Originally posted – Oct 30, 2014
One of every four self-service laundry owners today operates multiple locations, according to the Coin Laundry Association’s 2014 Coin Laundry Industry Survey.
And that number has risen consistently.
Each year, more and more single-store owners and industry newcomers follow their dreams, taking on the responsibilities, challenges and hopefully added revenues of running multiple laundry locations.
Why the steady increase in multi-store ownership? Who are these entrepreneurs and what are their goals? And, perhaps most importantly, what does it mean for the overall future of the laundry business?
We reached out to all three segments of the laundry industry in an attempt to add some clarity to this ongoing trend.
“Since 2011, we have seen more chain store operators,” confirmed Brad Steinberg of California-based PWS Laundry. “While these operators come in all different forms, the largest growth has been from high-end chain-store operators – more specifically, those operators who want high-volume, high-net stores.”
Michael Davis of Star Distributing in Nashville also has seen a significant increase in multi-store owners, as has Mark Svancara of Coin & Professional Equipment Co., which has offices in Phoenix and Tucson.
“We have found that the savvy store owners are realizing multiple stores allow them to maximize their overhead and extend profitability,” said ADC’s Tony Regan. “We also are seeing that store owners are leveraging their first laundry against the new project, allowing for a more favorable look from the finance companies.”
“Actually, we’ve seen this multi-store trend for 10 to 12 years,” said Joel Jorgensen, vice president of sales and customer services for Continental Girbau, Inc.
Today’s Multi-Store Owners
Although owning one store can be great for supplementary income, many people now understand that a chain of stores can produce enough earnings to provide a primary income, Steinberg explained.
“I believe that, during the economic downturn, people realized their investments as well as their job security weren’t as protected as they may have thought,” he said. “While virtually no business is recession-resistant, the laundry industry provides a fair amount of stability.”
Many multi-store operators have their own specific strategy, he added.
“Some only like to purchase high-end existing stores, some only brand new stores, some only like to own laundromats in which they also own the property, and we see a lot of multi-store operators who prefer rehabbing existing stores; most of these types of operators own at least one store before getting into rehabbing,” Steinberg said.
Despite an owner’s particular strategy, there’s no doubt that increased technology and alternative payment forms are making it easier for professional investors looking to own a number of laundries.
“Better technology in the self-service laundry industry has allowed laundry owners to more efficiently manage multiple stores,” said Jeff Harvey, commercial financial analyst at Speed Queen Financial Services. “For example, machines with networking capabilities give store owners the ability to program, monitor and diagnose equipment from any internet-connected computer or device. These technologies have contributed to the uptick in multi-store owners. Additionally, creative financing solutions with both acquisition and equity financing are available to support laundromat owners with the desire to pursue a growth strategy.”
“The technology in the form of revenue-tracking is the key to multi-store ownership,” Davis suggested. “Now, store owners can feel comfortable that the income being deposited is the same income the store takes in monthly. Previously, owners would have silent partners when the income was not as easy to track.”
“No question, the main reason we now can attract multi-store investors are the card systems,” said Dion Marcionetti of Laundry Concepts, based in Addison, Ill., also crediting technology for the increase in multi-store operators. “It gives owners complete audit capabilities.”
Beyond technology, the Great Recession forced a lot of investors to pull money from stocks and other investments and put it toward growing their coin laundry businesses, surmised George Pierce of Pierce Commercial Laundry Distributors in Mandeville, La.
“Coin laundries experienced a slowdown in business, just like almost every other business, but not to the same degree.” Pierce said. “In many cases, a multi-business owner was using laundry revenue to help support another business, which created a desire to further invest in an industry that is less affected by fluctuating economic variables.”
“Several stores closed or were sold at a significant discount during the Great Recession,” Svancara added. “New investors were able to purchase several closed or underperforming stores for what they would have paid for one store that was performing well during healthy economic times. In our market, we also had a chain of stores sell at a significant discount; many existing store owners or new investors bought groups of these stores at one time.
“In our market, the increase in multi-store owners can be almost entirely attributed to the Great Recession.”
Regan believes that store owners who weathered the storm were able to do so because of their ability to keep the laundries running profitably. Now that we are through the toughest times, it’s these owners who realize they can get through difficult times and are less concerned with added financial risk. They actually use it to their advantage when negotiating with suppliers and financial companies.
The other side of this, according to Regan, is the “new to the business” multi-store owner who is just now realizing that owning a self-service laundry is still a profitable business but sees the real reward in owning more than one.
Karl Hinrichs of HK Laundry in Armonk, N.Y., sees today’s new multi-store owners as business-minded people who built one laundromat and found that it worked for their lifestyle, while also discovering the inherent advantages of owning laundromats.
“For example,” he said, “if you started a new business that was successful, making money and still afforded you a lot of free time, why wouldn’t you want to multiply this business model?
“I think the biggest hurdle for people to ‘pull the trigger’ on multiple-store ownership is that the first store needs to be successful, and they need to have the business structure and support systems to make owning a laundry easy. It all comes down to the benefit-versus-return calculation.”
Hinrichs added that he feels the Great Recession – although it didn’t directly drive single-store owners to become multiple-store owners – did force some people out of their comfort zone and into the laundromat market.
Today’s low interest rates and the fact that most other types of small business are experiencing higher rates of failure are key factors, pointed out John Vassiliades of Chicago-based J. Vassiliades & Co.
“I believe people saw a new business opportunity,” Hinrichs said. “The recession scared most casual investors out of the stock market, and these investors were looking for a place to park their money. To invest in a semi-passive business such as laundromats is not a bad investment. The recession was an economic storm that affected most industries in the country, but I believe that the laundromat industry was mostly unchanged.”
In general, the new multi-store owners are those who already have one very good laundromat and, when they look around for other areas of investment, they find that another laundromat or multiple stores are the best investment for them, according to Hinrichs. The logic is that, if one laundromat can generate this much return on my money, why not two or three laundromats.
Vassiliades estimated that, over the last two years, about 60 percent of the multi-store owners he’s seen are industry veterans, while the remaining 40 percent are newcomers to the business.
Understanding This Trend
Above all, this trend means that laundry ownership is requiring more business savvy in general, according to Jorgensen.
“Today’s owners understand business and how to boost profits by lowering overhead costs and eliminating competition,” he explained. “They understand marketing and the profit potential of multiple revenue streams, including wash-dry-fold, drop-off drycleaning, vending and commercial accounts.
“Today’s multi-store owners also understand the value of a ‘brand’ and a well-organized marketing plan,” Jorgensen continued. “Finally, the emergence of multi-store operators contributes to a positive vended laundry image and broader demographic appeal. Today, owners market to more than just the ‘traditional laundry customer.'”
“With the emergence of multi-store owners, we expect to continue to see a reinvestment in new and underperforming locations,” Harvey predicted. “I believe this will lead to more consolidation in the industry. However, the self-service laundry industry is currently highly fragmented, and it will be many years before we see significant impacts or change.”
But, clearly, multi-store operators are influencing the laundry industry in many ways, Davis noted.
“Some of the most significant ways are with nicer, better-run stores,” he suggested. “The nicer newer stores definitely should be the market leaders in price. It has been proven that a well-run store with well-operating equipment can charge higher vend prices than rundown locations.
“There is some consolidation due to this, but overall the coin laundry industry is still very fragmented and will most likely remain that way. However, I think multi-store owners will make their competitors improve their ‘game’ or slowly be run out of the market.”
From an investment standpoint, multi-store owners tend to be stronger financially, which allows them to build stores with the latest, energy-efficient and high-quality products, as well as nicely furnish their locations, according to Chris Brick, regional sales manager for Maytag Commercial Laundry.
“The look and feel, coupled with high-quality equipment, provides customers with a more enjoyable atmosphere,” Brick said. “A multi-store owner within a market is also able to provide a more consistent customer experience from location to location.”
In theory, one would think that fewer owners would mean less competition and an increase in vend prices, which would improve business for the owners, Svancara stated.
“Generally speaking, multi-store operators are a benefit to the industry,” Steinberg said. “Many are full-time laundry operators; this means they understand the basic principles as well as the nuances of the business. They understand the importance of keeping their stores clean and safe, while balancing great service at a fair price.”
In general, according to Marcionetti, the trend toward multi-ownership should boost the perception of the laundry industry.
“It could bring some consistencies in operations that will help the overall industry,” he said.
“I believe that the entire laundromat market is gravitating toward more professionally operated stores – and away from the mom-and-pop stores,” Hinrichs explained. “We have seen this trend for the last 20 years, and I believe it will continue.”
The natural extension of this belief is that these professional operators will own more and more laundromats – and they will operate better-run stores and will have a much more consistent product for the public, he predicted.
“This can only be a good thing for the industry to have more business-minded operators,” Hinrichs continued. “Of course, the laundromat dynasties really are nothing more than several individual laundromats bundled together – and, like many small businesses, the longevity of the dynasty is only as good as the next generation.”
Is a National Chain Next?
As the multi-laundry concept continues to grow and take root across the country, is a successful national chain or laundry franchise finally in the cards for this industry?
With today’s technology, Marcionetti pointed out that it certainly would be easier to control a chain or a franchise than in the past.
“In other industries, national chains have been a trend for a long time,” Svancara noted. “Walmart is the perfect example in retail. In fact, national chains have risen up in most industries, offering extremely low prices by profiting on volume, not margin. The medical industry is another example, with primary care physicians’ practices being purchased by large medical groups offering medical services for less.
“Smaller competitors are unable to compete on margin and, eventually, are acquired or go out of business. It’s logical to think that this could happen to the coin laundry industry… someday.”
However, Vassiliades and many others don’t buy it.
“I don’t believe we will see any national chains, or anything close to it, since there have been so many failures with national chains and franchises – thus proving that there doesn’t seem to be any economies of scale,” Vassiliades explained. “However, I can see local chains of laundromats with as many as 30 to 50 locations, as long as they are locally owned and operated within a small geographical area that can be reached comfortably by ownership.”
A national chain is improbably because vended laundries are still catering to a neighborhood clientele and market, Jorgensen said.
“A franchise is complex with a lot of fees and red tape,” he noted. “Franchises also are regulated differently state by state; so this complicates the idea of a franchise.”
The four major expenses of a laundromat are labor, utilities, rent and debt service, Hinrichs explained.
“A small operator can minimize their costs just as well as a franchise,” he said. “The only benefit of the franchise is the operational systems, but this is easily duplicated with the simple laundromat business.”
In Their Own Words
We asked a few successful multi-store owners to explain why they personally went the multiple-store route, as well as what they’re seeing on the front lines among their peers:
Tom Rhodes
Sunshine Laundries
Vero Beach, Fla.
Customers are going to patronize a laundromat that serves their needs. The customer doesn’t particularly care if the laundromat is part of a chain or not; they simply want to get in and out as quickly as possible in a clean safe environment. If there are two laundries side by side, the one that offers better customer service will win the day.
I’ve always said that a savvy operator who owns only one store can win the sales battle over a multi-store chain that doesn’t take care of their customers. However, with that said, I think the multi-store trend will continue, simply because most multi-store owners are more professional in their approach to satisfying the customer than most single-store owners. But owning multiple stores won’t guarantee success if the multi-store owner is treating their laundromats similar to a part-time single-store owner.
The market will always favor multiple store owners, because they have greater access to financing and capital. The capital investment to enter the business is so significant that your typical mom-and-pop operator with $50,000 to invest will have a hard time buying or building a store that can compete with a professional, well-capitalized operator.
And, of course, the Great Recession definitely winnowed the field and exacerbated the difference between the mom-and-pop operations and professional stores. We had the financial capability to maintain and modernize our stores, while smaller operators who ran marginal laundries could not, thereby bring even more customers to us.
On a personal note, I enjoy running a multi-store chain of laundromats from the business side of things. I would go crazy if I actually worked at one of my stores. I’m not wired that way. So running a chain of laundromats gives me variety that I find appealing. One day I’m working on an ad campaign, the next day I’m at a distributor trade show learning about new equipment. Now if I could only find someone to collect all those quarters for me…
Brian Brunckhorst
Advantage Laundry
Oakland, Calif.
First of all, I believe that there will always be a large percentage of single-store owners. This industry is very attractive to people who have a lot of money and are looking for something to do with their time. In the San Francisco Bay area, I am running into more multi-store owners, but to be honest, I can’t say for certain that it is a larger percentage than in prior years. I think it is more likely that they are just more visible.
I think the self-service laundry owner today is more sophisticated than in years past, running the operation much more like a true business than ever before. Savvy owners are capitalizing on the ability to cheaply advertise their businesses online, and this creates brand awareness. As their businesses grow, adding additional locations is a natural evolution.
Also, I believe the Great Recession woke up a lot of people to the fact that they are vulnerable working as employees. Many came to the realization that, no matter how hard they work or how good they are at their jobs, they could be let go at any time for any reason.
As the percentage of multi-store operators increases, you can expect to see a lot more branding of stores. Having a branded chain adds more consistency to the look and feel of the stores and gives customers a more predictable experience, especially if the stores are close together. And, if done on a large scale, branding could lead to industry consolidation, but we’re not seeing that yet.
Remember, in the laundry business, a store typically serves its neighborhood. It’s rare that a laundry will have a market greater than a five-mile radius. By, with multiple locations, an owner could corner the market and reduce the amount of competition.
For me, shortly after we bought our first store, I went back to work and we used the income from the business to pay off the debt service. Once our store was paid off, we realized that the revenue replaced my wife’s income.
This meant she could leave her job and help raise our three small kids at home. At that point, we had one of those “ah-ha” moments – buy some laundromats, pay them off, leave your job and become your own boss. It was simple math at that point.
We purchased two more stores and, in a few short years, I was able to walk away from corporate America and become my own boss. We now operate five stores in the San Francisco Bay area and are looking for more.
John Henderson
Liberty Laundries
Tulsa, Okla.
For some multi-store owners, it may have come down to deciding where to invest their money: in the highly volatile stock market or in an illiquid investment like a laundromat that at least seems to come through market downturns without too much damage. I opted for the latter after the stock market collapse in the late ’90s. I made a lot of money in the stock market over a 20-year period and I will probably invest there again, but for now I feel a lot more comfortable having direct control of my investment.
It seems reasonable that an increasing number of multi-store operators would add an element of stability to the industry. More stores means increased cash flow for the owner, which could help to subsidize stores that may be underperforming, or give the owner the ability to invest in improvements to increase business at that store. A single-store operator may not have that advantage.
On the other hand, I don’t think an increasing number of multi-store owners necessarily means more better-run stores. That depends on the individual operators.
It’s been my observation that many multi-store operations are unattended. The best of those chains have systems in place to ensure cleanliness and functioning machinery. But many of them do not.
Certainly, for some owners, running attended stores is not even a choice. For instance, many rural operators’ market demographics simply can’t support a full staff. Again, those unattended businesses can be well-run and profitable or dirty and neglected – it just depends on the owner.
Robert Maes
Express Laundry Centers
Houston, Texas
My experience is unique in that I opened two stores at the same time. So, I was a multi-store owner right out of the gate.
Why? The one-word answer is also probably why there are more multi-store owners today – and that’s “leverage.” And the most obvious form of leverage is economies of scale and scalability. For example, if you operate more than one store, you might be able to spread out your overhead or management. If you have a website or any marketing efforts, those can be spread out over multiple locations.
In my case, both locations were owned by the same landlord, so I was able to leverage savings with the lease.
With maintenance, you can hire a full-time maintenance person, which offers cost savings and convenience. With equipment purchases, you can leverage your volume with your equipment vendor.
In my case, I was able to leverage a better deal on construction costs, because my contractor was building two stores at the same time.
This is a scalable business. Once you develop a good business model, because of the type of dollars required to get into it, you can certainly scale it; you don’t need venture partners – you can do it on your own.
In addition, if you choose to brand your laundries, every time you add an additional location you are leveraging that brand. The more stores you get out there, the more opportunities you have to get your name and brand out there. And that makes it more omnipresent.
We all know how frequently apartment dwellers move and how transient laundry customers are. However, if you have multiple locations that are branded, you have a better probability of retaining those customers when they move. If they move 10 miles across town and you’ve got a store there, they are familiar with your brand. However, if you have one store and that customer moves away, you’ve likely lost them.
Multi-store ownership also enables you to leverage your reach. The disadvantage of having one location is that you’re only as good as that location. If you locate across the street from an apartment complex and something happens to that complex, you could be in trouble.
The other risk with a single location is, if a competitor comes in and builds a store just down the street, now you’re both fighting for the same piece of the piece.
If you have multiple locations, you’re able to extend your reach so that, even if something changes next to one of your stores, you still have the others and the ability to capture business.
When you have multiple stores, your radius can become 20 or 30 miles, rather than just three miles. So, even if something happens within that radius, your risk is much lower because your reach is much greater and you’re drawing from a much larger pool.
Within three years after opening my two stores, I had several new competitors open up within a five-mile radius of my stores – and we have not skipped a beat. That’s significant. I had multiple, branded locations, and I had more reach.
Lastly, multiple laundries enable you to leverage your cash flow. Laundry businesses are capital-intensive, and they have the opportunity to depreciate that capital over a relatively short amount of time. If you continue to take your earnings and reinvest them into more locations, you are able to continue to take advantage of that depreciation, as you open each new store.
I know owners with multiple stores who keep opening laundries just to be able to take advantage of that capital depreciation.
Again… leverage, leverage, leverage.
Keith Griffin
Super Suds Coin Laundry
Searcy, Ark.
I see an increase in multi-store owners because I believe more people are making the laundry business a full-time occupation. We’re seeing new owners who left big business or banking or healthcare – or perhaps they’ve retired early but don’t want to be fully retired. And, of course, we also see the young people who would rather be their own boss and allowed the freedom to do other things.
Because of this, we’re seeing a lot more professionalism. We’re seeing cutting-edge stores with all of the amenities – credit card acceptance, WiFi, community outreach programs and so on.
Without a doubt, the Great Recession made us all a lot smarter. It slowed down some runaway lending and probably tightened up what we all can do as store owners. It hurt when it first happened but, all in all, I think it makes the industry stronger, because only the most qualified people with solid business plans are going to be your competitors, which in turn will make you a better competitor.
There is nothing wrong with the mom-and-pop operations, but I think that business model is going away because owners can spread out their fixed costs, services, back-office infrastructure and management more efficiently in a multi-store environment.
I was in other businesses and gravitated toward this. Running multiple stores has given me the freedom to do other things. I’m involved in rental properties and mini-storage, and I’ve got a cattle farm and build houses.
So, if there was any business out there that was better than the laundry business, I’d be doing it.
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