How Private Equity Is Buying Up Laundromats

Lucas: So there's this quiet roll-up happening in an industry you probably walk past every week and barely think about: laundromats. Luna: Like, the coin-op places where you dump your quarters and hope nobody steals your socks? Lucas: Exactly. But the quarters are getting replaced by card readers and app payments, and the buyers are private equity firms. Firms like Cion Investment and TPG have been building platforms - think 50, 100, even 200-plus locations under one corporate umbrella. Luna: Wait - TPG? That's a massive name. They're not exactly known for small-time wash and fold. Lucas: Right, but the thesis is pretty compelling. Laundromats are recession-resistant, generate steady cash, and often sit on valuable real estate. If today's episode gives you a new lens on the businesses you pass every day, that's the kind of thing that keeps this show ad-free. Listener support at buy me a coffee dot com slash fexingo is what makes that possible. Luna: Absolutely. And it's easy to see why private equity would look at this space. Lucas: So let's unpack the numbers. A typical mom and pop laundromat in a decent suburban strip mall - maybe 30 to 40 machines - can generate annual EBITDA between $50,000 and $80,000. Not huge on its own, but when you buy 50 of them and centralize maintenance, accounting, and marketing, you start getting real operating leverage. Luna: And the multiples? What are they paying for these stores? Lucas: Usually three to five times EBITDA. So a $60,000 EBITDA store might sell for $240,000. That's cheap compared to, say, a dental practice or an HVAC company where multiples can hit eight or nine times. The reason is that laundromats historically haven't been seen as 'professionalized' - they're often run by a single owner-operator who's there every day. Luna: So the PE play is basically: buy small, add a layer of management, install technology, and flip to a bigger buyer or an IPO down the line. Lucas: Exactly. One of the big platforms out there is called SpinCycle - well, there are a few with similar names. But the genuine roll-up story is from a company called LaundryLocker, which started in San Francisco and got acquired by tpg backed CSC ServiceWorks. CSC already had a huge network of coin-operated laundry machines in apartment buildings, and they added retail stores. Luna: So they're capturing both the multi-housing side and the standalone storefront. That's interesting. Lucas: Right. The logic is that the infrastructure - the machines, the maintenance trucks, the route managers - overlaps heavily. Once you have a fleet of washers and dryers, adding more locations is just incremental volume. And the data from card readers gives you real-time visibility into usage patterns, which a mom and pop owner never had. Luna: But what about the local owner who built the business over 20 years? Do they typically stay on? Lucas: In most cases, no. The PE firm wants to install its own management. The seller usually takes a cash payout and walks. Sometimes they'll stay for a transition period - six months, a year - to train the new staff. But the whole point is to standardize operations. Luna: Standardization means things like uniform signage, a centralized call center, maybe a common app for loyalty programs. Lucas: Exactly. And one of the biggest operational changes is switching from coin to digital payment. That alone can boost revenue by 10 to 15 percent because people spend more when they don't have to feed quarters. They'll add a dryer cycle, use the extra rinse. Plus, the data lets you dynamically price - maybe Thursday nights are cheaper because demand is lower. Luna: That's fascinating. But isn't there a risk that the local customer base resents the change? Like, 'My laundromat got bought out and now it's all corporate and expensive'? Lucas: It's a real risk, but the firms seem to be managing it by keeping the store appearance fairly local. They don't slap a big corporate logo on the window. They keep the existing staff - the attendant who knows customers by name - and just change the back-end systems. The customer might notice the new card reader, but if the price per load stays competitive, they don't care. Luna: So it's a stealth consolidation. Sort of like what happened with pest control and HVAC. Lucas: Very similar. And the numbers support it. The U.S. laundromat industry generates about $5 billion in annual revenue. But it's incredibly fragmented - more than 80 percent of the roughly 35,000 stores are single-location operators. So there's a huge opportunity for roll-up. Luna: Are there any public companies that are pure-play laundromat operators? Lucas: Not really. The closest is CSC ServiceWorks, which is owned by TPG and not publicly traded. There's also a company called E-Town, which operates in the Midwest, but it's tiny. Most of the action is in private hands. Luna: So the exit for these PE firms is probably selling to a larger PE firm or a family office, not an IPO. Lucas: Exactly. And we've seen that happen. In 2021, a platform called Boost Cleaners - which had rolled up about 30 dry-cleaning and laundry locations in the Northeast - sold to a larger consolidator. That's the typical cycle: buy, improve, sell to a bigger fish. Luna: What about the real estate angle? You mentioned that earlier. Lucas: It's key. Many laundromats own the building they're in. So when a PE firm buys the business, they often get a piece of commercial real estate in a decent location. If the business fails, they can always lease the space to someone else. That land value provides a floor on the downside. Luna: That changes the risk calculus significantly. It's not just an operating business - it's a real estate play with an operating business attached. Lucas: Right. And that's why some firms are willing to pay higher multiples for stores in dense urban areas where real estate is scarce. A laundromat in downtown San Francisco or Manhattan might trade at seven times EBITDA because the land underneath is worth so much. Luna: So if I'm an independent owner listening, what's the takeaway? Is now a good time to sell? Lucas: That depends on your store's size and location. If you have a single location doing $100,000 in EBITDA and you own the real estate, you could probably get a solid offer. The bigger factor is whether you've modernized payment systems. Buyers will pay more for a store that already has card readers and maybe a pickup and delivery route because it's less work for them. Luna: Pickup and delivery - that seems like a natural add-on. Customers drop off their laundry, pay by the pound, and pick it up later. It's higher margin than self-service. Lucas: Much higher. Self-service washes bring in maybe $3 to $5 per load. Full-service wash and fold can be $1.50 to $2.00 per pound. A typical 10-pound bag yields $15 to $20 in revenue, and the cost of labor and detergent is maybe $5. So you're looking at 70% gross margins. That's the kind of metric that makes PE firms salivate. Luna: So the consolidation playbook is: buy a cluster of stores in a metro area, standardize operations, introduce wash and fold and delivery, and then maybe add a mobile app for loyalty. Lucas: Exactly. And they're doing it quietly. There's no big press release. You just start seeing the same branded vans at multiple locations. The industry is still early - I'd say we're maybe 10 percent of the way through the consolidation cycle. So there's room for more entrants. Luna: What about the competition from on-demand laundry apps like Rinse and Sudsy? Those are tech-first models. Do they compete directly with the laundromat roll-ups? Lucas: They overlap, but they're different. Rinse is a pure-play pickup and delivery service that owns no storefronts - they partner with existing laundromats. So they're more of a tech layer. The pe backed roll-ups are buying the physical stores. In some cases, they end up partnering with the apps, which gives them a digital channel without building their own. Luna: Interesting. So the roll-ups aren't just buying assets - they're buying distribution points that can serve multiple business models. Lucas: Exactly. A store in a good location can be a hub for self-service, drop-off wash and fold, and a pickup route. And if the real estate is owned, it's even better. That's the trifecta. Luna: Let's talk about the risks. What could go wrong? I mean, laundromats are pretty simple, but they're not risk-free. Lucas: The biggest risk is probably technological disruption. If in-home laundry machines become much cheaper and more efficient - say, a $500 machine that does a full load in 15 minutes - some people might stop going to laundromats altogether. But that's been the threat for decades, and laundromats have held up. Another risk is labor costs. If minimum wage rises sharply, the wash and fold margin gets squeezed. Luna: And water and electricity costs. Those are variable and can spike. Lucas: Right. But the beauty of the self-service model is that the customer pays for the machine, which includes utilities. So the utility cost is baked into the price per load. The risk is really on the wash and fold side, where you're paying staff to run the machines. Luna: So the smart roll-ups will probably focus on self-service in lower-cost areas and push wash and fold in higher-density, higher-income neighborhoods where customers are willing to pay a premium. Lucas: That's exactly what they're doing. And it's working. The industry has seen steady 2 to 3 percent annual growth for the last decade, and margins are improving as technology gets adopted. Luna: I want to circle back to the seller's perspective. If I own a laundromat and I'm thinking of selling, what should I do to maximize value? Lucas: A few things. First, install card readers and a digital payment system. That's table stakes. Second, add a wash and fold service if you don't have one. Even a small one can boost EBITDA significantly. Third, clean up your books - make sure your financials are accurate and show the real profitability. Many mom and pop stores underreport income, which hurts valuation. Luna: And fourth, maybe sign a long-term lease if you don't own the property. A buyer wants stability. Lucas: Good point. A 10-year lease with renewal options makes the business more attractive than a month to month arrangement. And if you can show that the customer base is loyal and growing, that helps too. Luna: So the laundromat industry is kind of a hidden gem for private equity. Low-tech, steady cash, fragmented, and recession-resistant. Lucas: That's exactly the thesis. And it's why we'll probably see more of these roll-ups over the next few years. The next time you drop off your laundry, take a look around - you might be standing in a portfolio company. Luna: And maybe even one that's owned by a firm you've heard of. Thanks, Lucas. Lucas: Thanks, Luna. That's it for this episode of The Buyout Show.