September 12, 2022
According to Martin Ray Laundry Systems there are approximately 35,000 laundromats in the US generating over $5 billion in annual revenue. We can also see that there is a clear trend in the US with people looking for passive income producing opportunities. The Google Trends search volume for “Passive Income” is on a steady increase over the past 5 years.
Between the industry size and the fact that a laundromat can be a passive business, there is good reason to dive in and learn more about the numbers behind the laundromat business.
In this article I hope to help you understand the numbers behind the laundromat business, the different business models you can choose from, and how to put together a financial projection model that will help you secure a business loan to launch your own laundromat.
We are going to look at:
- What are the different types and sizes of laundromat business models?
- How much does it cost to start a laundromat?
- How can I finance the startup costs associated with a laundry business?
- How much revenue can a laundromat generate?
- What are the typical gross profit margins for a laundromat?
- What are the typical operating expenses for a laundromat?
- Finally, how much can a laundromat owner make?
As we walk through these questions, I will be using our Laundromat Financial Projection Template to help us create a financial forecast for your business.
Types of Laundromats
There are different types of laundromat business models that you should consider before choosing a particular path. You should also keep in mind that there are laundromat franchises that you could buy into if you don’t want to go the independent route. The different types of laundry businesses include:
- Public Coin laundromats
- Private Laundromats at Apartment Buildings
- Full Service Laundromats - Staff will wash and fold laundry for customers
- Commercial Laundromats that service businesses like hotels, hospitals, event centers
With some of these models you could also layer in a laundry delivery service where you pick up or drop off the laundry as well.
How Much Does it Cost to Start a Laundromat?
The average startup cost for a laundromat is between $200,000 and $500,000 according to Nerdwallet.
Given that there are different types of laundromats and then within each type there are different sizes and scales of operation it would be impossible to give you one specific dollar amount that you will spend on the startup costs, but I can give you some rules of thumb that can help you calculate your likely startup costs.
Laundromat Startup Costs
Below is a list of common startup expenses for a laundromat:
- Location Lease or Purchase: This can vary greatly depending on the area.
- Renovations and Build-out: Your location may require modifications to fit the laundromat layout. This includes adding or updating plumbing and electrical installations.
- Laundromat Equipment:
- Washing Machines
- Vending Machines for detergent, fabric softener, etc
- Utilities: You may have to pay utility deposits when you startup
- Licenses and Permits: Depending on your locale, you might need special permits to operate a laundromat.
- Security System: This includes surveillance cameras, alarms, and possibly security personnel if needed.
- Point-of-Sale (POS) System:
- Furniture: Chairs, tables, or benches for waiting areas. Also, consider adding charging stations or free Wi-Fi as a value-added service.
- Signage: Both exterior and interior signs to make your business easily identifiable and to provide instructions for machine use.
- Startup Inventory: This includes detergents, fabric softeners, and other supplies if you're selling them.
- Marketing and Promotion: Grand opening promotions, online advertising, and local print or radio advertisements to let the community know about your new business.
- Employee Salaries: If you're hiring attendants or other staff.
- Professional Services: These include fees for lawyers, accountants, or consultants you might need when setting up your business.
- Maintenance: It's wise to set aside a budget for machine maintenance and repair.
The largest startup expenses for a laundromat will likely be your equipment. So let's take a deeper dive on this.
Laundromat Equipment Costs
Laundromat equipment startup costs can range between $40,000 and $500,000 depending on the number, size and quality of your equipment. In order to narrow in on the cost for your specific equipment we need to answer a few more questions.
How much does one laundromat washer and dryer cost?
Upflip estimates that laundromat equipment can range between $1,000 for a smaller machine to $5,000 for a new larger machine and even up to $10,000 for very large units.
How many washer and dryer units does a laundromat need?
According to Martin Ray, most laundromats have between 40 and 100 units.
So if we assume that you purchase new machines, your equipment cost alone could be 40 small units x 1,000 = $40,000 or up to 100 large units at $5,000 = $500,000.
Financing a Laundromat Startup
Now that we know how much it costs to start a laundromat, I wanted to talk about some different approaches to funding the startup costs.
How to Get an SBA Loan for a Laundromat Business
There are a number of different approaches that you could take to fund the startup costs associated with a laundry business. Here are some different options for your to consider:
- SBA Microloan - for a small laundromat, my personal favorite loan product is the SBA Microloan program. This program allows you to borrow up to $50,000 with a fixed interest rate. The SBA Microloan program is operated by a network of nonprofits, these non profits also typically provide free business support and coaching services as well. To learn more about the SBA Microloan program and to find a lender near you check out our Ultimate Guide to Secure a Microloan.
- SBA Community Advantage Loan - For loans from $50,000 to $350,000 the SBA Community Advantage program is a good option. This program is also operated by a network of nonprofits that will help you through the process of applying for an SBA Community Advantage loan. These are SBA Guaranteed loans which means there is going to be more paperwork involved than a typical SBA microloan.
- SBA 7a Loan - Finally, for stronger borrowers and larger loan requests, I typically suggest an SBA 7a loan. You can see the list of the most active SBA 7a lenders and find a lender that you would like to work with.
You can also expect that you are going to need to invest at least 10% of the total startup costs from your personal funds. If you only have $20,000 to invest, then your total project size should not be over $200,000.
If you are looking to start a laundromat with no money down, then I think you have a couple of options.
How to Start a Laundromat Business With No Money Down
- Buy a Laundromat on Contract - Your first option might be to find a laundromat owner that wants to eventually sell their business and would be willing to sell it to you on contract over a period of time. You could operate the day to day of the business and pay the owner over time from the profits of the laundromat. Learn more about how to buy a laundromat.
- Rent Equipment and Negotiate with Landlord - You may be able to lease or rent the laundromat equipment with little to nothing down, and then you might be able to negotiate a lease with the landlord where you pay a higher lease rate over time, but the landlord covers all of the leasehold improvements required to get the space ready for operation.
- Find a Financial Partner - Finally, you could find a financial partner that is willing to put in the cash and perhaps sign on a loan for you. In exchange, you would be the one to work in the business on a day to day basis which would allow the financial partner to have a passive income stream as you cover the day to day operations. The search fund model is typically used to acquire a business rather than start a new one, but you can learn more about how search funds work to see how it is possible to be a part owner and the operator of a laundromat business without investing any of your own money.
How much Revenue do Laundromats Make?
The average laundromat in the U.S. generates $142,000 in annual revenue.
We calculated this based on annual revenue of $5 billion divided by 35,000 laundromats in the US as estimated by Martin Ray.
With that high level of revenue estimates for a laundromat in mind. Let's look at some of the details behind how much a laundromat can earn.
How much revenue does one laundromat washer and dryer make per wash?
The average laundromat charges roughly $2 per wash load and $2 per dryer load according to Laundry Solutions.
How long does a laundromat washer and dryer take per cycle?
It takes roughly 1 hour to wash and dry a load of laundry at a laundromat. It takes roughly 30 minutes to wash a load of laundry and 30 minutes to dry a load of laundry at a laundromat according to Laundry Solutions.
How much can one laundromat washer and dryer make per day?
A single laundromat washer and dryer unit can generate up to $190 per day. If we assume that the average wash is $2 and takes 30 minutes and that the laundromat is open 24 hours per day, you could do 48 wash cycles per day at full capacity. $2 x 48 = $96 for wash revenue and then another $96 for dry revenue. It is unlikely that a single washer and dryer can operate at maximum capacity 24/7, but at the highest capacity you could potentially generate up to $190 per day per washer and dryer unit.
So in theory a single laundromat washer and dryer unit could make $190 x 365 days = $69,350 per year. Obviously this is not realistic because your machines will not be running at full capacity all year, so this stat probably is not that helpful. In reality you will need to estimate the revenue for your own laundromat based on the number of units you will have and the capacity utilization that you expect.
Below I will show you how you can forecast your own revenue.
Forecasting Revenue for Your Laundromat
Now that you have a plan in place to get the laundromat up and running, you need to determine how much revenue you might be able to expect from the business. In our Laundromat Financial Model we allow you to add the following assumptions to help you forecast revenue:
- The individual units
- The cost for the units
- The potential revenue each unit could generate each month at full capacity
- The utilization rate that you expect for each unit
- The maintenance and cost of goods sold per unit per month
You can either enter in each individual washer and dryer, or you can enter in an entire laundromat property for reach line item and then add the number of units per property as seen below:
You can then enter in the expenses on a per property or per unit basis as well:
Once you have these assumptions determined for your specific situation, you will be able to calculate your estimated profit margins.
Laundromat Operating Expenses
Typical operating expenses for a laundromat are:
- Rent: 20-25% of gross revenue
- Payroll: 15-30% of revenue (for laundromats with staff)
- Utilities (water, gas, electricity): 20-30% of revenue.
- Supplies, maintenance, and miscellaneous: 10-15% of revenue
- Insurance, licenses, and other fixed costs: 5-10% of revenue
Since your payroll and utility costs are going to be your cost of goods sold, we can say that the typical cost of goods sold for a laundromat would be between 20% and 60% primarily depending on whether you have labor costs.
How much Profit can a Laundromat Owner Make?
The average profit margin for a laundromat will range between 10% and 35%.
There are some really great blog posts online with real laundromat owners sharing their financial results. For example, this Thrity Wash owner shows 7 years of high level financial data and showed that they were operating at roughly a 33% profit margin in 2020, even amidst the pandemic. Their particular operation was generating:
- $250,000 in annual revenue
- $165,000 in annual expenses
- = $85,000 in annual profit
Based on the math in this article the average unit might generate $4.50 per turn and have 3 turns per day. So $13.50 in revenue per day x 30 days per month = roughly $400 per month in revenue per machine. So if you have a 50 unit facility that is $20,000 per month in revenue or $240,000 per year. This is mighty close to what the Thrifty Wash above also experienced which makes me feel pretty confident in saying that a 50 unit Laundromat ought to be able to generate roughly $80,000 per year in annual profit.
We always suggest that you take the time to use our laundromat financial projection template to really nail down your numbers before you make a big jump and throw your life savings into a laundromat business, but from what we can tell, the opportunity looks pretty good when you pick the right location and the right team to operate your business.
If you have any questions along the way, please contact us today!