Originally posted – Jun 10, 2013
For the last 20 years, multi-store owner Bob Meuschke has averaged an additional 17 percent to 20 percent over and above his gross laundry sales, thanks to his operation’s ancillary profit centers.
“I am very much pro-ancillary profit centers,” said Meuschke, of Kansas City, Mo. “I have tried just about everything. Some work, and some don’t. However, I believe that, if laundry owners want to make as much as they possibly can, they need to add these additional pieces to their businesses – whether attended or unattended.”
Another laundry operator who agrees with Meuschke on looking beyond his washers and dryers to boost his bottom line is Danny Lee, who owns Super Clean Lavanderia in Langley Park, Md.
Lee’s 7,000-square-foot store features a number of added profits centers, including a café/convenience store, 10 internet stations and a large children’s play area. In fact, the store’s café contributes 15 percent of the total revenue, and the vending machines and internet stations bring in 5 percent. By themselves, the laundry’s five video machines bolster Super Clean’s bottom line by approximately $800 per month.
If you, like Meuschke and Lee, are looking to capture more money per customer per visit, including some additional profit centers within your laundry likely may be a good way to go.
As you consider what you can offer your customers, you need to ask yourself three questions:
• How much space can I afford to spare?
• Do I want to be hands-on, or shall I just contract out this profit center?
• How much do I want to spend upfront?
With those questions in mind, here’s a look at five of the more popular ancillary offerings some laundry owners have turned to:
Food and Drink Vending
Of course, soda and snack machines have become a staple in most self-service laundries.
“As a general rule, the reason for having them is going to be making use of floor space that may be unproductive or unprofitable,” said Daryl Johnson, who owns stores in Iowa and Minnesota. “You pay a lot for you square footage, so every portion of it needs to produce in some manner.”
Vending machines can be purchased or leased. Johnson – who has five snack vendors and eight drink machines in his stores – has done both.
He explained that laundry owners who lease their vending machines typically can expect to receive about 25 percent to 40 percent of the total gross revenue from those vendors.
“Financially, the machines I own are significantly more profitable,” he said. “Upfront, the cost of a soda machine is going to be anywhere from $500, up to $4,000. My personal preference is to get standard machines, not a glass-front – something that can hold 500 or 600 cans of soda. That’s the style I use.”
“If you allow a vending company into your store for these machines, you will receive a very unfair share of the profits,” added Dan Marrazzo, who operates multiple laundries in the Philadelphia market. “A combination machine selling both snacks and soda in the same machine will cost $3,600 to purchase new. Financing for two years will be $200 to $300 dollars a month, which is easily covered by sales of the product and will leave a reasonable profit for you at the end of the month.”
Meuschke is also a believer in purchasing his own beverage vendor; however, he’s had great luck with used machines.
“You can pick up older machines for just a few hundred dollars, and the electric cost is about $1 per day,” he explained. “If you own your own pop machine, you can make 80 percent to 110 percent profit, whereas if you [use a vending company], you will make about 25 percent. Of course, these margins don’t account for the time it takes to buy the products and load the machine.
“One of my pop machines is more than 40 years old. I have owned it for more than 22 years. It grosses me $130 to $180 per month during the summer, with a profit margin of 63 percent. I’ve only had to replace the compressor twice, at a cost of less than $200 each time.”
A major consideration with vending machines is having ample space for them, as well as finding the right location, according to Johnson.
“The biggest mistake I made with vending was when I bought my first candy machine,” Johnson said. “I had it too close to a west-facing window, and when the sun came in, it melted all of my candy bars. So, placement is critical.”
Also, keep in mind the fact that food vending machines can have some seasonal variation, according to Karl Hinrichs of HK Laundry Equipment.
“Soda and drink sales will explode during the summer months and slow down considerably in the winter,” he explained.
Another key factor to keep in mind if you own your machines are product dates.
“We have no protection against products that don’t get sold before their expiration,” Johnson said. “I’ve got to be careful when I purchase products that I buy items with a fairly long lead time on them. But I’ll get burned once in a while, and then my kids get a bunch of chips and candy.”
“You can usually get about a 100 percent to 120 percent markup on chips,” Meuschke said. “And, if the expiration date is getting close, mark them down to 75 percent profit, and they will sell out.”
Vended ice cream and cotton candy also have become quite popular in recent years.
For self-service laundry owners, the coin-operated amusement industry can be a unique business opportunity. Games and other amusement machines can offer outstanding profit potential for business owners who are willing to pursue that opportunity.
“They come with many advantages, most being a cash income that is commensurate with your store traffic – and, in the case of a pinball machine or a Pacman game, they are provided by a vending company, and the profits are evenly split,” said Dan Marrazzo. “This means there is nothing to fix, and you are making money just for having floor space and a standard electrical outlet.”
Music and game operators install and service the games and jukeboxes, as well as merchandise vending equipment. And, of course, the amusement industry has continued to respond to the shifts in the economy and changes within a social environment by becoming more efficient in utilizing the latest technology.
For instance, the placement of products that use the internet to manage content and that offer “tournament play” has increased in recent years. In addition to game networking, what else is hot in the gaming industry? Here’s a brief overview:
• Redemption prize games, such as cranes, are very popular in self-service laundry locations. They’re simple to maintain and easy to play – and, because the player can receive a prize for playing, there is the perception of added value.
• Video games, especially golf games, have displayed tremendous staying power and have become somewhat of a pop culture phenomenon – specifically the tournament-style games discussed.
• Any of the touch-screen countertop games, which feature a sleek physical design and expanding content options, currently present one of the greatest opportunities in terms of customer and location bases.
• Pool and billiard tables also continue to grow in popularity year after year, affording a great, inexpensive medium for entertainment purposes. Of course, space limitations might be an issue with this option.
“At one time, I had space for a pool table in one of my laundries,” Meuschke noted. “It averaged between $100 and $200 per week. There was usually a waiting list to play on weekends. It did require some extra insurance, but my gaming company took care of that. All I had to do was provide the space.”
• Complementing these trends in the coin-operated game sector are the jukebox and the pinball machine, which are the foundation on which the industry was built. With home technology like Xbox and PlayStation, the arcade video games take somewhat of a backseat, because the graphics and technology are just so tremendous at home on your own television. Therefore, things like pinball become more popular – things that not a lot of people have at home.
• Children’s rides, similar to pinball machines, also have a retro appeal to today’s laundry customers. As much as they are vending machines and you can count the quarters once a week, they also are marketing tools. It’s a way to differentiate your business from the laundry down the street.
“The games that have done well for me are pinball games and Ms. Pacman,” Johnson said. “I have some shooting games in my stores as well, and those also do well.
“In fact, the percentage of revenue I get is higher on my arcade games than it is on my vending. I’m up around 60 percent on my arcade games.”
To maximize your success, it’s important to keep your mix of games updated.
“I have my standard games, like my Ms. Pacman games always stay,” Johnson explained. “But I’ll rotate in a new shooting games or a different pinball machine every six months or so, I’ll have them change it up a little bit just to keep the store fresher.
“Your vending supplier knows what’s hot. They know what games are getting played, so they want to get those games into a location where they’re going to produce.”
“I would exclude any violent video games and only use ‘family friendly’ entertainment,” Hinrichs suggested. “My personal video game mix for a laundromat would be a sit-down driving game, where you can go head-to-head with another customer; a retro combination game like Ms. Pacman/Centipede; and a Mega-Touch game, where the customer has a choice of more than 20 different games.
For Johnson, one other type of arcade game that is always in each of his four stores is a crane game.
“The stuffed animals are about 50 cents, and it costs 75 cents to play the game,” he said. “So, I can pay out one stuff animal every five turns and still be making nice money. Plus, it’s good P.R. – the kids do the advertising for you; they’re screaming and hollering and jumping up and down. All of a sudden, everyone goes over there to play the game. I just use the natural tendency of the kids to my advantage.”
A common mistake is to position your arcade games toward the back of your store. Putting the game up front is a great way to get people into your laundromat. It’s a great advertisement.
Another pitfall to avoid, similar to your washers and dryers, is dirty or out-of-service equipment. You want to do some basic cleaning at least every night when you do the rest of your machines. You don’t want them to be sticky from kids’ fingers.
“A 3-year-old toddler, armed with a Chuck E. Cheese’s token or a bus token, can jam a video game in seconds,” said Brian Holland, co-owner of The Laundry Café in Philadelphia. “If you don’t realize it for days or weeks, you can lose valuable income – particularly if you have chosen to purchase machines and are responsible for repairs.”
Also, be sure you’ve got plenty of room, so that your arcade games won’t interfere with people who are washing their clothes.
But, above all, keep it simple. Remember that you’re not an arcade operator, you’re a laundry owner.
This amenity has found its way into several coin laundries across the U.S. Internet services can work in a variety of demographic settings, especially in low-income areas, where some customers may not have their own computers. As a result, your store can provide multiple services for them.
Johnson currently has 12 computers across his four laundries. He charges his customers $1 for 30 minutes, or $2 for 90 minutes – and he makes between $100 and $200 per store per month.
“It’s almost as profitable as my gaming,” he said.
However, Johnson originally got into the internet kiosk business by accident.
“We had created the option of having our customers fill out refund requests on our website and e-mail them to us,” he explained. “We built a refund link on our site, but we found out that a lot of our customers wouldn’t even go to the link because they didn’t have a computer or access to the internet.
“I wasn’t even looking at it as a profit center. I was looking to provide a service.”
He added that location of the computer stations is critical.
“You can create a bottleneck with the computers just like you can with vending, but vending machines you can move more easily,” he said. “Also, every store has cold areas and warm areas – you may get a cold breeze from a door opening, or perhaps it’s hotter in a certain area because it’s close to the heating ducts. And those factors can affect internet usage more than anything. People are sitting, and if they’re not comfortable with the climate, they’ll be less likely to use it.”
Bryan Maxwell of Western State Design offered some words of caution to laundry owners considering adding internet stations: “Many stores in California have added free wi-fi to their laundries, but I still have a small number of clients with internet kiosks. However, with the tremendous popularity of smartphones and tablets, I believe internet kiosks will be phased out over time.”
As evidenced by Johnson’s stores, in some markets internet stations can be real money-maker, while in others it simply won’t fly any longer.
“We have an internet station in one of our laundromats, and I thought it would be a great revenue-maker for our immigrant laundromat customers,” Hinrichs said. “But the playing field has changed where almost everyone has a smartphone with a data plan, which has killed the pay phone, pay for internet and internet station. Now, we offer free internet access for our laundry customers and will use the internet station to help entertain unruly children.”
Of course, for many laundry owners, profitability may not be the only factor to consider.
“While our computer stations are not the most profitable service, they add immeasurable value for our customers, many of whom cannot afford to purchase a laptop or home computer, let alone monthly internet service,” Holland said. “Although the actual income may be low here, the returns are magnified many times over because of the customer loyalty they create.”
Although his company doesn’t market automated teller machines, Maxwell said that ATMs are a popular ancillary product with his clients.
According to Maxwell, two options are available to store owners:
• An ATM can be purchased for $2,000 to $2,500. In this scenario, the owner stocks the ATM and receives 100 percent of the ATM fees, which range between $1.75 and $4 per transaction. Most clients stock the ATMs with $4,000 to $6,000, depending on the location. ATMs may hold up to $20,000.
• The ATM is installed in the location, and the owner incurs no upfront costs. The ATM is maintained by others, and the transaction fees are split 50/50. Although this option involves a lower initial investment and minimal risk, it is usually much less profitable.
Typically, there is a nominal maintenance fee of about $15 per month from the ATM company, and, of course, the ATM requires a high-speed internet connection.
“Obviously, ATMs must be installed in secure locations, but assuming you have the space and a secure location, an ATM can be one of the most profitable products in a laundry,” Maxwell said.
“ATMs are a great source of revenue and assist our laundromat customers in getting cash in our credit card society,” Hinrichs agreed. “Every transaction generates you money, and the busier the ATM, the higher the revenue.”
The only down side to an ATM, according to Hinrichs, is that you have a lot of money tied up in the ATM. Basically the cash in the ATM is your inventory and a part of doing business. There is also a greater risk of theft and vandalism due to a lot of money in one particular location.
“You don’t want to buy your own ATMs, unless you have several of them and they are placed in high-traffic areas,” Meuschke warned. “I bought my own years ago, and it worked well for quite a while; in fact, I paid off the machine in about three years, at $2 per transaction.
“However, I gave up on it after needing two expensive board upgrades within less than two years – as well as having a bank open only two blocks away.”
Car vacuums are “pure profit,” according to Hinrichs.
“They use a little bit of electricity but have no other consumables,” he explained. “There is some maintenance with the car vacuums, but these are money makers. This is a great accessory for the mom with kids and Cheerios all over the car – and also great for the single guy who has to wash his clothes. They will start their wash and then come back out vacuum their car. It’s a perfect accessory, and a very profitable one, too.”
Marrazzo couldn’t agree more.
“Car vacs can be purchased used from carwash owners needing to upgrade to the newest models,” he said. “They are very dependable and will return a handsome profit with minimal effort and weekly emptying. It’s a great way to give dad something to do while mom is washing – and make a profit at the same time. A remote area of the parking lot and a 120-volt electrical feed is all you need.”
Don’t Limit Your Business Potential
The list of what tomorrow’s coin laundry operators will offer their customers is only limited by their imaginations – and their drive to succeed.
Does your laundry offer cappuccinos, espressos or lattes? Perhaps think about it.
What’s more, there have been some great success stories with over-the-counter foods, such as sandwiches, wraps, fresh fruit cups, and high-end pastries and dessert items.
One laundry owner sells T-shirts and caps sporting his store’s soon-to-be-famous logo. Again, he’s making a profit, while getting tremendous free advertising.
Moreover, premium coffee, DVD rentals, lottery ticket sales, bottled water, pet washes, tanning and coin-operated vibrating massage chairs remain popular in some laundry markets.
Implementing a few of these ideas, along with some popular vending options (and coupled with your current wash-dry-fold and/or drop-off drycleaning services), can really begin to add up.
Depending on how many customers your laundry accommodates per week, your store could see a huge boost in income without adding any new patrons at all. Of course, not every customer will use all of your available amenities. But, if you can harness just a percentage of that potential, you can provide your customers with much-desired services, comfort and entertainment – all while increasing your business’s bottom line.
“The main consideration for all of these profit centers is time,” Marrazzo explained. “Do you have time to purchase, install and maintain the machinery, and keep the product in the machines? Your rewards will be well worth the investment.
“I had an 8-year-old son who was the wealthiest kid in the neighborhood, because I split the profits of a soda machine with him and made him bank half of his profits. Sixteen years later, he’s still an entrepreneur – and that was worth the price of the machine.”