How to Start a Laundromat Business

Laundromats can serve as a semi-passive business strategy. You will need to set them up, which typically includes a significant investment in equipment. Once in place, though, they do not always require someone to be at the location. That may seem like the perfect way to build a business.

However, there are numerous factors to keep in mind throughout this process. First, they are capital-intensive to start up. They require careful planning to choose the right location for opening, based on what community members are likely to need. You also need to consider utilities, lease terms, and equipment types to know just how much you must spend on an ongoing basis.

All of this considered, you can start a laundromat business and build a strong financial future for yourself. To do so, you need to understand the cost and infrastructure requirements of doing so. That’s what we’ll cover here.

What makes a laundromat business model different?

Laundromats are different from other business ideas as they typically are available 24 hours a day to allow people to show up, wash their clothes, and leave. Unlike a traditional business model with specific time demands, flexibility becomes the paramount difference maker in laundromats.

But, there is more. Laundromats are utility-based businesses, and as such, the following applies:

• Revenue: The amount you earn in revenue depends on how frequently machines are used. Frequency of use is directly dependent on demand within a highly localized community.
• Utility use: The more it is used, the higher the operational costs. That includes water, sewer, gas, and electrical costs.
• Equipment: Choosing the right equipment typically means balancing the expectations of modern systems with energy-efficient designs. Factor in costs related to equipment lifespan and maintenance costs as well.
• Location density: Where you open a laundromat matters. Many single-family homeowners have their own systems. Those in apartment complexes or other high-density population areas may have a greater need for laundromats.
• Cash flow: Your cash flow at the location is dependent on neighborhood demographics. That includes how frequently you service systems and how demand fluctuates. You really need to keep your pulse on the community’s needs.

Opening a laundromat business is more closely aligned with purchasing real estate and infrastructure-specific businesses rather than opening a retail shop. That means you need to carefully weigh very different objectives when making these decisions to ensure the potential for profit.

Location and lease considerations

In most situations, location plays the biggest role in the success of a laundromat business. You must be accessible to people who need to use your services routinely, not just infrequently.

You then need to consider the building itself and how well it can maintain the demand of a laundromat. Develop a real estate strategy that carefully considers the following:

• Plumbing capacity. Laundromats have a significant demand for plumbing. Old plumbing systems cannot handle the capacity necessary. The amount of water coming into the building, moving to each machine, and draining out at full capacity must meet local ordinances as applicable.
• Drainage infrastructure. Consider drainage a critical factor. You cannot simply add a laundromat to a retail structure and assume the drain and sewer system will be able to handle the workload. It may not.
• Electrical load capacity. Many of today’s machines rely on electrical functionality to keep costs low. However, electrical capacity is much higher in a laundromat than it would be in your typical retail establishment. An industrial-scale approach may be necessary depending on the facility’s overall size.
• Gas line availability. Most dryers operate more efficiently when they are gas, but gas line availability may be limited. Upgrades can be very costly in some areas, especially in older portions of the city.
• Lease length. Property owners must be willing to write a long-term lease. With such a high capital investment, and one that is tailored to the structure itself, meaning you are not likely to be able to take it with you if you move, a long-term lease becomes essential.
• CAM charges. Common area maintenance (CAM) charges can be an additional factor, including operating costs for lobbies, parking lots, and landscaping, all of which may be necessary in shopping center locations.
• Zoning compliance. Not all cities welcome laundromats as readily, which may mean you need to request zoning changes or find a location where they are allowed.

All of these factors make it clear that location matters more than just being close to customers. Retrofitting an available shop is expensive, especially if components are outdated. A long-term lease becomes essential to protect that equipment investment.

How much does it cost to start a laundromat

The startup costs will range significantly based on location, size, and overall retrofitting needs. Laundromats have a high upfront equipment and build-out cost.

Initial working capital needs will depend specifically on the amount of work to set up the property. This could cost anywhere from $50,000 to $250,000 or more, depending on size, location, and equipment purchase needs.

The following are some of the investments you are likely to make. Keep in mind that it is impossible to have a specific figure in mind because costs are very location-specific.

• Commercial washer and dryer purchase. More advanced systems will cost more, but could reduce energy consumption.
• Used vs new equipment is an option. Consider the value of purchasing newer, but used equipment. When doing so, factor in the cost of retrofitting for that equipment and whether it is possible.
• Build-out and plumbing installation will require a quote from an experienced commercial plumber. The size and layout of the facility will ultimately determine the costs.
• Electrical upgrades can be costly in older buildings. Contractors will take into account a variety of factors, including the long-term energy demands and safety regulations that must be met.
• Utility connection fees depend on local utility company charges. These are higher for commercial organizations than for residential ones, but will vary depending on demand.
• Leasehold improvements are a conversation to have. Many times, property owners will agree to cover some upgrades because of the long-term lease agreement, if they believe the move is in their favor.
• Licensing and permits depend on city requirements. It is very common for companies to forget to factor in these costs, but they can be several thousand dollars in some areas.
• Insurance is a big part of the process. Insurance for both liability and equipment protection is essential.

Build-out often exceeds your equipment costs in the laundromat business. That’s because of the comprehensive retrofitting that is so critical. Unfortunately, these costs vary dramatically by city and even by the building you select based on its prior use.

How to start a laundromat business with no money

Zero-capital laundromats are rare. Most property owners will want to see some experience and formal investment into the structure to ensure you have the financial flexibility necessary to build your business.

Let’s break down what you can expect as avenues to reducing the overall costs of initial investments.

• Purchase an existing laundromat. If it is modern or close to it, that drastically reduces the costs associated with retrofitting plumbing and electrical.
• Seller financing may be an option if there is an existing structure. That may significantly lower costs.
• Equipment leasing from reliable companies could lower costs initially, but ensure you consider the long-term implications of these steps.
• Partnership structures are another route to reducing some costs. You may alleviate some financial burden if you have someone to take on some of the financial burden from the start.
• Investor-backed models can work if you can locate an investor willing to put money into the service. That may be dependent on showing that this is a modern and much-needed service.
• SBA loans could be a route to take if you build a strong business plan that clarifies the value and cash flow potential of your business.

Significant capital is often required, and that can seem tough at first. However, there are some costs you just cannot get around, including utility and infrastructure spending. Your business will need constant maintenance and updates as well.

Licensing and permits required

Opening a business in any state takes several critical steps. You will need to give your business a strong foundation for growth from the start. Laundromats are less regulated than food businesses and some tech companies, but they still require approvals to keep the business legal. This may include:

• Registering your business: Establishing an LLC is beneficial in most situations, though a corporation may offer additional benefits over time.
• Get an EIN: An EIN allows you to register your business with the IRS.
• Local business license: Your business may need a local business license. This is dependent on the city’s specific rules.
• Zoning approval: Laundromats typically operate in residential areas and retail locations, but zoning approval for changes in plumbing and sewer lines is often a challenging part of the process in some areas.
• Building permits for plumbing/electrical work: You will need to obtain these, and the work typically must be done by a licensed professional.
• Environmental or water discharge rules (if applicable): Not all areas have these, but with the sheer amount of water demand and sewer use, there may be factors to consider, especially in rural areas.

Platforms like Tailor Brands help entrepreneurs form an LLC, obtain an EIN, and organize essential business documentation before signing leases or applying for permits. This can make it a bit easier for you to get started.

Remember that forming a business does not guarantee that your lease will be approved by the property owner. And, utility approval is typically required prior to opening your doors.

How to start a laundromat business in NJ

Every state’s rules are a bit different. Opening a laundromat business in New Jersey requires several steps. Some key areas to consider include:

• Municipal zoning approval means each community requires approval for a laundromat on its own terms.
• Plumbing permits will always be necessary for any modifications and significant upgrades.
• Environmental compliance that meets the rules of the NJ Department of Environmental Protection, including the strict Environmental Justice (EJ) laws, is a core concern. Many businesses must submit EJ impact statements demonstrating their air, water, and waste strategies.
• Local health and building inspections happen within each community and county. Rules change, but a formal inspection by the health department is typically required before buildings can open.
• Sales tax registration may be necessary if your business provides a service, such as a wash-and-fold service.

Note that real estate costs in New Jersey are typically higher than those found in other states, and utility costs can also be high. Urban NJ areas may have higher rent and build-out costs as a result, but rates differ based on municipality. Careful consideration and balance of location matters here.

How to start a laundromat business in NY

New York has one of the highest real estate costs in the country, including in many urban districts where laundromat services may be valuable. Cost aside, business owners will also need to navigate the complexities of permitting, especially in cities like New York City. Factors to consider when opening a business in New York include:

• Zoning approval will be the biggest challenge in some communities, especially urban areas.
• Building permits for plumbing and gas lines can be challenging, especially in older communities where rules are very strict.
• Department of Buildings approval in New York City follows very strict requirements, including zoning, building codes, and the complex review process by the DOB. This process typically includes plans completed by professionals approved by the city.
• Utility coordination can be challenging when significant upgrades are necessary. Modernizing and updating existing structures may be far easier, but still requires meeting compliance requirements.
• Sales tax registration is necessary if offering services, such as wash and fold, or others.
• Local inspection requirements before businesses open are also necessary, typically including the health department and local building departments.

Opening a laundromat in New York is a time-consuming process. For example, NYC build-out costs are significantly higher than nearly any other area. Lease negotiations are essential to making the move profitable.

How to start a laundromat business in California

Opening a laundromat in California offers specific opportunities and obstacles. Most significantly, the state’s stricter environmental and utility regulations are a difficult process. Consider the following:

• Local zoning approval is very strict in terms of environmental protection and building code requirements in individual communities.
• Plumbing and water use regulations are some of the strictest in the country, especially during peak dry spells. A water-based business could struggle during those periods.
• Energy efficiency requirements on all equipment, especially on water usage systems, can change equipment costs.
• Building inspection is essential in most cities, and regulations differ significantly.
• Sales tax registration is a necessary step for most laundromat businesses in the state.
• ADA compliance enforcement will be a factor for most locations, including creating accessible equipment.

Water usage regulations may be stricter in California, and utility upgrades may be both necessary and more expensive.

Revenue and profitability considerations

Is there money to be made in opening a laundromat business? There can be, if you break down the factors like these related to your business:

• Machine utilization rate.
• Peak vs off-peak hours.
• Wash-and-fold services.
• Vending and add-on services.
• Equipment maintenance cycle.
• Utility cost management.

Your profit potential is highly dependent on location and cost control. Every one of the decisions above makes a difference. Remember, this is not a fully passive business, as maintenance is necessary.

Conclusion

Opening a laundromat can be a profitable business venture in some areas. These businesses require significant upfront capital, and balancing infrastructure and utilities, as well as related costs, will play a role in the profit margins. To offset those risks, businesses will need to consider long-term lease protection, ensure build-out costs allow for profitable margins, and create a strategic plan that reduces financial risk.