Letter of Intent Template for Buying a Dry Cleaning & Alterations Business

Parties and Business Identification

Clearly identifies the buyer entity, the seller, and the specific dry cleaning or alterations business being acquired. This section establishes the legal foundation of the LOI and prevents ambiguity about what is being purchased — the business assets, the trade name, the route accounts, or the real property if applicable.

💡 Confirm whether the deal is structured as an asset purchase or entity purchase. Nearly all dry cleaning acquisitions are structured as asset purchases to allow the buyer to exclude unknown liabilities — particularly environmental remediation obligations tied to prior PERC solvent use. Ensure the seller's legal name matches the entity that holds the lease and equipment.

Purchase Price and Valuation Basis

States the proposed purchase price and explains the basis for valuation, typically a multiple of seller's discretionary earnings (SDE) adjusted for equipment condition, lease quality, and environmental status. Dry cleaning businesses typically trade at 2x to 3.5x SDE, with discounts applied for aging equipment or unresolved environmental concerns.

💡 Push to tie the final purchase price to verified SDE, not seller representations alone. Because many dry cleaning businesses have historically underreported cash revenues, lenders will require bank deposit reconciliation, POS transaction reports, and supplier invoice analysis. Build in a price adjustment mechanism — ideally a dollar-for-dollar reduction if verified SDE is more than 10% below the seller's stated figure. Also negotiate an equipment holdback (typically $15,000–$40,000) to be released only after environmental clearance.

Deal Structure and Financing

Outlines how the purchase price will be funded, including buyer down payment, SBA 7(a) loan proceeds, and any seller financing component. Dry cleaning acquisitions are frequently SBA-eligible when the business has clean environmental status and verifiable revenues.

💡 SBA lenders will scrutinize cash revenue businesses closely. Be transparent with your lender about the cash-heavy nature of the business and prepare to provide bank deposit summaries, supplier invoices, and POS records as revenue support. Seller financing signals seller confidence in the business and reduces your cash at closing — negotiate for it when possible. Note that SBA requires seller notes to be on full standby during the loan term, meaning no payments until the SBA loan is repaid, which some sellers resist.

Earnest Money Deposit

Specifies the good-faith deposit the buyer will provide upon LOI execution, the escrow arrangement, and the conditions under which it is refundable or forfeited.

💡 Keep the earnest money modest — $5,000 to $10,000 is typical for deals under $500,000 in total purchase price. Ensure the environmental and lease contingency refund triggers are explicitly stated. Do not allow the seller to make the deposit non-refundable prior to your environmental Phase I/II assessment being completed. Sellers who push back on these protections warrant additional scrutiny.

Due Diligence Period and Access

Defines the length of the due diligence period, what information the seller must provide, and the buyer's rights to inspect the premises, equipment, environmental records, financial records, and customer accounts.

💡 The environmental document request is non-negotiable for any dry cleaning acquisition involving legacy PERC equipment or operations. Request historical chemical supplier invoices — the quantity of PERC purchased over time is a proxy for contamination risk. POS reports are essential for cash revenue verification; insist on raw transaction-level exports, not summary reports. If the seller cannot produce 3 years of POS records, budget for a forensic revenue reconstruction using bank deposits and supplier invoices before you commit to price.

Environmental Contingency

Explicitly conditions the buyer's obligation to close on a satisfactory environmental assessment, establishing the buyer's right to terminate or renegotiate if PERC contamination or other solvent liability is discovered.

💡 This is the most important contingency in any dry cleaning LOI. PERC remediation costs routinely run $100,000 to over $1 million depending on contamination severity and state regulatory requirements. Even businesses that switched to hydrocarbon or wet-cleaning equipment years ago may carry legacy PERC liability in the soil or groundwater. Require the seller to disclose any prior Phase I or II reports, regulatory correspondence, or insurance claims related to solvent use. If contamination is found, a remediation escrow — funded from sale proceeds — is the most common resolution; carve-out indemnification from an individual seller is difficult to enforce.

Lease Assignment and Landlord Approval

Addresses the critical dependency on the existing lease, including the requirement for landlord consent to assignment, the acceptable remaining lease term, and the buyer's right to terminate if lease terms cannot be secured.

💡 Lease transferability is a make-or-break issue in dry cleaning acquisitions because the customer base is almost entirely location-dependent — a dry cleaner cannot easily relocate and retain its walk-in clientele. A lease with less than 3 years remaining significantly reduces business value and SBA lender appetite. Request a copy of the full lease and all amendments on day one of due diligence. Identify any co-tenancy clauses, radius restrictions, or demolition clauses that could threaten the location. If the landlord is uncooperative, consider negotiating a direct lease rather than an assignment.

Seller Non-Compete and Transition Assistance

Establishes the geographic and time-bound restrictions on the seller's ability to compete after closing, and defines the seller's obligation to train the buyer and facilitate the transition of customer and wholesale account relationships.

💡 A 5-mile, 3-to-5-year non-compete is standard and reasonable in this industry given the hyper-local nature of customer loyalty. Sellers who resist a geographic non-compete are a red flag — the business value is substantially tied to customer relationships. Require the transition period as a closing deliverable, not a goodwill gesture. For businesses with significant wholesale accounts (hotels, restaurants, uniform services), consider a longer non-compete tied specifically to those named accounts regardless of geography.

Exclusivity and Confidentiality

Grants the buyer an exclusive negotiating period during which the seller agrees not to solicit or accept other offers, and reinforces mutual confidentiality obligations for all deal information exchanged.

💡 60 to 90 days of exclusivity is appropriate for a dry cleaning acquisition given the time required for environmental assessment, lease negotiation, and SBA lender underwriting. Sellers may push for shorter exclusivity windows — stand firm, as environmental Phase II investigations alone can take 3 to 4 weeks. Employee and customer confidentiality is genuinely important in this industry; a premature rumor of a sale can trigger staff departures among seamstresses and technicians who are difficult to replace, meaningfully damaging business value before closing.

Conditions to Closing

Enumerates the specific conditions that must be satisfied before the buyer is obligated to proceed to closing, including financing, environmental clearance, lease approval, and staff retention.

💡 Staff retention is often overlooked in LOI conditions but is critical in dry cleaning and alterations. Skilled seamstresses and dry cleaning press operators are genuinely scarce — losing one or two key technicians between signing and closing can materially impair the business's capacity to serve customers and fulfill wholesale contracts. Consider requiring the seller to put transition incentive agreements in place for key staff as a closing condition, with the buyer reimbursing the cost.