Industry Insiders Recap the Past Year – And Look Closely at the Factors Shaping the Laundry Business in 2023
[This is the first of a two-part feature article reviewing the year in laundry and taking a glimpse at what 2023 and beyond might hold for store owners.]
It’s that time of year again – a time to reminisce about the 365 days gone by – and to try to get a feel for what the next 365 have in store.
Everyone does it – from the largest television networks to the most niche bloggers. This month, we will be inundated with all that 2022 had to offer in the way of politics, sports, music, movies, literature and so on.
Of course, in many ways, this summer’s successful Clean Show served as a backdrop to much that occurred in the industry this year, and the new technology and services unveiled in Atlanta definitely will have an impact on the laundromat business in 2023.
What other headlines from this past year will help shape the business going forward? What trends seem to be taking hold? And what should store owners be concerned about as we ring in a new year?
We posed just those questions and others to an expert panel comprised of industry leaders representing all three segments of the laundromat business. Our panel includes:
- Kevin Butorac, owner, Triad Laundry Equipment, Akron, Ohio
- Matt Conn, global director, commercial laundry product development and marketing, Whirlpool Corp.
- Daniel Duckworth, president, Laundry One, Canal Winchester, Ohio
- Jason Fleck, vice president of vended sales, Laundrylux
- Mike Hand, vice president, direct distribution, Alliance Laundry Systems
- Paul Hansen, owner, Hanco Enterprises Inc., Chicago
- Joel Jorgensen, vice president of sales, Girbau North America
- Mark Vlaskamp, managing partner, The Folde, Houston
What were the biggest industry stories to come out of 2022 that are sure to impact laundromat owners in 2023?
Daniel Duckworth: This year garnered many exciting product developments in the industry. This summer’s Clean Show highlighted many innovative technologies and major product developments from manufacturers. Mobile pay platforms are increasingly becoming popular, and equipment manufacturers have even developed their own systems. Furthermore, these platforms include collection reporting, promotions, and control of machines right at your fingertips. The added convenience of mobile pay to a laundromat can be a huge convenience for the customer base and a competitive advantage for the owner.
Pickup-and-delivery operators now can choose from multiple management software to help with scheduling, routing, and even partnering with DoorDash to handle pickups and deliveries. In addition, owners can double down on this opportunity to better manage their operations and expand their businesses further. We will continue to see this growth in 2023.
Paul Hansen: Some of the biggest stories affecting our industry have to include the continued consolidation of distributorships by manufacturers and others. How this change in the old distributor model will impact the way owners buy equipment and open stores is yet to be seen. The other big story is the continued expansion of manufacturer-owned stores and the addition of several franchise operators.
I also can foresee private equity and VC firms getting into laundromats, if they haven’t already done so. We seem to be a prime target for these firms, given how fragmented the industry is and the strong cash flow laundromats generate.
What’s more, pickup and delivery is continuing to grow, with many operators entering the space. Perhaps there might be some consolidation there.
Mike Hand: I think the biggest stories are still the costs that are impacting manufacturing, the labor shortage, and the overall uncertainty around the economy. These three things are impacting laundry owners in many ways. Attended stores are moving to unattended stores. Owners are reducing the hours stores are open. Some owners are looking for “bolt-on businesses” like pickup and delivery to drive additional revenue. And many laundromat owners are afraid to raise their vend prices – however, it’s a must.
Mark Vlaskamp: An interesting story that’s starting to bubble up is the potential for an economic downturn in 2023. This past year was full of growth for laundromat owners – from new stores to new revenue streams with booming pickup-and-delivery businesses.
The laundry industry is known as a recession-resistant industry. With speculation of an upcoming recession, there seems to be a lot of chatter online about how successful laundromats will be in the upcoming downturn. But speculation is easy. It’s quite difficult to pressure-test a business for changing economic factors. As consumer spending slows, it’s sure to impact laundromat owners in 2023, but I’m not sure how.
Does this hit pickup and delivery more than self-service laundry? How will decreased consumer spending impact laundromat owners? Are new store owners who just paid for equipment and buildouts going to be hit harder than those with established businesses? Will economic uncertainty hit Main Street businesses, or will the impact be felt more by Wall Street-type businesses? I don’t have the answers, but it’s hard to ignore the questions as we head into 2023.
Jason Fleck: I’d say that the rise of “industry personalities” as another voice for store owners looking for advice has been a notable movement this year. I’ve noticed our industry has opened up to help each other and become less tribal about the secret sauce that makes laundry ownership successful on all levels.
Aside from that, I saw interest in pickup and delivery rise significantly in this post-COVID world. When I think about the time we all spent stuck in an office or at home, I consider those initial attempts to mobile order food. Those first food delivery experiences – if they were good – had a lasting effect now that we’ve experienced the convenience. It’s similar for laundry pickup and delivery. There was a lift of such services during the pandemic, and now that store owners have seen the rise in potential, they’re looking to invest in this additional stream of income that can level off some of the peaks and valleys of a more traditional self-service laundry business.
Lastly, I think we’re living in a time when high-efficiency, soft-mount stores are becoming more mainstream in North America. Europe is way ahead of the U.S. on this movement. However, perhaps by necessity, we’re seeing a wave of interest in North America.
Matt Conn: Like most industries, the commercial laundry segment was not immune to economic challenges in 2022, as inflation took hold. With costs escalating, ensuring owners get a significant amount of run time with machines when they purchase them is key to ensure they don’t need to replace more often. Additionally, selecting more efficient products and solutions that work to address rising utility costs can help the owners going into 2023.
Laundromat owners have taken stock of where they sat over the pandemic and have worked to make necessary changes to provide safer, cleaner, and fresher stores for their customers. With those changes comes a need to educate. Owners can market their key learnings and insights to customers so that they can best use the machines and tools available.
Joel Jorgensen: The Clean Show returned after the COVID disruption and pandemic, allowing for much-needed networking and in-person education. It also allowed all manufacturers to showcase live demonstrations of new products and technologies. The show was a bonus for store owners looking to develop new vended laundries, replace old equipment, or invest in point-of-sale or alternative payment systems.
This was a year for record-breaking equipment demand, as well as for transportation and supply-chain challenges for all consumer products.
What were the biggest general business stories to come out of 2022 that are likely to affect laundromat owners in 2023?
Vlaskamp: The beginning of 2022 was marked by labor shortages and difficulty hiring for laundromat owners. As we enter 2023, I’m curious to see how labor availability changes as general unemployment increases.
Jorgensen: This year was marked by a dramatic rise in utility costs, which impacted the bottom-line profitability of every vended laundry owner out there.
While utility costs grew, so did interest rates. There were numerous Federal Reserve interest rate hikes, which made borrowing money for store improvement and development more expensive, following many years of low interest rates.
In 2022, hourly labor availability, employee dependability, and payroll costs became a huge concern for store owners – impacting growth areas of full-service wash-dry-fold, commercial laundry processing, and pickup and delivery. It was difficult to find dependable employees and qualified drivers.
Duckworth: This year, laundromat owners were put to the ultimate test. Labor shortages, wage increases, product shortages, aggressive interest rate hikes, and utility price increases all played a part in a difficult year. Fortunately, many owners saw substantial revenues and have adjusted to the changing landscape of running a business. Operators are still purchasing machines and modernizing their operations. This is crucial, as this industry has become extremely attractive to outside investors, due to its “recession-proof” reputation. Amenities, promotions, efficient machinery, and technology to help run the business are imperative to stay competitive. Also, owners wishing to update their laundromats need to be proactive. Don’t wait until competition comes – act like competition is already here.
Hansen: Labor was – and will continue to be – an issue for store owners going forward. In many markets, I don’t feel that wage pressure will come from higher minimum wages laws, but rather from the tightness of the labor market. Many owners are paying much higher than the statutory minimum wage, just to attract quality employees.
The other big issue is utility costs. Water rates have been going up for years. In Chicago, they are up approximately 350 percent in the last 10 years. And, given some of the drought conditions out West, those costs will continue to rise. Additionally, gas and electric will be a challenge – and, for those of us who can buy from non-utility providers, the trick is when or if to lock in a price, or to simply ride out the market.
Hand: The cost of equipment continues to rise, which will certainly encourage some store owners to repair their machines, versus purchasing new. Also, labor issues may cause them to move to an unattended business model; however, in my opinion, vended laundries will still thrive if they provide a clean, safe, and friendly atmosphere.
Fleck: On the construction side, we saw everything from a delay in getting automatic doors to the challenge of a labor shortage. Construction costs rose more than 30 percent in some cases, but incredibly it hasn’t yet slowed our store development noticeably. I think other industries have been hit harder. Plus, the stock markets are finicky right now, which is driving more investment to laundromats, despite some of the challenges.
Kevin Butorac: As we all know, supply-chain disruptions, rising costs, and labor issues were some of the biggest stories. It was – and continues to be – difficult to plan for a retool, a new build, or a remodel, as well as to obtain parts to keep existing equipment running. I think many laundromat owners looked at ideas outside of what they were used to – perhaps changing brands, reconsidering equipment mixes, and so on.
In terms of rising costs and labor shortages, owners reevaluated what was profitable and what wasn’t. This may have included changing business hours or the hours they were attended, along with focusing more on walk-in vended sales, versus drop-off and pickup-and-delivery business. I don’t believe there was one specific right or wrong. Some owners saw increased opportunity in their drop-off laundry segments, while others may have shifted focus to the self-service vended business. Overall, I think it has made owners take a closer look at their businesses and focus on what aspects are profitable, as opposed to what can be trimmed or even eliminated.
Conn: We heard at Clean 2022 that laundromat owners are taking an even closer look at their business strategies and objectives, and working to determine better ways to optimize their operations.
As they meet with vendors, they’re figuring out how to make technology enhancements, exploring additional products and services, and addressing areas of improvement for their laundromats that were highlighted during the pandemic.
Store owners also are working through the supply-chain challenges which have eased, but not completely subsided.
In Part 2, the panelists share their thoughts on industry trends, growing concerns, and reasons for laundromat owners to be optimist about the coming year.
