As Interest in the Laundromat Industry Grows, Who’s Getting into the Business… and Why?
Melody Fanto has never been afraid of hard work.
She has been a registered dental hygienist in Long Island, N.Y., for 30 years. In addition, she previously owned an auto repair shop, as well as operating her own snow removal business.
Then, an accident caused her to rethink her financial future.
“A few years ago, I sustained a shoulder injury that rendered me incapable of doing my clinical work as a hygienist for several months,” Fanto explained. “During that time, I realized I had no backup plan – no pension, no benefits, no nothing… as private practices don’t offer these benefits. So, I started doing some preliminary research into the laundromat business, just scratching the surface. When I returned to clinical practice, I didn’t have much time to attend laundry webinars, seminars or educational meetings.”
But the seed had been planted.
“Fast forward to 2020,” she continued. “COVID-19 hits, and my city of New York and the town I worked in became the epicenter of this virus. My clinic was unable to provide ample PPE, and it became apparent that I couldn’t treat patients in that way. And that clinic shut its doors last March.
“At that time, I had to find a silver lining in the clouds, and I made the decision to enter the laundromat business. I wanted to own a business again – one in which I could secure a better, more stable future for myself.”
Fanto joined the Coin Laundry Association. She also attended every industry webinar and meeting she could find, studied the business, networked with established store owners, and attained a laundromat consultant to help her scout for suitable locations in her area.
During her research, she also came across a laundry pickup-and-delivery business opportunity.
“I knew I’d need to implement this much-needed service into my store once I found one,” Fanto noted. “So, I’m now the territory owner/master licensee for the state of New York for Dirty Laundry Solutions. I’m still
scouting for a laundromat, but in the meantime, I’m also networking with laundromat operators to help bring this service into their stores.”
And Melody’s story is not unique.
“The disruption of the COVID-19 pandemic has resulted in many people looking into starting their own businesses to be in greater control of their own destinies,” said Kevin Hietpas, director of sales for Dexter Laundry. “With vended laundries being labeled as ‘essential,’ our industry has weathered the pandemic better than many others, and the interest in both new and existing stores is significant. What many investors find particularly attractive is that our industry has come through an incredibly stressful time in much better shape than many other businesses that they might be considering.”
No, laundromats are not trendy and, for most of us, will never be even remotely sexy.
“Laundromats are not a business to brag about at cocktail parties,” agreed Karl Hinrichs of HK Laundry in Armonk, N.Y. “But they are a component of the bedrock of our society. They provide a place for people to perform the important basic function of washing clothes. Doing laundry is one of the basics of survival – along with air, food and shelter. Laundromats are an important part of societal hygiene, as we have witnessed with the current pandemic. There always will be interest in laundromats, because they represent a basic and consistent service industry, a cash business, and a business that can operate with minimal management.”
Interest in the laundry business is driven by investor confidence in the market, Hinrichs continued, adding that both positive and negative investor confidence can drive interest and sales in vended laundries.
“Whenever there is a disruption in the economy, investors will start to look for safe havens for their money, and laundromats, being essential businesses, can be one of those economic safe havens,” he explained. “Today’s economic disruption is unique in our history, because the disruption is primarily within the travel and hospitality sectors, while other markets are relativity untouched. So, we’re seeing strong interest in laundromats, but perhaps not to the depth of interest as during the financial collapse of the Great Recession.”
Joel Jorgensen, vice president of sales for Girbau North America, concurred that his company also is seeing a strong interest in vended laundries. He pointed to four key reasons for their popularity:
- “Thanks to the lobbying efforts of the CLA, laundromats are deemed ‘essential businesses,’ so they tend to fare well during pandemics and economic unrest.”
- “Activity remains strong in the areas of machine upgrades with automatic soap injection, ozone delivery systems and new washer controls with sanitizing options. These have created a lot of buzz.”
- “Investors like the stability of laundromats, which is something we’ve always marketed. That stability proved true during the pandemic, when many other investments and franchises faltered and failed.”
- “New investors like the diversification of services that are offered through a vended laundry – including pickup and delivery of residential wash-dry-fold loads, commercial work, restoration and sanitization.”
“There has been a definitive increase in interest, both from the standpoint of listing information and education as to the operation of a laundromat,” explained Cindy Wolf, director of sales and brokerage for PWS, headquartered in South Gate, Calif. “There is no question that the concept of running an essential business has sparked interest with investors. As an example, my husband and I own a laundry that is next door to a restaurant, which has been closed since last March.”
Eastern Funding Executive Vice President Brian Grell pointed out that interest in the laundry business is as strong as he’s ever seen it.
“As a more than 30-year ‘laundry hack,’ I often peruse social media, including the CLA online forum, and have noticed a significant uptick in inquiries by potential investors in the laundry business. That, combined with the number of inquiries coming into our own organization regarding financing opportunities, backs up the same contention – interest in laundromats is at a peak.”
Who’s Investing in Laundromats?
The new laundromat investors in today’s marketplace vary widely.
“Some are looking to supplement their current jobs, while others are looking to rapidly scale the business to a multi-location operation,” Hietpas said. “They see today’s low interest rates as incredibly attractive, along with a retail landscape that has been decimated by online retail and now the pandemic. It has created an attractive opportunity to find good deals on promising locations. Also, with the pandemic-induced damage to the retail landscape, we’re seeing interest from property owners who are looking for good options for their buildings.”
“We’re experiencing more individuals escaping corporate America from a variety of industries,” explained Kathryn Rowen, general manager of the laundromat segment for Alliance Laundry Systems. “We’re also noticing a migration from other entrepreneurial businesses – such as restaurants and hotels – which have been much harder hit by the pandemic’s effects.
“And new investors cite all of the factors we have been sharing for decades – stability of the industry, as well as an extremely strong and proven ROI. Although a larger capital investment is required, the low inventory and minimal-to-no-employee requirement is very attractive. Also, stores may have experienced a decline due to the pandemic, but the recovery has been quite good – and faster than expected.”
Additionally, available cash and time tend to be spurring new investment in the laundromat business, according to Jorgensen.
“The public is not spending money on travel and luxury vacations, so instead there has been a big jump in purchases of second homes, investment properties and other luxury items like boats, ATVs and RVs,” he said. “Likewise, more individuals have taken this time to research other business and investment opportunities.”
Wolf noted that her company’s laundromat investment webinars have been attracting a decidedly younger audience.
“We always get a handful of corporate executives, usually with younger children, who see laundromat ownership as an opportunity to own a business, make good money with incredible tax benefits – and still have time to go to soccer practice,” she said. “The majority of our investors are younger people in the workforce who have been saving for years with the intent of working for themselves. What we see less of these days are the mom-and-pop investors who are retiring from their 9-to-5 jobs and looking for something to keep them busy while bringing in some income.”
“One type of investor we do see is someone who is already managing some other small businesses,” added Michelle A. Suhy-Elzinga, national sales manager for Whirlpool Corporation Commercial Laundry. “Maybe they’re already a commercial landlord or they operate a franchise of another national business. These investors recognize the value in commercial laundry and make the most of their distributor relationship.”
Alex Harris of Professional Laundry Systems, based in Deer Park, N.Y., doesn’t necessarily see the COVID-19 pandemic as a major deciding factor for those considering entering the laundromat industry. However, he believes that some of the new government programs indeed have helped financially with the current growth within the industry.
“Let’s pray that we never have another pandemic,” he said. “However, I don’t see investors going into the business for that reason. They get into the laundromat business because it’s a stable business and the recessions we may face will have little or no impact on the business.”
PLS’ investors run the gamut, from individual husband-and-wife teams looking to purchase laundry businesses in smaller formats as a second source of income to groups of well-heeled investors looking to buy multiple stores simultaneously.
“Right now, I have partnership investors looking to buy properties and put in 5,000- to 10,000-square-foot stores,” Harris said. “Several of them are real estate property owners who have vacancies and are looking to fill their locations. Also, I have seen multi-store owners who want to expand on their neighborhood businesses and build in close proximity to their existing laundromats.”
Clearly, there has been significant growth in interest from sophisticated groups of investors who are armed with capital and a desire to own multiple locations, Grell noted.
“This is especially evidenced by the growth of franchising opportunities that are popping up specifically for new investors,” he said. “The wave of new state-of-the-art laundromats, as well as an increase in rehabbing and retooling older stores across the country, also is highlighting the trend toward greatly improving the image of the industry, and thus appealing to and attracting new investors.
“The demographics continue to support the growth of the laundry industry,” he continued. “The demand for wash-dry-fold services is at an all-time high – and the growth of laundry pickup-and-delivery services, especially app-based businesses, also are rapidly growing and creating profitable new revenue streams for laundries.”
Like Harris, Hinrichs reported that his investors indicate being interested in laundromats not specifically because of COVID-19, but due to the fact they are cash businesses that churn out a steady income.
“Only when you start to drill down into the real reasons why they chose laundromats do you discover that their main business and main source of income has been partially or completely disrupted,” Hinrichs said. “An airline pilot who contacted us about opportunities in laundromats is still flying, but his schedule is greatly reduced, so his income also is greatly reduced. The disruption in the economy is driving interest in laundromats from those who normally wouldn’t look into the industry.
“I have another customer who renovates apartments for landlords. As tenants move out of their apartments, his company corrects anything that is wrong and spruces up the units for the landlords. Due to the pandemic, there is a no-eviction law currently in effect in the states of New York and New Jersey, so people are not moving out, and this gentleman’s business has stopped, because no one is vacating those apartments. So, now he is looking at investing in laundromats.”
While the coronavirus outbreak has either directly or indirectly impacted the laundromat business from the owners’ perspective, today’s operators and potential investors would do well to realize that this past year has affected the industry from the customers’ viewpoint as well.
“The pandemic may have changed people’s schedules, work situations and child-care arrangements,” Suhy-Elzinga suggested. “Always having a customer-focused approach can influence other elements of any store build or retool, including the customer services you provide. Laundry drop-off services, vending or even a store design that accommodates children with toy areas or libraries are services that may matter in new ways to customers.”
Of course, as investor interest in the laundromat industry rises, so too does the need to retool existing stores and build new ones. At Eastern Funding, Grell explained that both categories appear strong.
“As many in the industry know, I’ve been preaching the benefits of retooling and rehabbing laundromats for more than six years, with my ‘Eradicate ZombieMats’ campaign,” he said. “The pandemic has accentuated and accelerated the need to upgrade laundry facilities. Given that we are now obsessed with cleanliness and sanitization practices, who would ever walk into a dirty, old, dilapidated laundromat?
“On the other hand, many investors are attracted to the prospects of building new stores, as they are noticing the modern, state-of-the-art laundromats that are popping up in cities across the U.S. These new facilities are equipped with the latest and greatest innovations and technologies – and, when combined with industry best practices, are redefining the image of today’s laundromats.”
“I see both ends of the spectrum,” Harris reported. “I have the investor who wants an existing business with a cash flow stream in place, and then I also get the investor who wants something bigger and better than the competition, and builds from the ground up.”
Words of Wisdom for Laundry Investors in 2021
2021 will be a year of change and “a new beginning,” according to Harris.
“We all have had the ultimate reality check,” he said. “Laundromats are vital to the community and to everyone’s well-being. Locations are more readily available in many markets today, and several landlords are placing corrections on their high rents of the past. The key is negotiating a lease that is long-term and without high cost increases. Also, do your due diligence on your town’s fees and restrictions.”
Moreover, the focus for laundromats in 2021 will be on cleanliness and safety, Wolf predicted.
“An entrepreneur should focus on contactless payment systems, pickup-and-delivery service and curbside drop-off,” she said. “Marketing on multiple platforms, with regular updates as to specials is advisable. Avoid putting too much equipment in too small of a space – more equipment doesn’t always translate to more income. Customers don’t want to feel crowded or closed-in when doing their laundry. This has always been the case, but now more than ever.”
Suhy-Elzinga advised new investors to “think holistically.”
“Measure turns and foot traffic, as well as utility costs, water costs, neighborhood changes, and service and repair costs,” she suggested. “Identifying the whole picture helps investors recognize the moment their investment turns into profit and helps them create ongoing return on investment.”
Jorgensen pointed out that new investors need to be certain that their laundry operations are well-equipped to serve their target markets.
“We know the laundries that quickly reacted to the pandemic with sanitizing solutions and investments – such as equipment upgrades, automatic chemical injection and ozone – were the quickest to recover and grow,” he said. “Also, distributors can assist you with location/demographic/competition analyses, store layout and design, development of a pro forma cash-flow summary, financing and more. So, work with a quality distributor to build a laundry that stands apart.”
“The timing is right to negotiate the best lease possible on a location,” Rowen added. “Focus heavily on the customer experience by providing as safe, fast and trouble-free a service as possible. Go the extra mile to appreciate them with rewards programs that maintain customer loyalty and satisfaction. Incentivize your essential employees to listen to your customers and to cultivate the happiest customers possible.”
In addition, prospective investors need to do their homework with regard to site selection.
“This is a real business, and many markets are already very well-served by strong competitors who are good operators,” Hietpas offered. “It’s always unfortunate to see someone get into the business too quickly, only to realize that it’s a bit more complicated than they realized. We’re fortunate that our industry is essential, and we should be for a long time to come. There is time for investors to do their due diligence, to plan to do it right and to choose a location where the market is underserved.”
Above all, avoid going it alone.
“There’s no need to reinvent the wheel,” Grell advised. “The success principles are easy to follow, and there are so many of us who will share those principles with you. So, surround yourself with the winners, leaders and experts within our industry. You can do this by attending local vendor events and CLA Connect LIVE meetings, as well as listening in on webinars and taking part in online chat sessions. And, if you’re really serious about succeeding in the laundromat business, register for the Clean Show, which will be held in Atlanta next year – this is a prerequisite for growth, and it will provide an unbelievable ROI.”
As Melody Fanto continues to search for her perfect laundry location, she shared similar parting advice, aimed toward her fellow potential investors.
“Network, speak to those already in the business and be around like-minded people,” she advised. “The CLA and PlanetLaundry magazine have been wonderful sources of information. I’m grateful for them. The laundromat business will be the business on which I build my future.”