Originally posted – Oct 08, 2013
In last month’s column, I wrote about the five biggest mistakes you can make when running your drop-off laundry business. One of the pitfalls I warned against was letting your employees work for themselves – essentially allowing your attendants to run their own wash-dry-fold business within your store.
This is a common mistake that many laundry owners make, so I wanted to discuss it further this month.
It’s due to the mindset that many operators share. They want to add a wash-dry-fold service because they want to keep their machines turning on a regular basis. However, many of them don’t want to deal with a retail-type of business, which wash-dry-fold most definitely is.
They just want their equipment running, and they’re happy with the margin they can make by having those washers and dryer turn. The typical thought process goes like this:
“Why don’t I just let my attendants run their own wash-dry-fold business in my laundromat? I’ll make money, because they’re utilizing my equipment. They’re paying me a vended price I’m happy with, and my equipment is getting more use.”
Sounds good, right?
Not so fast. There are quite of few considerations before completely turning over your drop-off laundry business to your attendants.
Your Reputation is On the Line
The first hurdle is the fact that these employees are still representing your business. It’s your name on the marquee out front. It’s your location. So, in many ways, these employees have your reputation in their hands.
How will you handle it when you get a phone call from a customer saying “you” ruined or lost his clothes with “your” wash-dry-fold service? How are you going to handle that?
It’s going to happen. The employees are going to mess something up, and you’re going to have to deal with it. The customer will want you to pay for it, and you’ve got to keep those customers happy.
That’s a huge potential risk.
Are You Properly Insured?
Next question: Do you have the right insurance? Do your attendants have the right insurance?
Let’s say an employee gets hurt in the process of doing laundry, versus cleaning the store. Your worker’s compensation insurance may or may not cover that injury. Insurance companies will deny claims if you didn’t tell them what businesses you were running at your location.
Or, what if an employee has a car accident on the way to Sam’s Club to pick up supplies for her wash-dry-fold business? Will she want to file a worker’s compensation claim and expect your insurance to cover it? Of course, that’s a completely legitimate claim – but only if you had sent her to get supplies for your own drop-off business.
You need to be sure you have the correct insurance to cover the work that your attendants are doing for your business.
Also, don’t neglect bailee coverage. If you don’t have this type of insurance and your employees damage someone’s clothes, you’re likely going to pay for it. Or, if your store has a fire or flood and you’ve got wash-dry-fold loads in there (but you don’t have insurance for a wash-dry-fold business running in your laundromat), your insurance company is not going to cover the cost of those clothes.
Don’t Overlook the Tax Implications
In many states, there are sales taxes associated with drop-off laundry services. And, if your employees aren’t paying it (but they’re still your employees and they’re running their laundry service out of your location), the state will more than likely come after you, if they audit your business.
It may be difficult to collect from your attendants because they probably won’t have a good record of what’s going on there. So, you may end up paying an estimated sales tax on business you never did or even received any money for.
Cleanliness Can Slip
Another big issue is the cleanliness of your store. I can tell you on good authority that, when you get busy with wash-dry-fold orders, the last thing your attendants are going to be doing is cleaning your laundromat.
The first thing they will be doing is taking care of their own personal bottom line – and, thus, the appearance of the store can suffer. So, you need to ensure that, even though you’re letting them run their own business, these employees are still doing what you originally hired them to do.
Other Considerations
There are some other issues to consider as well:
• Business Licenses: If your attendants are going to run their own business, they need to have a separate business license. A lot of cities and municipalities will grant you a coin laundry business license, but if you’re also doing drop-off laundry, a separate license is required.
• Business Insurance: Your employees also need an insurance policy that names you and your building as additional insureds. If they are running their own business within your business, you need to have it properly defined and properly protected.
• Lease: Your attendants should have a lease – a defined contract between you and them, defining what they can and cannot do in your facility. How much space can they take up? What kind of space can they utilize? Can they use your washers on Saturdays and Sundays, during your peak business hours? You need to define these issues and parameters because, as their business grows, you don’t want it interfering with your business.
• Termination: It’s harder to fire employee when they’re running a separate business in your store – so you should have a contract defining how that can happen. After all, if you terminate an employee who is running her own wash-dry-fold business, she can claim all of the income she was doing from running her own business when she files for unemployment benefits. Also, if you let an employee go, you’re effectively “stealing her business” from her – and, theoretically, she could request that you pay to buy back the rights to that wash-dry-fold business.
It can become a real mess.
Ironically, most laundry owners who let their attendants run the wash-dry-fold business do so because they want to keep their business lives simple; however, this can backfire and end up creating twice the hassle.
Your self-service laundry business is a huge investment. You don’t want to lose it to some careless mistake by a minimum-wage employee who was hired to clean your store and who has no vested interest in your business. You don’t want to take the chance that someone else can ruin your investment.
In my opinion, if you’re going to get into the drop-off laundry business, you should always do it yourself. You need to run it as an independent retail business – and you need to have total control over it.
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