Considering investing in a laundromat? Here’s what you need to know

Are you interested in creating an additional income stream through a proven business model?

If so, this is a great time to start or invest in a laundromat, or renovate your existing facilities. Laundromats are low-maintenance once established with great profit potential if strategically placed and managed correctly, making them an excellent business opportunity for anyone with entrepreneurial ambitions.

Whether you’ve owned a laundromat for some time or you’re considering investing for the first time, any major financial decision warrants serious thought, and you may have a few questions. Our customers often want to know:

Buying vs setting up a laundromat in Australia: which is the better path?

Why invest in a laundromat?

How do I start a laundromat?

How much start-up capital do I need and what are my financing options?

Are card systems necessary in a laundromat?

What are the different laundromat business models?

What equipment is needed to start a laundromat?

Is a laundromat a good business?

How much do laundromats make?

What are some ways laundromats increase revenue?

We’ve answered all of these questions for you below.

Buying vs setting up a laundromat in Australia: which is the better path?

Whether you plan to buy or invest in an existing business or start a new one, there are pros and cons to consider. The best path for you is ultimately dependent on the role you intend to play in the business (owner operator or silent investor), your location and your budget.

Buying an existing business can be an ideal turn-key solution, particularly if the equipment is relatively new and the business brand has a good reputation and strong local customer base. However, if this is not the case, you run the risk of incurring additional unexpected start-up costs such as equipment replacements and possible rebranding.

Setting up a new laundromat, on the other hand, gives you a clean slate on which to build a brand. While this involves a great deal of responsibility, it also gives you the opportunity to design everything about your business, from the fit-out and equipment to the branding and marketing.

Why invest in a laundromat?

There are many good reasons – financial and otherwise – to consider investing in a laundromat; however, as with most businesses, the outcome will ultimately depend on the management approach.

If the basics are right (convenient location, fit-for-purpose machinery, and effective preventative maintenance solutions and marketing strategies), running a laundromat can be a financially rewarding venture. In fact, thanks to low operational costs, the average laundromat can achieve an ROI as high as 30 percent or even higher in the right location – and the immediate cash-for-service exchange that takes place prevents many of the cash flow problems that commonly plague other industries.

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While staffed laundromats incur additional operating costs, the presence of staff also creates the potential to generate additional income through paid services like garment alterations or pick-up and delivery. This, in turn, strengthens relationships with loyal customers, ultimately building momentum for future expansion and potential franchise opportunities.

Work-life balance is another key benefit for laundromat owners. If you intend to run the business yourself, you’ll have the freedom to decide where and how to operate, while passive investors have the opportunity to earn good money with minimal effort.

How do I start a laundromat?

If you’ve decided to start a laundromat from scratch rather than purchasing or investing in an existing laundromat, it’s important that you’re aware of all the financial and legal requirements involved in the purchase. The first step is to find the right location and site. In order to get the benefit of foot traffic – a key source of customers for laundromat businesses – you’ll want to set up shop in a reasonably populated area.

Once you have a location in mind, the next step is to secure appropriate finances. While you can seek backing from any financial institution, companies with extensive experience in this niche market provide finance tailored to laundromat owners and investors, like Richard Jay’s Capital Plus.

Then, it’s time to start designing and building your premises. 60 square metres is generally enough floor space for a small laundry, whereas big cities often have larger laundromats ranging from 150 to 400sqm. While larger rooms are generally more expensive to rent, they also enhance the atmosphere and user experience for customers, increasing the likelihood of repeat business. Opting for a larger space will also give you more room for equipment, meaning you’ll be able to serve more customers at once.

Once your business is established, you may want to consider additional features that set your business apart from your competitors’ and attract new customers. This may involve upgrading your payment systems, offering additional services like ironing or clothing alterations, or installing game machines, televisions or wifi. Richard Jay advises hundreds of customers on this process every year, and we have the commercial acumen to ensure that your business starts off on the right foot.

How much start-up capital do I need and what are my financing options?

Costs will vary depending on size, rent, equipment capacity, number of machines, services offered and fit-out. All things considered, setting up a laundromat from scratch generally requires an investment of between $100,000 and $400,000.

Subject to approvals, Richard Jay can finance your entire laundromat set-up through Capital Plus if you have a good credit rating, enough money to service the lease and access to funds for store furnishings and advertising. This includes fit-out, equipment, installation and accessories – everything you need to establish your laundromat.

What equipment is needed to start a laundromat?

The right washing machines and dryers are the most important equipment in any laundromat, as they determine not only the quality of your service to customers, but also the costs associated with energy consumption and equipment maintenance, repairs and replacements. Front-loading washing machines make a better long-term investment than top loaders, which can be more susceptible to breakdowns and more resource-intensive to use. The right payment technology is another important addition, particularly as society has collectively moved away from cash as a means of payment.

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Are card systems necessary in a laundromat?

As our society continues to move away from cash, it’s important that your laundromat follows suit by providing cashless or combination payment options. Card payment systems may be more expensive to install than cash – or coin-operated alternatives, but the value of convenience for potential and existing customers cannot be overstated. A good cashless system allows you to vary pricing across the week, for promotional periods or seasonally. It reduces the risk of theft or vandalism and ultimately, will mean more profit for the owner who values their own time spent doing anything else except unblocking coin jams, collecting heavy coins and securing against theft. We’ve provided detailed information and answers to all of the questions we receive regarding card systems here.

What are the different laundromat business models?

Laundromats fall into one of two business models: self-service and fully serviced. Under the former, business owners provide access to high-quality commercial washers and dryers in a retail space and charge a fee per load of laundry. This model is ideal for those who want to make money without spending much time onsite or employing others to do so. While this approach is very low maintenance, physically and financially, you will need to cover the costs of product, equipment maintenance, utilities, cleaning, security and account management. It’s also important to note that customers may expect self-service laundromat businesses to remain open 24 hours a day, as many existing businesses do. This, in turn, increases the importance of security measures like CCTV or other surveillance.

The alternative to self-serviced laundromats is the fully serviced approach. While a full-service business is inevitably more expensive to run, it creates opportunities to build relationships with customers and foster a loyal customer base. Full-service businesses are also well positioned to capitalise on the value of convenience in a time-poor society by offering services like, folding and ironing, wet-cleaning, and laundry pick-up or drop-off for an additional fee. Naturally, catering to both self-service and full-service customers is the best way to maximise earning potential.

Is a laundromat a good business?

As long as you have the commercial acumen and industry knowledge needed to run the business effectively, a laundromat can be a lucrative business. The one caveat is that successful laundromats generally require a significant investment of time, money and energy during the early days. In fact, many business analysts think of laundromats as “recession-proof”. An ideal investment opportunity for those who want to avoid intensive management duties, laundromats allow you to generate a relatively passive income, earning money without spending much time on site or paying staff to do so.

How much do laundromats make?

Laundromats can be a rewarding investment with the potential to remain viable and profitable even in challenging conditions; however, prospects for success ultimately depend on how the business is run. Profitability and revenue are heavily influenced by factors such as location, facilities and optional extras designed to enhance the in-store experience. As a general guide, the average Australian laundromat generates returns of approximately 25 percent of the initial investment each year, translating into earnings ranging from $300 to $1300 per day. This assumes that the business is well established and positioned, and that the business is unattended. Although the cost of store upkeep and product purchases soak up a significant revenue portion, many businesses – self-service, in particular – still generate a strong profit margin. In fact, some businesses generate up to $350,000 in annual profit, whereas poorly managed businesses can be costly for owners and investors alike.

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In order to make sure your laundromat generates a strong financial return, it’s important to first do your research into locations, consumer demographics, and store fit-outs, furniture and equipment. Beyond these initial expenses, you’ll also need to factor in the ongoing costs of utility bills and laundry supplies like detergent and fabric softener. The best way to protect and grow your profit margin is by enhancing the customer experience with both expected and unexpected benefits; in other words, ensuring that they’re happy with the store atmosphere as well as the wash results. We’ve provided more information on laundromat profitability here.

What are some ways laundromats increase revenue?

Many successful laundromats combine laundry with other services, all with the view of making the in-store experience more pleasant for customers. Some of the more common additions include ATMs and food and beverage vending machines, but it doesn’t end there – there are plenty of practical and fun options. Other bright ideas include:

  • Kids’ corner. For families with young children, a trip to the laundromat can be a long one, but providing activities for kids makes it a more pleasant experience.
  • TV and video games. Whether they’re classic arcade games or modern televisions, entertainment features are great for attracting potential customers of all ages.
  • Free wifi. With more and more businesses offering free wifi for customers, it’s important for laundromats to keep up with the times.
  • Pet-only washing machines. Pet owners are a large niche, and by offering pet-friendly machines, you can meet a need for a market that standard laundromats often miss. This also gives comfort that your special clothes do not have to share a machine with someone else’s pet blankets.
  • Garment repairs and alterations. If you have the skills (or are willing to hire someone who does), a garment repair and alteration service would add another layer of benefits for customers.
  • Pick-up and delivery. In our busy modern world, the convenience of a laundry pick-up and delivery service is sure to win favour with time-poor customers.
  • Wash, fold and iron service. Like a pick-up and delivery service, a laundry folding or ironing service takes the customer experience to the next level.

Get started with ease

With assistance from the expert team at Richard Jay, starting a laundromat business is easy. Select your dream location, organise your finances, and let us help you design and construct the perfect fit-out for you and your community. To get started, have a read of our handy laundromat investment guide and give us a call to find out more about how we can help you launch your new venture.