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How To Start A Laundromat In 2023

How To Start A Laundromat In 2023

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How To Start A Laundromat In 2023

How To Start A Laundromat 1

Laundromats have a unique business model, with customers doing most of the work themselves, while the laundromat supplies the machines they need. With issues like managing inventory almost entirely eliminated from the business, laundromats can create an intriguing business model.

If you’re looking to open a business where your income will stay steady year-round, even during recessions, then it may be time to start saving up to open your own laundromat.

Business Overview

Laundromats provide customers with the use of their washing machines and dryers. The machines may be coin-operated or card-operated, allowing laundromat attendants to focus on solving problems rather than on taking payments and monitoring machine use. Some laundromats are located in freestanding buildings, while others may be located within apartments or college dormitories. No major laundromat chains or franchises dominate the industry, which is great for individual entrepreneurs. Many laundromats open early in the morning and close late at night to accommodate customers’ schedules, though some are open 24 hours a day.

While starting a laundromat requires significant initial funding, mainly to purchase washers and dryers, laundromats offer steady year-round income that doesn’t fluctuate much with the seasons, holidays, or other factors that affect other types of businesses. This type of business requires only minimal inventory management of dispensable laundry detergent and softener, making it an appealing option to entrepreneurs looking for a non-retail business.

One of the major perks of owning a laundromat is that the business is flexible. Because customers do their own laundry, training employees is a fairly simple process. Once the laundromat is up and running, owners have scheduling flexibility and can even manage their laundromats and other business pursuits.

Industry Summary

According to IBIS World, laundromats in the United States generate $6 billion annually. As of 2023, there were 19,375 laundromats in operation that employed 52,960 staff.

As disposable income has increased for many Americans, some Americans have purchased their own in-home laundry machines or have opted to use drop-off and pickup laundry services, creating competition (or opportunities) for laundromats.

  1. Technological Innovations: Laundromats are embracing technology to enhance the customer experience and improve operational efficiency. This includes the use of mobile apps for payments, machine availability tracking, and loyalty programs. Some laundromats are also incorporating smart machines that offer customized wash and dry cycles, remote monitoring, and automatic detergent dispensing.

    Digital payment systems offer more flexible pricing options and a more automated system, which means minimal oversight and less machine downtime due to broken coin machines. With less staff needed to monitor the machines, the excess money can go toward other items like televisions, Wi-Fi, and other amenities that help draw in customers or profits for the owner.
  2. Enviroment-First Considerations: Laundry is moving towards a more eco-friendly practice, which reduces water and energy consumption. This includes investing in energy-efficient machines, implementing water recycling systems, and using environmentally friendly detergents. 
  3. Drop-off and Pickup Services: Many customers are looking for the convenience of dropping off their laundry and picking it back up. Customers can leave their laundry for the laundromat staff to wash, dry, and fold, saving them time and effort.
  4. Subscription Models: To encourage customer loyalty, some laundromats are offering subscription or membership models, where customers pay a fixed amount each month for a certain number of washes.
  5. Specialized Services: Some laundry facilities are focusing their efforts towards niche or specialized market sectors. As an example, some facilities may have special machines for fabrics that have been stained by pets. Sports team uniforms and hospitality businesses may also be good target markets for a laundromat. 
  6. Value-Added Amenities: The laundromats of today may look very different from those in the past. Snack machines and comfortable seating have replaced the hard plastic chairs of the past. Many laundry facilities are now offering Wi-Fi and entertainment options, including arcade games.

Target Market

Most laundromats target adults who do not have washers and dryers in their homes or apartments. In some cases, a laundromat’s target audience may be college students.

Checklist To Start A Laundromat

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If you’re thinking about starting a laundromat business, it’s important to do your research first. Here is a checklist to help you get started.

Step 1: Conduct market research

Starting a laundromat can be a profitable business if you correctly evaluate the market before investing your time and money. Here are some steps and resources to help research whether there are enough customers for your laundromat:

Area Demographics: Check the demographics of the area where you plan to establish your laundromat. Use resources like the U.S. Census Bureau data, local government websites, or commercial real estate websites to obtain demographic information.

You need to look at the population density, average income, age distribution, and the percentage of rented households. A higher proportion of renters usually translates into a larger customer base for laundromats.

Market Survey: Conduct a survey in the area where you plan to open your laundromat. This can be done through various means, such as online surveys, phone surveys, or even door-to-door surveys. The questions should revolve around the needs of potential customers, such as the frequency of their laundry, their preferred time for doing laundry, whether they currently use a laundromat, what they like or dislike about their current laundromat, etc.

Competitor Analysis: Take a close look at the existing laundromats and dry cleaners in the area. This will give you a sense of the competition. If there are several laundromats in a small area, it could mean that the market is saturated. Use resources like Google Maps or Yelp for this kind of research.

Real Estate Trends: Utilize online resources like Zillow or local real estate agencies to understand the trends in your chosen location. If there’s a significant influx of new apartments or condos, it could signal an increased demand for laundromats in the near future.

Social Media and Online Forums: Use social media platforms, online forums, and community groups (like Facebook groups) to understand people’s sentiment about the current laundromat services in the area. This can give you an idea of what people are looking for and whether there is a demand for a new service.
By utilizing these resources and steps, you can get a clearer understanding of the potential market for your laundromat business.

Step 2: Create a laundromat business plan

After determining whether there is a market, the next step is to start writing a business plan. A business plan helps you define your business concept, identifies the key factors for your success, outlines your financial projections, and provides a roadmap for your operations.

A well-crafted business plan is often a requirement when trying to secure funding from investors or lenders as it demonstrates your understanding of the market and your strategies to succeed in it.

For a laundromat business, while all sections of the business plan are important, certain sections are especially critical:

Market Analysis: This section needs to cover your understanding of the laundromat industry, the local market, and your competition. Include detailed information about the demographics of your target customers (income level, type of housing, etc.), their laundry needs, and their current options for laundry service. This information is key to proving that there’s a demand for your laundromat and that you have a strategy to attract customers.

Services: Clearly define the services your laundromat will offer. Will you offer self-service laundry, wash-and-fold service, pickup and delivery, dry cleaning, etc.? What will make your laundromat stand out from competitors? Will you have amenities like free Wi-Fi, a lounge area, vending machines, etc.?

Location Analysis: Location is a critical success factor for a laundromat. In this section, provide information about the location of your laundromat and explain why it’s ideal. Factors to consider include visibility, ease of access, proximity to your target customers, and the presence of competitors nearby.

Financial Projections: A laundromat has significant upfront costs for equipment, renovations, and leasehold improvements. This section should show that you’ve accounted for these costs and calculated your break-even point, projected profit margins, and return on investment. Be sure to include your pricing strategy here as well.

These sections should be given particular attention when creating a business plan for a laundromat, as they provide specific insights into the business’s operations, profitability, and growth potential. However, a comprehensive business plan should also include an executive summary, company description, marketing and sales strategy, and organizational structure.

Related: How to write a business plan

Step 3: Select your Location

Choosing a location for your laundromat is a crucial decision, as it can significantly influence your business’s success. Here are several factors to consider:

Customer Demographics: Laundromats provide a service that many adults need, but it’s important to strategically locate a laundromat in an area where people do not have washers and dryers of their own. Laundromats are usually best located close to densely populated areas, with higher numbers of renters. Additionally, locations close to college students are typically strong for laundromat usage.

Your location should be conveniently located for your target market. Consider who your typical customer is (for instance, busy families, college students, or apartment dwellers) and make sure your location is easily accessible to them.

Visibility and Accessibility: A visible location on a well-trafficked street can attract walk-in customers. Easy accessibility is also key. Look for locations with ample parking and easy entrance and exit points.

Proximity to Complementary Businesses: Laundromats do well when they’re near businesses like grocery stores, cafes, or shopping centers, which give customers something to do while they’re waiting for their laundry.

Competition: While it’s not impossible to succeed in an area with other laundromats, you’ll need a clear plan for differentiating your business. If there are several existing laundromats nearby, you’ll need to offer something they don’t, whether it’s better equipment, lower prices, or extra services.

Size and Layout: The location needs to be large enough to accommodate your equipment and provide a comfortable space for customers to wash, dry, and fold their laundry. It should also have room for a waiting area and, if applicable, a service counter.

Infrastructure: The location must have the necessary infrastructure for a laundromat, including sufficient water supply, drainage, and electrical capacity. If these are not in place, the cost to add them could be significant.

Renovation Costs: When you’ve identified a potential location, you’ll need to estimate the cost of any renovations. These might include upgrading the plumbing, adding additional electrical capacity or gas lines, improving ventilation, or modifying the layout. Keep in mind that renovation projects often end up costing more than initially expected, so factor in some extra buffer in your budget.

Lease Terms: Review the lease terms carefully. It’s wise to negotiate a long-term lease with renewal options to avoid having to relocate your business after investing heavily in setting up the location.

Given the importance of location in the laundromat business, consider working with a commercial real estate broker who understands the local market and can help identify potential sites. Also, consult with contractors or other professionals to get accurate estimates for any required renovations.

Step 4: Secure funding

There is a lot of advice online talking about how to start a laundromat with no money. And while starting a laundromat business with no money can be done, it will make the odds of getting started less likely.

In my work with clients, starting a laundromat can be quite expensive and the funding is often a combination of using personal funds and a business loan from a bank. When going this route, the lender is likely going to require that the owner to personally invest between 15% and 25% of the total startup costs. The bank comes in with the rest, and may possibly require a Small Business Administration (SBA) loan guarantee.

In addition to bank funding, there are companies that specialize in laundromat financing and some machine manufacturers offer equipment financing as well.

There are other options such as asking friends and family to invest in your business. Also, if the plan is to buy an existing laundromat, it is common for the seller to provide some (and sometimes all) of the business financing.

Related: Finding the money to start a business

Step 5: Register the business

The next step after getting the funding is to register and legalize your laundromat. Be aware that regulations can vary significantly by state and locality, so you’ll need to research the specific requirements in your area. Here’s a general step-by-step guide to help get you started:

Form a Business Structure: The first thing you’ll need to decide is what business structure is best for your business. This could be a sole proprietorship, a partnership, a limited liability company (LLC), or a corporation. Each of these structures has different implications for liability, taxes, and administrative complexity. Many small business owners opt for an LLC because it provides personal liability protection and has fewer administrative requirements than a corporation.

Related: Comparison of business structures

Register Your Business Name: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state.

Related: Tips and ideas for naming a laundromat

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Zoning: Zoning requirements for laundromats vary by location and before signing any lease or purchase contracts, it is important to check the zoning requirements of your proposed business location carefully.

Obtain Business Licenses and Permits: Laundromats use a lot of water and energy, and they also handle potentially harmful substances like detergents and bleach. Therefore, they must comply with environmental regulations. You may need to obtain permits related to water discharge and hazardous waste management. Again, this will depend on your location, so check with your local environmental regulatory agency which may require a health department license or water pollution control permit.

Related: State guides for business licensing

Step 6: Acquire the facilities and set up the space

Now that the funding and licensing are in place, it’s time to get the keys to the building and start designing and renovating the space.

Setting up a laundromat involves many moving parts, so organization and planning are essential. Some key steps you’d want to consider after securing a location:

Set Up the Layout: Proper layout planning can maximize your income potential. Ensure there’s enough space for customers to move around comfortably, sufficient folding areas, and comfortable waiting space. Tools like SmartDraw or SketchUp can be useful for layout planning. Consulting with equipment manufacturers or suppliers can also be beneficial, as many offer layout planning assistance.

Renovations and Installations: Depending on the current state of your location, you may need to do some renovations or build-outs. This might include installing the proper plumbing and electrical systems for your washers and dryers, setting up a change or payment station, creating a waiting area, etc. Hiring a contractor experienced with laundromats could be very beneficial.

Purchase and Install Equipment: Procure the necessary machines, including washers, dryers, change machines, vending machines, laundry carts, and seating. Remember to consider energy-efficient machines as they can save you a significant amount of money in the long run.

Set up Utilities: If not already on, you will want to make sure the utilities are on and all equipment is working correctly.

Schedule Inspections: After setting up your equipment and making any necessary renovations, you’ll likely need to schedule an inspection to ensure everything is up to code before you can open for business.

Remember, these steps can vary depending on your specific business plan, the services you intend to offer, your location, and local regulations. Consulting with other professionals in the industry, such as equipment suppliers, laundromat owners, and business consultants, can provide valuable guidance during this process.

Step 7: Implement the marketing strategy

Effective marketing for a laundromat often involves a combination of both online and offline strategies.

One of the most impactful ways to attract customers is through local, targeted advertising. This could involve physical signage, local newspaper ads, direct mail campaigns, and flyers at nearby apartment complexes or spaces where the business’ target market spends time.

Online, you can use social media platforms and online business listings like Google Local and Yelp to reach potential customers in your area. Also, building a user-friendly website that provides essential information such as services, pricing, and operating hours is also crucial. Having a search engine optimization (SEO) plan in conjunction with the website will also be beneficial, especially for attracting customers who are new to the area or are searching for a laundromat online.

For ongoing customer engagement, consider setting up a loyalty program or offering regular discounts or promotions. Hosting community events at your laundromat or sponsoring local activities can also be a great way to build a positive brand image and cultivate customer loyalty.

And last, for laundromats, word-of-mouth remains one of the most effective forms of marketing, though it will take time. To generate word-of-mouth marketing, be sure to prioritize providing excellent customer service to encourage positive reviews and referrals.

Related: Low-cost ideas to market a new business

Step 8: Hire & train staff

If you plan to have attendants at your laundromat, they should be well-trained and ready to assist customers by the time you open. They should understand how to operate and troubleshoot the machines, handle transactions, and maintain cleanliness.

Laundromat employees are typically paid hourly, often around minimum wage, and wages can vary based on the region and the range of duties. Depending on the size and hours of a laundromat, only one or two employees may be needed. In addition to wages be sure to calculate additional expenses such as payroll taxes, paid time off, health insurance contributions, and workman’s compensation insurance.

In addition to attendants, if you don’t have sufficient experience in fixing washers and dryers, either consider finding hiring someone with an appliance repair background or hiring a local repair company to fix machines when they go down.

Related: Hiring your first employee

Step 9: Prepare to launch

Opening a laundromat is a significant endeavor that requires thorough planning and attention to detail. Beyond securing a location and setting up the store, there are several other essential steps to ensure the successful and smooth operation of your business.

First, securing the appropriate business insurance is critical. At a minimum, you should have liability insurance and property insurance. You may also need additional coverage for equipment, employees (workers’ compensation), and even business interruption insurance.

Related: What types of insurance does a laundromat need?

Implement a reliable bookkeeping system early on. Regular financial tracking will help you understand your business performance, manage your cash flow, and meet your tax obligations. You may want to use accounting software such as Wave Accounting (FREE) or Quickbooks or hire a bookkeeper or accountant.

Related: Setting up the accounting for your business

Opening a business bank account is essential for separating your personal and business finances, making tax time much simpler. You’ll also need to set up a system for accepting payments, which should ideally include credit and debit cards due to their prevalence.

Also, consider whether you’ll use a traditional merchant services provider or a more modern solution like Square or Stripe
. Some laundromats also use laundry card systems, which allow customers to load money onto a reusable card.

Keep in mind that every business will have unique needs and challenges. This advice covers some common considerations, but your exact path might differ based on your location, target market, and specific business model. Consulting with professionals such as lawyers, accountants, and experienced laundromat owners can provide valuable guidance as you navigate this process.

Greg’s Tip: Make sure you have enough starting cash for operating expenses. Some new owners underestimate the amount of working capital needed to keep the business running smoothly. Beyond the initial setup costs, you’ll have ongoing expenses like utilities, maintenance, supplies, and possibly payroll. Ensuring you have enough capital to cover these expenses, especially during the first few months when your customer base is still growing, is crucial.

Greg's Business Tip

Common Questions When Starting A Laundromat

How much does it cost to start a laundromat?

Laundromats provide on-demand washing and drying services, so they rely heavily on having enough washers and dryers to accommodate their customers. Because this machinery is expensive, starting a laundromat requires a significant initial investment. Aside from this machinery, though, laundromats require relatively minimal additional supplies.

The average cost to start a laundry business can easily range from $200,000 to $500,000. The largest expense for a new laundromat is commercial laundry equipment like washers and dryers. High-efficiency, commercial-grade washers, and dryers can range from $1,500 to $20,000 per machine, and you’ll need a significant number of them to start a laundromat.

Additionally, there will be other costs like coin machines, vending machines, TVs, security cameras, tables, laundry carts, and more.

Renovation costs can also be substantial, especially if your location requires significant modifications for a laundromat, such as upgraded electrical and plumbing systems, installation of ventilation, or adjustments to the layout.

Smaller costs include obtaining the necessary business permits and licenses, purchasing initial supplies like detergent and change for the change machine, and marketing expenses like signage and promotional materials for your grand opening.

It’s also highly recommended to keep three to six months’ worth of operating expenses on hand as a buffer. Operating expenses include ongoing costs like utilities, maintenance, supplies, and possibly payroll. Keeping a buffer can help ensure that you can keep your business running smoothly, even if revenue is slower to grow than expected.

Remember, these are just estimates, and your actual costs could be higher or lower based on your specific business plan, location, and other factors. It’s important to carefully calculate your anticipated costs and have a solid financial plan before starting your business.

How much can a laundromat owner make?

Determining how much a laundromat owner could make requires consideration of various factors including the business’ size, location, services offered, and operational efficiency. As a baseline, one study shows that a laundromat can yield revenue of approximately $1 per square foot per day. So, for a 2,000 square foot laundromat, you might expect around $2,000 per day or $60,000 per month in gross revenue.

However, remember that revenue is not the same as profit. From this gross revenue, you’d need to deduct operating expenses such as utilities, supplies, maintenance, lease, and employee wages, to determine your net profit.

Let’s say your monthly expenses amount to $30,000. In that case, your net profit from the $60,000 gross revenue would be $30,000 per month, or $360,000 annually.

As another data point, Martin Ray Laundry Systems, Inc., discusses that laundromats they work with produce between $15,000 and $300,000 in cash flow each year. Investing in a laundromat results in an average 20% to 35% return on investment, and 63% of laundromat investors consider their investment to be a full-time job, not the reality of passive income that is commonly promoted.

Some laundromats might also generate additional revenue from vending machines, dry cleaning, wash-and-fold services, or delivery services.

While the cost of equipment to start dry cleaning is quite high, many laundromats collect a percentage of the sale by simply acting as a drop-off point where a local dry cleaner picks the items up, dry cleans the clothing, and returns it to the laundromat for the customer to pick up. Full-service laundry services are becoming more popular as time-strapped customers will gladly pay someone else to do the laundry for them.

Again, these are rough estimates. The actual profit can be higher or lower depending on various factors like your pricing, the local market, and how effectively you manage your business.

What skills are needed to run a laundromat?

You don’t need a business degree to start a laundromat, but the following skills and experiences will be beneficial in helping you to get started.

Experience with appliances. Whether purchasing or troubleshooting a washer or dryer, some experience with appliances is valuable in owning a laundromat. Laundromat owners call in technicians to fix major issues, but some knowledge of how appliances work and how to fix minor problems, and perform routine maintenance can help to save money over the costs of hiring a professional.

Problem-solving skills. Like any business, problems will arise in a laundromat, requiring an owner to have strong problem-solving skills and creativity. Whether it’s working with customers to fix a finicky machine or finding the best technician around who can get to the laundromat quickly, being able to improvise and come up with solutions to problems is a must-have skill.

Customer service experience. Industry reports state that 90% of a laundromat’s customers become returning customers, so providing quality customer service is particularly important in the laundromat industry. When a laundromat owner understands how to listen to customer concerns and take steps to actively address those concerns so that the customer feels heard, it can result in a repeat customer who comes back every week to do laundry at that laundromat.

Marketing skills. Marketing skills will be important, especially when the laundromat first opens, and the owner needs to establish a customer base. While a professional marketer can always help, you can save money if you can do some marketing basics yourself.

Business experience. Starting and running a laundromat does require deep business experience or knowledge. Every laundromat owner needs to manage supplies and inventory, decide on appropriate pricing, track a budget and income, and more. Many of these skills can be learned through business courses or through the help of a mentor.

What is the NAICS code for a laundromat?

The NAICS code for a laundromat is 812310.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?

Resources:
Coin Laundry Association

Author

  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

How To Start A Laundromat In 2023

How To Start A Laundromat In 2023

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