A Linen Rental Service May be the Perfect Way to Keep Your Washers Turning – And Your Business Growing
Traditionally, when we speak of doing commercial accounts work in a laundromat setting, we’re most often talking about customer-owned goods. This is where the laundry owner finds business customers who have their own linens that need to be cleaned.
However, another approach – which I want to discuss this month – is to rent linens to your business clients, in an attempt to compete with the industrial plants perhaps currently handling their linen pickup and delivery.
Here are some keys to consider:
As a vended laundry, the first factor to remember is that you will never be able to compete with an industrial linen plant on price if the account has any type of volume whatsoever. The big plants’ ability to process in volume gives them the ability to price at rates in the 40- to 60-cents-per-pound range, depending on how strong or weak the market.
Therefore, the key to getting into this type of business is finding the “spare change that they drop out of their pockets” – which are the small linen customers.
Most of the industrial linen plants won’t stop their trucks for anything less than a $70 to $100 order. As a result, even with accounts worth less than this amount, the “big guys” typically are going to elevate their prices to somewhere within that range, in order to make the account cost-effective for them and their established routes.
And it’s with these smaller accounts that laundromat owners can be competitive with their linen rental businesses. Let’s look at a massage therapist as an example. Perhaps this small business is turning over maybe 30 to 50 sheets per week. That massage therapist isn’t going to get a 58-cents-per-sheet rate from an industrial linen company, which is receiving thousands of dollars a day in sheet volume from the local hospital.
So, it’s those smaller accounts that create a “sweet spot” for laundry owners looking to build their businesses – whether through towels, sheets or other rented products.
Now that we’ve identified what the market is, let’s look at the advantages and disadvantages of the linen rental business.
First, the advantages:
The biggest and most obvious advantage of linen rental is that it requires only half the number of trips to generate the same amount of revenue. If you’re bringing a customer linens from your inventory, you’re picking up an order at the same time that you’re bringing items back. So, you have one trip for every revenue-generating event, whereas with customer-owned goods, you typically have to make two trips for every revenue-generating event. One of the most costly aspects of the commercial laundry business is the pickup and delivery portion of it – and this cuts that cost in half.
Another advantage of having a linen rental business is that you can approach an entirely new group of customers, because now you have a product for them. Maybe your product is a walk-off mat and 20 sheets a week, or perhaps it’s 30 towels and 20 sheets and pillow cases – whatever it is, now you’ve got the ability to not only pick up that extra customer but also to garner a few extra products that you might otherwise not have done. It’s a great way to generate some extra revenue.
Another advantage is the fact that linen rental customers typically are very consistent, so you can count on that business. And, if you have the linens in-house, you don’t have to turn it around as quickly, so you can more easily and evenly plan your labor around processing it.
Of course, there are some disadvantages to linen rental:
For the most part, the linens must be returned in excellent shape. You have to be able to clean them perfectly every time. You’re also going to have a depreciable asset, because there will be shrinkage, and there’s going to be damage to products that you can’t send back out or reuse.
One factor to consider is who you want to rent to. We always mention hair salons when talking about great opportunities to do commercial laundry. However, hair salons are probably at the top of the list of businesses not to rent linens to. The primary reason is because nearly all hair salons dye hair or at least expose your linens to hair that has been dyed. Of course, when you dye an absorbent towel, that dye will transfer, and it won’t come out. That color will become permanent within that towel.
As a result, it’s wise to avoid accounts that likely will damage your linens.
Beyond damage, another factor to consider is shrinkage. For example, if you’re renting towels to your local boutique health club/spa – which no doubt provides great potential for a linen rental business – expect to suffer a fair amount of shrinkage. Invariably, people will take a shower or wipe down the equipment with a towel, and then that towel frequently will end up in their gym bag – and it will never return to your money-making inventory.
If you’re catering to that kind of business, be aware that you will probably have to replenish your inventory more often.
With regard to inventory, definitely do your research on quality and pricing. There are several sources out there to help you build your linen stockpile. Simply go online and search “hotel linen suppliers,” “industrial linen suppliers” or something similar.
If you’re in an area that has a linen warehouse, you can save a lot of money by picking up the items yourself, because the cost of freight typically represents about 10 percent to 15 percent of the cost of the linens.
What’s the life expectancy of commercial linens?
A bar mop or towel used in restaurants will have life expectancies between 25 and 30 washes, under an industrial linen application where they are conducting heavy grease-cutting chemical treatments.
However, I strongly suggest staying away from rental clients that subject your linens to heavy-duty grease stains in the first place. In my opinion, coffee shops and similar establishments that don’t deal with heavy soil or heavy grease are ideal linen rental customers to approach for towel service.
First of all, they likely require low volumes of linens to be processed per week, so they’re definitely in that “sweet spot.” Plus, you can process their items without exposing them to strong chemistry – and, in turn, you will get as many as 100 washes out of those bar mops and towels. But, beware that bar mops, like fitness center towels, will “disappear.” So expect some shrinkage.
For pricing purposes, I usually figure that I’m going to see and process a bar towel about 30 times. So, I need to make whatever money I can based on that frequency.
Generally, you’ll find that rental sheets aren’t going to be subject to shrinkage, so that inventory will last you the longest, as long as you can keep it looking good. Sheets typically are the most profitable linen rental items, as well as being the most expensive.
In an industrial setting with heavy chemistry, sheets will last 50 to 60 washings at the most. However, in a laundromat environment, those same sheets – which are not heavily soiled and therefore can be washed in lighter chemistry and at lower water temperatures – can last up to 300 washes. In fact, I’ve had some sheets in my inventory for up to six years.
Next, let’s consider pricing structure.
One of the interesting things about the linen rental model is that you can create an accurate spreadsheet for this segment of your business. For example, let’s say that a bedsheet costs me $4.13. I’m going to rent it for 85 cents, and I’m going to budget 100 uses of that sheet over its lifetime. So, it’s going to generate $85 in revenue over its entire life. And, again, it cost me $4.13.
Now, it’s also going to cost me approximately 15 cents each time I clean it, which includes packaging; please note that this is my number, and yours may be slightly different. The other important number is the delivery cost, and mine is about 5 cents per sheet.
As a result, I can look at the life of that sheet, and know what that sheet is going to generate for me over its lifetime. I know my costs and my price point – and that’s how I determine whether or not a particular market is one in which I can be profitable.
I’ll ask potential linen rental customers who might be using an industrial linen company about their current costs, because markets vary widely in price, especially depending on how competitive the marketplace may be. To further help determine your pricing, seek out business-owner friends who might be renting their linens and ask to take a look at their billing. What products are they renting and at what cost?
Of course, you should always set the fairest price for your customer, as well as the fairest price for you and your business. To determine that, a good starting point is to see what the market will bear, understand what your costs are, and then figure what value you can add.
Perhaps a customer doesn’t have a lot of storage space. Maybe they’re on a restrictive schedule with a large industrial linen plant, which is only delivering and picking up once of month. However, you could service their linen needs once a week at a smaller volume, thus freeing up storage space for this client.
That’s just one example of how you possibly can service certain linen rental customers better than the “big guys.” Clearly, there are all sorts of ways to add value in this business. You just need to look for them. Determine where you can do a better job – and those are the clients you should be trying to capture and service.