The Laundry Doctor Reconsiders His Perspective on the Profitability of the Wash-Dry-Fold Business
For 20 years, I’ve warned laundromat owners against letting their wash-dry-fold operations interfere with and encroach upon the self-service end of their businesses. After all, that walk-in business is the “bread and butter” of this industry. Right?
Yes, of course, that’s still the case.
However, a recent webinar on the topic of wash-dry-fold – hosted by the Coin Laundry Association and featuring stellar laundry operators Neal Shapiro, Daniel Sofranko and Bruce Walker – featured some interesting comments regarding the profitability of a wash-dry-fold business, versus a strictly self-service laundry operation.
It made me reconsider my perspective a bit.
For the last 20 years that I’ve been in this business, the industry has never quite been able to successfully push the value of the wash-dry-fold product beyond a national average of about $1.10 per pound.
Although the industry has continued to attract greater numbers of consumers who covet this service (especially within the last year or so), there hasn’t been enough to really push the price of wash-dry-fold up to where it probably should be.
Up until recently, that is.
Of course, a number of drycleaners have gotten into the wash-dry-fold business as an add-on service for their customers. In fact, many drycleaners for years have been charging in the range of $3 to $4 per pound for the convenience of their laundry services.
Additionally, although the national average for wash-dry-fold in the laundromat industry may still be languishing at about $1.10 per pound, there are several store owners out there who are doing it right – and they’re getting $1.60, $1.70 and even $2 per pound for their wash-dry-fold services. They’re delivering a superior product – and their customers aren’t even blinking at the price.
The Labor Factor
The key factor that has always made wash-dry-fold less than attractive to some owners is the cost of labor. And, granted, we’ve seen a movement toward a minimum wage of $15 an hour nationally. But let’s look at that labor cost more closely.
First of all, we need to establish a wash-dry-fold production rate. In my experience, a well-trained laundromat employee should be able to produce, on average, 50 pounds of processed wash-dry-fold laundry per hour.
Next, let’s figure out revenue. At 50 pounds per hour at the national average price of $1.10 per pound, the revenue would be $55 per hour.
Now, let’s work the labor cost into this equation. Assuming you’re paying your wash-dry-fold employee $15 per hour, this will come to approximately $18 per hour once all of the labor costs have been fully factored in and accounted for. That $18 per hour represents 33 percent of your $55 per hour revenue for a wash-dry-fold product priced at $1.10.
However, what happens if we raise the cost of that wash-dry-fold service to $2 per hour – keeping in mind that many laundromat owners are already getting this price and higher, not to mention the fact that drycleaners are currently in the wash-dry-fold space at $3 or $4 an hour?
At $2 per pound, that 50-pound production rate will now get you $100 of WDF revenue per hour. Factor in the same $18 per hour labor cost, and labor has plummeted to represent just 18 percent of the equation.
At that point, with labor still by far the largest portion of your wash-dry-fold costs, you can begin to look at raising some of the other costs associated with full-service laundry, such as detergent and stain-treating chemicals.
Using more expensive soap doesn’t cost very much in the grand scheme of things, yet it produces a much higher quality finished product. Even at $1.10 per pound, soap costs represent about 3 percent revenue – and, at $2 a pound, that figure inches closer to just 1 percent. So, why not use the very best detergent and chemicals available?
Even with paying your employees $15 per hour and “splurging” on high-quality detergents, your overall cost of doing wash-dry-fold laundry at $2 per pound will represent only about 25 percent of the total revenue. And, at a 75 percent gross margin, a wash-dry-fold service becomes an extremely attractive business model to many owners. Perhaps even more attractive than self-service laundry.
What’s more, with a wash-dry-fold business, you have more control – you’re not waiting around for customers to walk in. Plus, you can do the work in a much smaller space, and you can utilize your equipment much more efficiently.
Adding Pickup and Delivery
Next, let’s consider adding another element to the mix – pickup and delivery.
If you’re simply offering drop-off wash-dry-fold, you never know when those laundry loads may come in. When you operate a pickup and delivery business, now you’re truly managing workflow and production. You’ll know exactly how much labor you’ll need and when you’ll need it. You can make that labor the most efficient, and you can produce finished products as quickly as possible.
With pickup and delivery, it’s important to watch your costs. Personally, I’ve always budgeted 10 percent of revenue per hour for my pickup and delivery service. At The Laundry Doctor, our costs per hour to operate a pickup and delivery service are about $30 an hour – with labor, fuel, vehicle depreciation and so on. So, we try to keep the volume at $300 per hour for that end of the business.
If you can keep your costs to 10 percent of the revenue per hour, a pickup and delivery service becomes quite an asset, because now you’re controlling the production side within your facility.
But be careful. Pickup and delivery costs can kill you. When we initially got into the laundry locker business, we were driving all over town, and it was drowning us in pickup and delivery costs. At one point, those costs were as high as 50 percent of our revenue. We quickly fixed that situation, but if you’re not paying attention, this is a variable that will take you down.
All in all, I’ve had a change of heart with regard to the profitability of the wash-dry-fold business.
Yes, you must manage your costs. Yes, you must provide a high-quality service and an excellent finished product. And, definitely, you must price your full-service options at a reasonable rate – for both you and your customers.
But, given these factors, a wash-dry-fold business, especially with a pickup and delivery element, potentially can be better for your overall laundry operation than strictly being in the self-service laundry business.
