Financial teardown: Why laundromats have become an attractive investment
You might think laundromats are a dying business. But as it turns out, modern laundromats leveraging technology are highly profitable, automated businesses.
You might think laundromats are a dying business, I know I did. After all, doesn’t everyone own a washing machine? It turns out that home washers and dryers aren’t competitors with laundromats and business (for some) is booming.
Modern laundromats leveraging technology are highly profitable, automated businesses that operate more like giant vending machines than traditional storefronts.
Spinzone, Australia’s only franchised laundromat chain, is revolutionising the industry. Its locations can generate up to $136,000 each in annual net profit and need just 45 minutes of daily maintenance from a contracted cleaner. A model that’s caught the attention of smart investors.
And who uses them? Small businesses are major customers — think Jim’s Mobile Laundry, Airbnb cleaners, and massage therapists.
According to Spinzone founder Chris Hill, the customer base defies typical stereotypes.
“We see everyone from young professionals to tradies doing their work clothes on Friday afternoons. Even pet owners with large items like horse rugs are regular customers.”
They aren’t people who don’t have washing machines at home — they’re choosing laundromats for convenience, capacity, and efficiency.
Gone are the days of coin-operated machines
At Spinzone’s locations, digital payments are 85-92% of all transactions. Its newest location has completely eliminated coin slots, after all, who carries change these days?
Digital payments are the least impressive advancement Spinzone has made. Through their management platform, owners can monitor every aspect of their operation remotely — from machine status and cycle selection to detergent levels and revenue data.
When issues arise, they can be resolved with a few taps on a smartphone by restarting the machine or crediting the customer and getting them to move their wash to a different one.
Using analytics Spinzone has been able to optimise operations.
“We know that 64% of customers choose hot washes,” Hill reveals.
“That kind of data helps us make pricing decisions — like charging an extra dollar for hot washes. When you’re doing 300-400 washes a week, those small optimisations add up significantly.”
Diving into the financials for Spinzone’s Gungahlin location
It’s rare to see the profit and loss of a private company without an NDA. But looking at them, you can see why Spinzone is happy to share them.
With traditional staffing costs eliminated by automation, the major expenses are surprisingly modest.
Understandably, their largest fixed cost is rent, but the big surprise is that water is included. You would think water would be one of their biggest costs, but modern machines are incredibly efficient. They weigh the clothes and adjust water usage accordingly. Spinzone’s water consumption is comparable to a one-bedroom apartment.
The contracted cleaner is another major expense, they visit daily and clean for 45 minutes. For locations that include coin machines, the owner will usually go every couple of weeks to empty machines.
When you consider that many traditional laundromats average between $1000 – $2500 in revenue per week, the Gungahlin location’s annual net profit of $136,947 is impressive.
The build vs buy decision
For aspiring laundromat owners, the first challenge is actually securing one. While there are typically 20-30 laundromats listed for sale in Australia at any given time, these listings can attract up to 200 inquiries each.
Hill, who tried to buy a laundromat for two years before starting Spinzone and after reviewing dozens of profit and loss statements, now argues that building new almost always makes more sense.
“After nine years of analysing laundromat financials, I haven’t found one worth buying when compared to building new,” Hill explains.
“They’re often asking the same price as what it would cost to build a brand new one, but you’re inheriting old equipment, outdated technology, and possibly a poor location.”
Traditional laundromat builds take six to12 months, but Spinzone reduced it to about five weeks by using the innovative approach of pre-building the frame and bulkhead to speed up the construction. Instead of mounting all the individual pipes, taps, and power points on the wall for each machine, everything is integrated into a pre-built frame.
A Spinzone laundromat reaches break-even between three to twelve months, depending on timing.
“Winter is your friend in this business,” Hill notes. “Revenue can double in winter compared to summer. If you time your opening just before winter, you could break even within three months.”
What’s particularly interesting is the seasonal stability after the initial growth phase.
“By your second winter, you’re settled in. From there, you typically see 8-12% annual customer base growth,” Hill explains.
Location: The science behind site selection
The most important element of success with a laundromat is the location. Spinzone uses a proprietary formula with 17 weighted factors to identify optimal locations.
“Population density is weighted heavily in our calculations,” Hill explains, “but it’s just one factor. We’re looking at everything from household sizes and rental percentages to the number of Airbnbs and 24/7 gyms in the area”.
Some factors might seem counterintuitive. For example, both high and low socioeconomic areas can be equally viable — they just require different approaches.
A suburb like Mascot, with a socioeconomic index of 9, needs a more premium, boutique approach. Meanwhile, areas with lower ratings can be excellent for laundromats, but you might adjust your service offerings accordingly.
While others might spend months or years searching for the right location, Spinzone is now finding them rapidly, some in a matter of days. The company currently has signed leases for new locations opening in Sydney, Melbourne, Orange, and Batemans Bay.
Looking forward to more innovation
Hill is looking to continue reducing the remaining manual operations by adding AI chatbots for customer service.
“I can go three or four days without a single call,” he notes. “And when I do get calls, 90% are simple questions like ‘Are you really 24/7?”.
He is also looking to diversify revenue streams by offering complimentary services. Spinzone has added a barbershop in one location — the haircut takes 30 minutes, the wash takes 36 minutes.
Picking the right complementary service is important, an obvious choice would be a coffee shop but as soon as you add food, you increase the need for cleaning throughout the day. Early on, Hill did try vending machines but got too many calls about issues to keep them.
While the business model is attracting significant interest from investors, financing remains a challenge in the current economic climate with banks reluctant to lend to new businesses. To help address the barrier Spinzone has devised a ‘light’ model requiring a lower initial investment and the ability to add more washers and dryers over time.
Exploring how technology and automation are transforming laundromats into attractive hands-off investment is inspiring. Sometimes the best opportunities aren’t in reinventing the wheel, but in making the existing wheel work better.
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