-fold services, dry cleaning, snack and beverage vending machines, and detergent sales.

Typical Costs

• Fixed Costs: They are the costs that do not change with your sales volume. They are mortgage/rent, insurance, installment loans, and property taxes.
• Variable Costs: They change with your activity level. They include utilities (electricity, gas, water), payroll, supplies (such as detergent), and maintenance.

Profitability

The profitability of a laundromat can be very varied, but under good management, it can be gratifying. A successful laundromat can achieve 20-35% return on investment, according to the Coin Laundry Association. The average revenue per square foot of a laundromat can be $15-$25, and the profit margins are 20-40%. The key to high profitability is keeping utility expenses low, maintaining your equipment correctly, and offering value-added services.

Risks, Disadvantages, & How to Mitigate Them

Even though it has the reputation of being a “recession-proof” enterprise, running a laundromat has its own risks and disadvantages.

1. High Upfront Investment

• Disadvantage: Capital required to start from the ground up is substantial, usually between $200,000 and $1 million.
• Mitigation: Make equipment financing more secure, consider taking SBA loans, or acquire a pre-existing business at a lower expense.

2. High Utility Costs

• Disadvantage: Your power bills can eat up your profits if your equipment is old and inefficient.
• Mitigation: Get commercial-style washers and dryers that use energy efficiently. Check for leaks frequently and make sure your heating system is running at maximum efficiency.

3. Equipment Breakdowns

• Disadvantage: One of the ways a malfunctioning machine can affect your business is by leading to loss of income and making your customers angry.
• Mitigation: Observing the highest level of preventive maintenance will ensure that the problem of equipment breakdowns is minimized. Look for reliable repair personnel and develop a good rapport with them.

4. Security Issues

• Disadvantage: Vandalism, theft, and safety issues can be a problem, especially in unmanned laundromats.
• Mitigation: Install great security cameras, good lighting, and a robust alarm system. Use a card-based payment system to keep less cash on the premises.

5. Competition

• Disadvantage: If another laundromat opens close to your business with newer machines or cheaper prices, you can lose customers.
• Mitigation: Stand out from the crowd by offering services like free Wi-Fi, a serene waiting area, or wash-and-fold. Maintain a tidy and inviting environment that fosters customer loyalty.

Conclusion

Starting a laundromat business is indeed an attractive proposition for the entrepreneurs who are interested in a stable and positively cash-flowed venture. The process, however, is intimidating, the business from sourcing the initial capital required to the day-to-day administrative management. 

By placing yourself in the right location, using money for the current equipment, and making customer service your top priority, you can create a powerful business that addresses a need that is both stable and recurring in your community. In the end, a profitable laundromat is nothing but a building to do laundry, it is a managed business that counts on the implementation of a well-thought-out plan and customer delight.

FAQs

Is having a laundromat profitable?

Yes, running a laundromat can be highly profitable. An efficiently run laundromat can have average profit margins ranging from 20% to 40%. The explanation for the profitability is high-volume repeat demand and a relatively low labor cost model, especially with the self-service laundromat.

Do I need a license to open a laundromat?

Yes, you will need several licenses and permits to open a laundromat. This will typically be a general business license, special water and sewer use permits, a fire department permit, and a tax identification number from the federal and state governments. The specific ones will vary according to where you are.

What is the best location to set up a laundromat?

The best location for a laundromat is in a high-density residential area with a high ratio of renters, especially lower-to-middle income neighborhoods. Apartment complexes, colleges, and military bases are also good locations. The location should be obvious, conveniently located, and have ample parking.

What are the disadvantages of a laundromat?

The main drawbacks of a laundromat include the high initial investment (typically over $200,000), high ongoing utility costs, and potential expensive equipment breakdown. Competition will also be a problem, and safety will also be a problem when there is no attendant.

Who uses laundromats the most?

The primary users of laundromats are typically individuals residing in apartments or homes without in-unit laundry facilities. This includes renters, students, and people residing in urban communities where living space is small. In addition, some homeowners utilize laundromats for larger items like comforters or for the benefit of having access to high-capacity machines.