Originally posted – Dec 09, 2013
In odd-numbered years, nothing that happens in the self-service laundry business can top the spectacle of The Clean Show. And 2013 – with the industry’s trade show and convention in New Orleans – was no exception.
“One of the major highlights of 2013 is not so much that we had a show, but what happened at the show and what those happenings say about where we are as an industry,” said Coin Laundry Association President and CEO Brian Wallace.
Anyone who attended this year’s main event likely left New Orleans with two major takeaways: (1) there was an overwhelming amount of new products, services and innovations on display; and (2) the energy and confidence of the show’s attendees was plainly evident.
“Nearly every manufacturer had a new product, a new service, new capacities, new controls or new innovations,” Wallace noted. “To me, that signals a stronger industry, when you have the manufacturers collectively investing millions upon millions of dollars to bring new product to market. It signals that they have confidence in the future of the business. They have confidence there is a demand for these products and services going forward, and I think that speaks well of what our current status is as an industry.”
When you couple that with the demand for education and the strong turnouts at the show’s educational sessions, it spells confidence in the laundry business.
“The industry gained confidence in 2013,” Wallace explained. “It had weathered a tough economy and performed admirably during those toughest times – and now that we’re in the slow recovery phase, people are feeling more confident about the laundry business. They felt that experience and the tough economy was an affirmation that they are in the right industry.”
Along with that boost in confidence was an increase in “qualified investors,” according to Tony Regan of American Dryer Corp.
“There was a definite increase, both in new investors as well as existing store owners who felt the economy is coming back and it was time to invest in new equipment for their laundries,” Regan said. “As a manufacturer, that’s a big highlight for us.”
“Equipment sales are strong,” added Ted Ristaino of Yankee Equipment Systems in Barrington, N.H. “This is mainly due to established owners rehabbing their stores. The rehabs are essentially centered on water-saving equipment and larger machines. To a lesser extent, high-extract machines are in the mix.”
Bryan Maxwell of Western State Design in Cerritos, Calif., agreed.
“The cost of financing equipment in 2013 was as low as I have ever seen,” he marveled. “Many store owners in recovering markets took advantage of these low financing rates and renovated their stores.”
“We observed a continued increase in laundromat owner confidence levels now that the economy has settled down,” said Kathryn Rowen, North American sales manager for Huebsch. “This led to an increase in replacement business, as more owners invested in their companies. This is a good trend that we expect to continue.”
Despite the obvious boost in industry confidence as we head into 2014, Chris Brick, the southeast regional sales manager for Maytag Commercial Laundry, felt that industry observers may want to temper their bullishness just a bit.
“Although the market continues to show improvements and lenders are loosening their stringent borrowing requirements, there are still potential owners not comfortable investing in the industry,” Brick said. “The reasons for this include concern of another recession and politics.”
“Overall, we’ve seen the industry prove itself to be ‘recession-resistant,’ which is appealing to new investors in the industry and comforting to existing owners,” added Brian Grell of Eastern Funding. “The Great Recession appears to be behind us. But will ongoing uncertainty and rising costs also make the industry perhaps ‘growth-resistant?'”
Of course, there will always be challenges in any industry. And, when looking back on 2013, two of the biggest obstacles were an unprecedented threat to the self-service laundry sales tax exemption and a continuing steady increase in water and sewer rates.
For the first time in memory, five different states seriously considered legislation that would have removed sales tax exemptions, including the exemption enjoyed by self-service laundries. That states of Ohio, Minnesota, North Carolina, Maine and Louisiana each had active discussions about specific legislation that would have removed the sales tax exemptions for self-service laundry, as well as exemptions for other types of service businesses in those states.
“To have five at the same time was really unprecedented,” Wallace said. “We’ve had single challenges or maybe even years where we’ve seen two states take a look at it, but this is the first time we had such a widespread threat to our very important sales tax exemption.”
Although it was a huge challenge, the good part is that the industry successfully defended its exemption in all five states. The CLA – with its affiliates on the front lines – hired lobbyists, rallied members and made the case that the self-service laundry industry is uniquely qualified to maintain its exemption.
“We feel that – because of the service we offer, how it’s provided, who we provide it to and the fact that it’s a basic necessity – we ought to be able to maintain that exemption indefinitely into the future,” Wallace explained.
The other big and continuing challenge for laundry owners has been the fact that water and sewer rates continue to go up – year after year, city after city, town after town. In 2013, this issue became even more top of mind, with many laundry owners seeing their water and sewer rates steadily increase.
“In some markets, there were significant jumps in utility costs, and more specifically water and sewer, as local municipalities looked to shore up decreasing revenues in other areas,” Rowen said. “This puts more of a burden on our industry as a major consumer of water.”
“We feel this will continue to be a challenge practically on an indefinite basis,” Wallace said. “As long as you’re in the laundry business, you’re likely to continue to see higher water and sewer rates.
“This challenge would be much more daunting, if not for the fact that our members have done such a good job of reducing their consumption by reequipping their stores and running their laundries more efficiently, which is absolutely paramount to maintaining the bottom line,” he added. “Our members also have been willing to pass along those increases to their customers through vend price increases to maintain margin in the face of these increasing costs for water and sewer rates.”
For those looking to build new stores or renovate existing ones, Ristaino warned that build out costs remain high.
“Long lead times for build outs, coupled with aggressive oversight by code enforcement officials, can extend opening dates by upwards of 90 days in some cases,” he added.
For owners with attended stores, payroll may prove to be another daunting challenge, as many states and markets consider increasing their minimum wages.
“San Jose raised its minimum wage to $10 per hour,” said Ron Kelley of EZ Coin Op Laundromat in San Jose, Calif. “Although many of my attendants were at or higher than $10, I raised their wages to maintain equality for long-time employees, versus new hires.”
From a marketing standpoint, one of the biggest challenges facing today’s laundry owners may be figuring out how to effectively promote their businesses in 2014 and beyond, according to Tom Rhodes, who owns Sunshine Laundries in Vero Beach, Fla.
“Marketing our laundromats in a world that is evolving from traditional media markets to a more digital world – and one that is more fragmented – will be a huge challenge,” Rhodes explained. “I realize that some of the old methods still work, but they need to be complemented by a strong digital presence.”
Another challenge for all small-business owners continues to be the uncertainty of government regulation, specifically Obamacare.
“The impact it has on the economy will be challenging,” said Michael Finkelstein of Associated Services Corp. in Danville, Va. “It seems like it’s a disaster that’s going to be coming down the pike, and it’s going to affect everybody – not in a good way.”
Trends Taking Hold
The reequipping and rehabbing of existing stores was a major trend that really took hold in 2013. Many savvy laundry owners have found poorly managed, neglected and under-performing laundries to be diamonds in the rough. Many of these stores happen to be in great locations and are ripe to have a forward-thinking, multi-store owners acquire and fix them up.
“In a sense, such owners are rescuing those locations and turning them from stores that are losing dollars and losing value to ones that are not only gaining sales but gaining profit margin as well,” Wallace said. “It’s good for our industry to have some of these bad stores replaced by good or great stores, making the best of great laundry locations.”
A second major trend is the continued increase in the number of multi-store owners in the industry.
“This is a continuing trend of a consolidation from within, where we’re not necessarily talking about major chains or franchises, but rather someone with two stores adding a third or three stores adding a fourth – and steadily growing their investment in the laundry business,” Wallace said.
In some cases, these multi-store operators are looking at existing locations that require better management and reequipping. However, in other scenarios, they’re seeking out potentially successful new locations.
“Again, this goes back to confidence, where many of the entrepreneurs in our business are taking a real look into the future and seeing that their best opportunities may in fact be in the laundry business,” Wallace explained. “There is, in a sense, a doubling down of their investment in the industry. I think we will continue to see multi-store owners increase in number and increase in the number of stores that they’re managing in the business.”
The third industry trend that really seemed to take center stage in 2013 was the growing use of alternative payment systems.
“We’re finding a continued increase in the number of store owners who are getting off the quarter as the only form of payment in their stores – understanding that larger equipment, changes in consumer buying habits and their need to better manage often multiple locations can all benefit from one of the many different types of alternative payment systems on the market today,” Wallace stated.
From the very high-tech card-only store management approach to the more “analog approach” with respect to tokens or dollar coins, it all adds up to an industry that’s moving away from the quarter as the only form of payment.
“Credit/debit card readers continue to be an area that is growing in popularity.” Finkelstein explained. “It’s already happened at gas stations and fast-food chains like McDonald’s, so it’s definitely impacting laundromats.”
“The integration of new payment systems, credit card readers, $1 coin accepters, etc. will continue to increase,” Maxwell concurred. “As equipment gets larger, dropping 36 quarters into a washer is really no longer practical or convenient. It’s a pain for customers, and it requires store owners to empty coin boxes too frequently. Also, many customers no longer carry much cash, so the convenience of ‘pay at the pump’-style credit/debit card readers will become more necessary.”
Maxwell also believes the cost of these systems will continue to decrease, as they have over the past few years – and, as they do, the investment in these types of systems will be more justifiable.
“The other trend I see moving forward is the use of live streaming of laundries on store websites,” Maxwell continued. “Now, customers can visit store websites and look to see if machines are available. If the store is busy, customers can wait a few minutes before they come down. If the store is empty, they can run over and get their laundry done. Also, these types of systems improve the security of a store, since the people in the store know they are being watched.”
Joel Jorgensen of Continental Girbau has seen a growing interest among laundry owners in servicing commercial accounts.
“I see more laundries expanding to serve commercial accounts,” Jorgensen said. “The great thing is that they can start small by offering commercial wash-dry-fold to a few accounts. As they become more proficient at handling commercial business, they can choose to expand their equipment and labor to meet client needs.
“A growing number of laundries will expand and serve commercial business to capture that extra revenue stream and put their equipment and labor to work.”
Clearly, the popularity of high-speed, energy-efficient equipment is another trend that’s here to stay.
“We saw a huge uptick in high-speed extract on the washer side,” Regan noted. “That has to do with using less water and less time in the dryers. Customers like to get out of the laundromat faster, and owners want to save on their utility bills.”
“Our customers are more strapped for time than ever,” Rhodes added. “I think a trend that will gain even more traction in the next few years is the purchase of frontload washers with higher G force. The laundromats that can save customers 15 to 30 minutes in the laundering process will win the battle for customers. And the price difference between 100-G and 200- to 350-G machines will be offset by higher customer loyalty.”
Looking to 2014
What’s ahead for next year?
Many feel that 2014 may well be a busy year for laundry brokers – with a good deal of laundry businesses changing hands, some owners exiting the business and even more investors looking to increase their portfolio of stores.
“I think we’re going to continue to see increased activity – buying and selling – building on the trends of the current year, with people looking to increase their footprint in the laundry business,” Wallace said. “That may or may not result in store values rising, but it has in the past.”
In addition, next year is likely to see not only a continuation of the reequipping trend, but reequipping with an emphasis on more large-capacity machines in the mix.
“Both with new stores, but particularly with stores that are reequipping, I think we’ll see a larger number of washers with capacities of 50 pounds and higher,” Wallace predicted. “I think we will continue to see more stores with the very largest capacities as part of their mix in 2014.”
Beyond just more large-capacity equipment, Laundrylux CEO Neal Milch sees “a greater focus on fully branded stores – with sophisticated operators who implement comprehensive marketing plans, deploying technology to optimize their stores’ performance.”
In 2014, while some of the basics will remain the same – clean, safe, well-lit stores with few out-of-order tags – the marketplace will continue to reward the more professional stores that offer well-trained attendants and equipment with more washing options than simply hot/warm/cold and more payment options than just quarters, Rhodes said.
“Every time we have upgraded our stores, the marketplace has rewarded our efforts,” he added.
“I think the laundry business is headed in a positive to direction in 2014,” said George Pierce of Pierce Commercial Laundry Distributors in Mandeville, La. “Owners will continue to reinvest in their businesses, using money from a growing number of eager lenders at low interest rates. Older laundries that fail will create opportunities for existing owners to grow in their market. With an improving economy, owners interested in selling their laundries will be less challenged in finding qualified investors.”
Regarding the CLA in 2014, the association has plans for several more membership campaigns in the new year, as it looks to add more people to the “CLA team” and to extend the organization’s reach in representing more store owners in 2014, according to Wallace.
The CLA’s activities in 2014 will be punctuated by its Excellence in Laundry Conference, which is scheduled for May 14-15 at the Ocean Reef Club in Key Largo, Fla.
“This will be the second such event, which is meant to appeal to the very best operators, bringing them together for an opportunity for education and networking,” Wallace explained. “It enables the best of the best to spend time with the best of the best in our industry. That will certainly be a highlight for 2014.
“From a governance standpoint, we are very proud to have Andy Kretz, president of Dexter Laundry, serve as our 2014 Chairman of the CLA Board of Directors. Andy’s got a lot of great ideas and important priorities he has in mind for his term of service as chairman, so we look forward to Andy’s contributions.
“It’s going to be a busy year, and it will be here before we know it.”