Working with a Broker to Buy or Sell Your Next Laundromat
With some 30,000 laundromats in the United States – give or take – there are stores perpetually being bought and sold in nearly every market throughout the country.
This is where a reputable laundry broker comes in.
“The role of a broker can be very important, especially to someone new to the industry,” said Carol Dang of Elite Business Investments Corp. in Los Angeles. “A good laundromat broker should be able to walk the buyer or seller through the entire transaction – from making an offer to closing the deal.”
“In my experience, the importance of the broker is tremendous and often undervalued,” noted Connor Frankian of D&M Equipment Co., based in Chicago. “Understandably, sellers have an emotional attachment to their businesses, which can cause them to overvalue what they think their store is worth. On the other hand, buyers have an emotional vision of what will be required to make their investment a success. This is where the importance of a broker – being a neutral party whose utmost interest is a successful deal – comes into play. Many good deals fall apart without the mediation of a broker.”
What to Expect
No doubt, buyers and sellers of laundromats should expect a broker to be honest and transparent with them, as well as displaying a strong knowledge of the self- and full-service laundry businesses.
In addition, George Morgan of Best Laundry Brokers in Grass Valley, Calif., added some specifics that potential investors and owners looking to sell should expect.
For buyers, the broker should:
- Be knowledge of the particular market area, as well as the typical price range within which stores in the area sell.
- Be knowledgeable about the laundry equipment in the laundromat, including the approximate age and condition.
- Know how to obtain and verify the seller’s income and expense records. This includes knowledge of all expenses typical to a laundromat, and the ability to use the store’s utility bills to verify the seller’s stated income and expenses.
- Be knowledgeable on commercial leases. This includes making sure there are no “land mines” in the lease that could cripple the buyer. The broker also should check the length of the lease and, if there are options, determine whether those options are assignable to the buyer.
- Be able to guide the buyer toward competent service technicians and building inspection companies – to determine the condition of the equipment, including the boiler and other ancillary equipment; the condition of the water and sewer lines, the electrical system, and the heating and cooling systems; and verifying ample makeup air for the dryers and water heating system.
- Be aware of competition in the marketplace, along with the prospect of any new laundromats being planned for the immediate area, which could impact the store’s income.
For sellers, the broker should:
- Provide ideas to make the laundromat more visually appealing.
- Be able to present the laundromat and its financial information in the best light possible without deceiving anyone. There should always be full disclosure.
- Take the necessary steps to protect the seller’s privacy, safeguarding financial and other critical information until a non-disclosure agreement has been signed.
- Market the laundromat in the most effective way possible. Typically, this entails extensive website advertising with strong SEO. Also, specialty laundromat brokers usually have a short list of serious, qualified potential buyers to contact.
When seeking a broker, your first stop should be local laundry distributors. If a distributorship doesn’t do brokerage work, chances are it can refer you to someone who does. Another way to find brokers is to search local ads and see who are selling laundromats.
“With brokerage, I believe word of mouth often can be best,” Frankian said. “Talk to other store owners or former owners in your area who have already undergone buying or selling a store through a broker.”
Of course, be sure to meet with a few brokers before making your final decision.
“The most important question to ask is what experience the broker has in representing laundromats,” Dang explained. “There are excellent brokers out there who sell millions of homes and various businesses, but unfortunately, they’re not familiar with the unique qualities of the laundromat business. You should be asking them what they are going to do for you, either as a seller or a potential investor. What are the fees? Who pays the fees? How long have they been in the laundry business, and do they currently own or operate any stores?”
Working with a Broker
When working with a broker, sellers need to be able to provide a breakdown of their income as it pertains to their various washers and dryers, a copy of their lease, and access to all utility and other monthly bills.
“The owner can help the broker by having all of their financial and equipment information available,” Morgan said. “We send out a checklist to all sellers, giving them a clear idea of what we need to see to give them an accurate picture of what their laundry should be listed at and what it will probably sell for.”
“If you’re looking to sell the store, now is the time to make it shine,” Dang added. “All lights should be on and working. The store should be clean. And, if needed, a fresh coat of paint should be added. All equipment should be in working order. How does the store look from the outside? Are the windows clean and clear of any clutter? Is the sidewalk clean?”
Also, if the lease has little time remaining, it would be helpful if the seller reached out to the landlord to make sure that obtaining a longer term will be available and learned what the terms would be for a new buyer.
As a potential investor, be honest with the broker about your goals. Is this going to be a hands-on business, or do you plan on continuing to work at your current job? What is your most recent credit score, and what does your financial statement look like?
“You should have your financial information handy for the landlord or lender when asked,” Dang said. “Also, make yourself available during the due diligence period. Remember, the seller has his or her own obligations as well, so you both need to be flexible.”
Don’t Bypass the Broker
Even experienced laundry owners should utilize the services of a broker when buying an additional store or selling their business, according to Dang.
“It’s always good to have an extra pair of eyes to look over the transaction and paperwork, as well as having someone as a go-between with the buyer or seller,” she said.
What’s more, experienced laundromat brokers can bring in a wealth of knowledge to the table.
“Brokers are important even for veteran operators,” Frankian explained. “For one thing, store owners are busy running a business, and their time is valuable. On your own, you are going to have to screen every potential buyer yourself, and could end up wasting a lot of your time dealing with tire-kickers or simply buyers who are not financially strong enough to make a deal happen.”
“Brokers are experienced at looking not only at the obvious, but also the hidden factors that even savvy owners could miss,” Morgan pointed out. “It’s just good insurance to have an experienced broker working for you. In my more than 32 years in the industry, I’ve rarely seen a buyer – excluding some veteran operators – receive a good deal after bypassing a broker and purchasing directly from the seller.”