Read on Twitter
It seems like there& #39;s a sudden interest in laundromats from the Twitter community. I get it, they can be great cash-flow generating businesses.
In 2018-2019, I nearly invested in 5 different locations around the SF Bay area.
Here are my learnings:
In 2018-2019, I nearly invested in 5 different locations around the SF Bay area.
Here are my learnings:
My Overall Thesis:
- At the time, I was a FT investor at a fund and wanted a business that had minimal staff. No interest in delivery, wash & fold
- Loved the geographic monopoly. It& #39;s a declining market with high start-up costs. Irrational for new competitors to enter the mkt
- At the time, I was a FT investor at a fund and wanted a business that had minimal staff. No interest in delivery, wash & fold
- Loved the geographic monopoly. It& #39;s a declining market with high start-up costs. Irrational for new competitors to enter the mkt
Key Challenges / Research Areas:
- Location is everything
- Utility costs are hard to predict. SF hiked water rates 10% during one of my deals
- Owners lie about income for tax benefit
- Lease matters. See if you can get 10yr
- Machines represent a potential fixed cost nightmare
- Location is everything
- Utility costs are hard to predict. SF hiked water rates 10% during one of my deals
- Owners lie about income for tax benefit
- Lease matters. See if you can get 10yr
- Machines represent a potential fixed cost nightmare
Strengths / Value Creation Levers:
- Conversion from Coins -> Credit Cards
- Prepaid Cards to give you the gift card benefit
- Automatic doors - eliminate opening and closing. Make it easy for janitor to come when they want
- You have pricing power
- Recession Resistant
- Conversion from Coins -> Credit Cards
- Prepaid Cards to give you the gift card benefit
- Automatic doors - eliminate opening and closing. Make it easy for janitor to come when they want
- You have pricing power
- Recession Resistant
Key Outstanding Downside: It’s really difficult to grow the enterprise value of the business. Machines are fixed.
There are minimal benefits to scale. After 5ish locations, you can hire your own repair man and janitor to lower maintenance CAPEX. That& #39;s about it
There are minimal benefits to scale. After 5ish locations, you can hire your own repair man and janitor to lower maintenance CAPEX. That& #39;s about it
At the end of the day, it& #39;s really a CF investment that& #39;s attractive based on the deal. I was always aiming for high-teens CF return utilizing some leverage.
Most deals I saw we& #39;re trading for 2.5x-4x SDE, but at the end of the day, NO ONE KNOWS what the actual SDE is.
Most deals I saw we& #39;re trading for 2.5x-4x SDE, but at the end of the day, NO ONE KNOWS what the actual SDE is.
Every owner lies about their income and the broker acknowledges it. You can use an outsourced firm to count washes from video tapes to actually get the real revenue. However, should an investor give the owner credit for that? Not in my world...
I still wish I owned one of these and I& #39;ll probably keep my eyes peeled for the right one in the right neighborhood.
If you have any questions or want to leverage my models, just shoot me a DM. Would love to help.
If you have any questions or want to leverage my models, just shoot me a DM. Would love to help.