Managing a Coin Laundry Business

The initial price of the typical HK equipped Laundromat ranges from $195,000 to $500,000.  The wide price range is dependent upon the amount of equipment installed, remodeling décor and necessary leasehold improvements.

HK Laundry Equipment financing available through our commercial equipment manufactures and private lenders.  In these cases, HK can obtain up to 100% financing (for qualified buyers) on all serialized laundry equipment.  (i.e.: washers, dryers, bill changers, hot water heating systems etc...)  You will be financially required for the store build-out or leasehold improvements (to make your rental space into a Laundromat). 

Your HK sales representative can provide you with all the financing options.  Bank financing is also available including Small Business Administration loans, but caution should be taken with SBA loans because they can take a long, long time to get approval.  Banks are generally harder to borrow money from, but usually offer slightly better rates.

In any Laundromat business there are both fixed and variable costs. Fixed costs continue at a set rate each month, no matter what volume of business. They consist of items such as:

• Rent
• Payroll & Cleaning Costs
• Supplies
• Insurance
• Advertising
• Repairs
• Alarm & Cable/Internet Costs
• Trash Collection
• Note Payments - Equipment

Variable costs are a direct function of the volume of business and consist of those utilities consumed such as water, sewer, gas or oil and electricity.  These utilities will generally run approximately 16 to 25 % of the total volume of business, or gross.  An all HK equipped store with energy-saving washers & dryers will generally be about 20% of gross.  (The following example is figured at a conservative 23%.) 

A formula which has proved to be accurate in determining the weekly break-even point (and thus provide a basis for calculation of profitability at various levels) is as follows: 

Multiply the sum of the Monthly Fixed costs by 0.302 this equals the weekly break-even point.  (This factor of .302 figures in the variable costs of utilities at 23% of gross and that there are 4.3 weeks per month.)

An example of a 20 washer store would be as follows:

Rent                           $4,200 per month

Labor/Cleaning            3,525

Supplies                         450

Repairs                           200

Insurance                       325 

Alarm/Cable                   175

Misc.                                150

-------------------------------------

Fixed Costs (less note)   $9,025

To this figure, add the monthly payment for notes.  Assuming that the total cost of the store was $375,000 and that $100,000 was the down payment and the balance was financed at 7-1/2% interest; the monthly note payment (covering interest and principle) would be $4,218 per month for 84 months.

Therefore your total Fixed Monthly Cost would be: 

Rent, Payroll etc.                $ 9,025

Note Payment                    +  4,218

                                                          ---------------

Total Fixed Costs             $ 13,243

minus Vending (mo.)           -   430

minus WDF (mo.)             -   3,425

                                                          ---------------

Adjusted Fixed $                 $ 9,388

Conversion Factor              x   .302

                                                           --------------

Weekly Break-Even Point    $ 2,835

Almost without exception, the coin-op laundries which we have constructed during the last 15 years show a weekly gross income range of $4000 to $8000. Assuming the lower end of this range as a conservative estimate we have: 

        $  4,500       Weekly Gross Business

Less  - 2,835        Break-Even Point

  ----------

        $  1,665       Difference

A portion of this difference must be allocated to pay the increased utility costs (above the break-even point), which means only 77 % of this difference is profit. In this example the

Profit is $ 1,282 per week or over $66,000 per year. This is a ROI of 66% - not too bad! In this case the laundromat owner is making a handsome profit while building equity at a rate of over almost $40,000 per year.

If you increase your laundry business by an additional $500 a week your profit is now over $86,000 per year. For every dollar above the Break-Even point 77% is profit. This is a tremendous multiplier. Just a little more business can make a big difference! This shows the importance of keeping your Fixed costs to a bare minimum and also operating the most energy efficient laundry equipment possible to maximize your profitability.

Review a Sample Proforma

Continue to "What Makes a Great Laundry Equipment Distributor?"