housing

Originally posted – May 28, 2014

Each year, billions of dollars go through apartment laundry rooms, which provide basically the same service your laundromat offers.

And, although the target demographics for self-service laundries and apartment laundry rooms are extremely similar – nearly identical in many marketplaces – renters’ use of these two types of laundry facilities is hardly comparable.

In fact, according to recent Coin Laundry Association statistics, only about 15 percent of renters regularly utilize laundromats, while 39 percent prefer to use their buildings’ laundry rooms. This is despite the fact that almost 70 percent of renters live within a mile of the nearest laundromat, and nearly 50 percent have a store within six blocks. (It should be noted that, according to the CLA’s 2013 Renters Survey, another 42 percent of respondents regularly take advantage of their apartment complexes’ in-unit washers and dryers.)

To be sure, today’s multi-housing laundry facilities – which are serviced by a shrinking number of “route” operators – aren’t the dark, dingy apartment laundry rooms of old. These operators have grown increasingly more professional, and the equipment, in many cases, is high quality. So, here’s a look at this competitor – and a potential customer source – which you probably can’t afford to overlook.

The ‘Route’ Business: How It Works

The laundry route business deals with multi-housing developments – apartments, college dormitories, retirement communities and so on. While there are some similarities between coin laundry ownership and route operation, the two businesses are certainly not identical. Typically, the ratio is still about one washer and one dryer for every 10 apartments.

Route operators approach landlords or management companies and offer to supply their designated laundry rooms with all of the necessary equipment for tenants to do their wash. The route operator agrees to install, maintain and upgrade the machinery, and shares the collection revenues with the building owner.

There are no upfront costs to the building owner, as the route operator owns all of the equipment. All the building owner needs to do is pay the utility bills, keep the room clean and notify the route operator if a machine goes down. Once the terms are agreed upon, the route operator and building owner enter into a contract.

In most instances, the route operator does the physical setup, the plumbing, electrical and so on. Generally, they divvy up the income, which can vary anywhere from a 50/50 split to 75/25 – and it can go either way. It’s not a fixed proportion, and it’s based on the size of the laundry room and the size of the business.

Of course, just as a coin laundry is worth nothing without a good lease, a successful route business is dependent on a strong contract.

The length of the term is a key factor, as are the percentage of the split and clearly spelling out who is responsible for what.

Generally, the contracts are set up no less than seven years and, in many instances, 10 years. The reason for the seven- to 10-year contract is because most of the time the laundry rooms are set up with a four- to five-year payback to the route operator, which will leave him at least another few years to make his profit.

A typical percentage split is 50/50, though there also are cases where the landlord may get 60 percent or more, if they offer the route operator a longer contract and free rein on pricing.

In some cases, the route operator may be asked to give the building owner an allowance for decorating expenses or some other “bonus” situation. For example, the route operator may give the owner $10,000 upfront, plus 50 percent of the collections.

In some situations, the landlord may prefer to rent the laundry equipment from the route operator. In that case, the landlord signs a contract and pays the route operator a flat fee per month, and it is his responsibility to collect the machines (and keep the money). The route operator is responsible for the maintenance.

Of course, collection procedures are much easier with today’s technology, and help to keep the landlord happy as well as keep the collectors honest. Most of the machines currently in use are computerized and generate reports that route operators can provide the building owner, along with his check. However, some landlords prefer to be present during collections.

With regard to collections, vend price disparity is another issue between self-service laundries and multi-housing locations – and a major advantage for apartment laundry rooms.

“When laundromats are closer to multi-family housing locations, the prices tend to be similar,” said Cathy Jackson, vice president of marketing for WASH Multifamily Laundry Systems. “Where there is a greater distance between these locations, pricing can fluctuate more, as the consumer has less convenient options. However, it is in the best interest of both the route operator and laundromats to avoid pricing wars, as pricing wars tend to reduce everyone’s revenues and keep overall pricing in the market artificially low.”

“There is no doubt that laundromat pricing is vended higher than apartment laundry,” added Alex Kane, director of marketing and technology for Equipment Marketers, based in Cherry Hill, N.J. “In our area, laundromats are about 25 percent to 40 percent higher than apartment vend prices. This pricing structure is mainly ‘by design’ from the route operators. In an apartment complex, the route operator wants to maintain the captive audience of renters by enticing them to the apartment laundry and keep them away from the laundromat. I don’t believe we will see any shrinkage in this disparity, since the route operators have a vested interest in keeping these prices below the laundromat price to maintain their customer base.”

“In general, the price disparity is sometimes dependent on the location of the route,” explained Wally Makowsky, a long-time Chicago laundry owner and the author of this magazine’s popular “Wash with Wally” column. “In most instances, the route operations – per pound of wash – are cheaper than they were five or 10 years ago. Right now, the price disparity between a coin laundry and a route operation is anywhere between 5 percent and 10 percent.”

The Rental Housing Market


Taking an closer look at the rental market: even during the home-buying boom, the share of U.S. households living in rental housing never fell below 30 percent, according to “America’s Rental Housing: Meeting Challenges, Building on Opportunities,” a report on the state of the rental housing industry from Harvard University’s Joint Center for Housing Studies.

The study includes extensive data on the apartment industry in the key areas of market conditions, renter demographics and the rental housing stock. Among the report’s major findings:

• Rental housing serves a large and diverse population of nearly 39 million U.S. households.

• The number of renter households grew by almost four million between 2005 and 2010.

• Population trends should lift the number of renter households by more than 3.6 million between 2010 and 2020.

• Renters cover the age spectrum. While younger groups are much more likely to rent their housing, more heads of renter households are between the ages of 35 and 64 (46 percent) than under 35 (41 percent).

• Single-person households make up nearly two out of every five renters. The rest of the renter population is fairly equally divided among married couples with and without children, single-parent households, and other related and unrelated groups of people.

• Minority households contributed 81 percent of the renter growth from 2001 to 2010. Hispanics accounted for 39 percent and African-Americans for 27 percent of the increase. Over the last decade, the minority share of renters rose from 39 percent to 45 percent.

Also, while estimates vary, the Census Bureau’s Housing Vacancy Survey indicated that the number of renters swelled by 3.9 million from 2004 to 2010. Meanwhile, the national homeownership rate dipped below 67 percent in 2010, down from 69 percent in 2004.

What’s Trending?


Once considered a mom-and-pop business, route operation is now a booming and sought after industry. Unlike self-service laundry, route operation has lent itself to consolidation. Large corporations, such as Coinmach and WASH, are growing each year by buying out smaller, independent route operators.

“During the postwar boom in the 1940s and 1950s, route laundry was a popular family startup business,” said Jackson, whose company acquired Canada’s Coinamatic in 2013 and now operates laundry rooms in approximately 65,000 locations. “There were not many barriers to entry, and companies could grow organically without a large outlay of capital. Through time, the sophistication and technology required to stay competitive within this more demanding market caused small route operators to sell off. Also, many of these companies were being run by a disinterested third generation that wanted to cash out and pursue other opportunities.

“While it is still too early to predict the full impact of the consolidation trend, we are hearing that many of the smaller route operators are experiencing quality and ‘trust’ issues, as they attempt to keep pace,” she added. “They don’t have the resources to invest in the infrastructure, processes and technology that are so critical in today’s marketplace. The trend is expected to continue as small operators will have difficulty competing with the service and technology requirements of this sector.”

Kane sees the recent move toward consolidation as an opportunity.

“With this consolidation, we feel there is an even greater opportunity for smaller, regional companies to provide personalized service and customized packages to apartment owners,” he said.

“Consolidation is probably the single biggest factor in our industry today,” added Multi-Housing Laundry Association Vice President Mike Marsden of Coin Meter Co. in Portland, Ore. “Of the three largest companies in the U.S., two of them – Coinmach and Mac-Gray – merged. So, now you have some markets in the U.S. where one single provider has the majority of the business that’s on route. It’s a significant milestone in our industry.

“There just aren’t that many large route operators left. There are some and there will certainly be some growth, but I’m unsure just how much. It used to be a business that had at least 150 large route operators around the country – and, by ‘large,’ I mean 10,000 machines or more. Today, it’s down to just a handful.

“The business has gotten about as consolidated as it can get. Whether that’s a positive or a negative, I don’t know – it’s too soon to tell.”

Also, the trend away from landlord-owned multi-housing facilities means that the laundry rooms are now increasingly run by professionals in the industry. As the route business has become increasingly more professional, the laundry rooms also are becoming much more customer-friendly than in the past.

For example, the transition away from coin acceptance and to smart card/credit card systems has been occurring as an ongoing trend, and there continues to be a big push toward these systems, according to Kane. They are more convenient, more secure and more reliable than coin acceptance. In addition, collection frequencies are much lower (and sometimes non-existent) with these systems.

“The biggest trend in the route business is getting out of coins,” Marsden said. “The No. 1 trend that’s changing the industry is electronic payment. Society as a whole is getting out of the cash industry. In fact, we’ve gone to almost 35 percent electronic payment systems, rather than coins.”

“As internet connectivity becomes cheaper, faster and more prevalent, connecting laundry equipment to the outside world is the latest technology trend within the industry,” Kane explained. “Maytag just introduced a program that allows control and tracking of laundry equipment through any web-based device. Changing pricing, giving refunds, service alerts, auditing, usage reporting and accessing service history are all easily available to the route operator through a standard web browser, optimized to work with mobile devices. For the end user, seeing what machines are available and getting text or email notifications are just a couple of the many benefits of this system.”

Especially in the college market, there has been a trend toward “free laundry” in which the laundry fees are connected to the rent payment and the operation of the laundry equipment is set to “free vend.”

“This arrangement works only when the laundry rooms can be sufficiently secured to prevent outsiders from coming in, which can result in additional wear and tear on the machines,” Kane noted. “Especially in the college market, student’s parents find the concept of free laundry a very attractive amenity.

Also, with the proliferation of smart phones and a connected world, laundry monitoring has become a hot button for apartment laundry. With laundry rooms sometimes many floors below the apartment level, checking to see whether machines are available or done is a logical next step in the evolution of technology and laundry equipment.

“We have seen a good response from end users in variable pricing on soil-level options on washers,” said Jared Mueller of Coin Meter. “Residents select for extra rinses and long wash cycles at higher vend prices. This way they can control how much water they use and how long a cycle runs. If they feel they need more water, they can have it.”

“Aside from technology-enabled improvements, laundry room design and amenities also are coming more into play,” Jackson explained. “New laundry rooms have fresh, vibrant and modern designs with WiFi access, designated seating and folding areas, large flat-screen TV monitors and other amenities.

“We are also seeing improvements in energy conservation. In recent years, manufacturers have developed new washer and dryer models that meet strict energy efficiency guidelines set by the U.S. Environmental Protection Agency and the U.S. Department of Energy – and this translates into significant energy savings for laundry rooms.”

“The route operators have put larger machines into some of their laundry rooms, which they hadn’t done before, and the management companies also are requiring some route operators to completely remodel their facilities,” Makowsky added.

One emerging trend in some markets – which may bode well for laundry owners and route operators alike – is the resurgence of the laundry room, as opposed to in-unit machines.

“In these days of ever-increasing sewer costs, the common area laundry is proving to be a significant cost-saving for many buildings’ operating costs,” said Coin Meter’s Tom Behn. “This has been seen in both conventional and affordable housing.”

Getting Renters Through Your Doors

At first glance, apartment laundries appear to have two big advantages – cost and convenience. In most cases, vend prices are lower in apartment laundry rooms and other rental housing laundry facilities, when compared to retail, self-service laundries. In addition, residents do not have to leave the apartment complex to do laundry. And, like home washer owners, apartment laundry users will argue that they “can do other things” while doing laundry where they live.

But, at the end of the day, most laundry owners can still provide for a better overall laundry experience for these households. Despite all of the vast improvements in multi-housing laundry facilities and the prevalence of in-unit equipment, the self-service laundry still has the competitive edge in many areas.

“Coin laundries can have a distinct advantage over apartment laundries with several factors,” Kane said. “The primary advantage is the number of and size of laundry equipment available. Often, apartment laundry rooms have a smaller number of machines and they are typically single-load units. In a coin laundry, a customer can bring a large load of laundry and pack it into either many smaller machines or into one large machine. Drying is generally faster in multi-load equipment as well. Speed of getting laundry is the key advantage here.

“And, of course, the laundry owner can enhance the experience with a clean location, bright lighting and activities to keep the customers busy and happy, such as TVs, games, internet access, children’s play areas and so on. Also, a safe environment and helpful attendants will make people feel more comfortable.”

“Most apartment building laundries are vulnerable to coin laundries that have larger equipment,” Makowsky added. “In addition, drying time is a key. The real advantage of a coin laundry with larger dryers is that it can get most people in and out in half the time, if not less, than it would take in an apartment laundry. Although it hasn’t been widely advertised, when it comes to drying clothes, it can take an hour and a half in a typical laundry room, versus 30 minutes or so in a laundromat.”

Also, while the good thing about apartment laundries is that they are typically quite convenient for the tenants, the bad thing is there are never enough machines on the weekends for the laundry customer to use. And the most important thing to customers is that they have machines available when they need them. People want to get in and get their work done. They don’t want to be going up and down stairs or down the hall for every load.

As a laundry owner, you need to let apartment tenants know that you exist and that you have the machines available they need to get all of their laundry done at once. Their time is the key factor, and you have a variety of machines. That’s the magic wand.

“I believe that selling laundry services to multi-housing customers is mainly based on the principal of convenience,” Kane explained. “You need to give the apartment dweller a reason to load up the laundry in the car and travel outside of their apartment complex. This convenience can be promoted in many ways, but one of the best is through credit card/user card systems – not having to find, convert and deal with quarters is a huge benefit.

“Another way to sell coin laundries is through promotions. Apartment laundry operations hardly ever run promotions, so it’s a good opportunity to catch the thrifty apartment dweller. Pricing machines cheaper at off-peak times and days is a great way to pull in the customers.”

And, typically, once you get them to try your coin laundry, you can keep them, or at least a large percentage of them, because they see how nice today’s laundromats are. Unfortunately, some people’s perception of a coin laundry is still a row of washers, a row of dryers and couple of dim light bulbs.

Although apartment laundry room are definitely improving, a main reason why you still don’t see a lot (or any) large equipment in these facilities is because the route operators who service many of them are almost never responsible for paying any part of the utility bills.

Some building owners will request one or two frontloading machines just to be sure that the room is ADA-compliant. But many apartments still don’t have frontloading washers.

As a result, convenience and value are the main aspects coin laundry owners need to advertise. A self-service laundry has larger machines to get the laundry done faster. And with larger machines, the user also gets a better value. Owners have to convey that message to those potential customers.

Promoting Your Advantages

It has been proven time and again that every five to six years, the equivalent of your entire marketplace will turn over. Those business owners who claim that they have been at the same location for 20 years and, therefore, don’t need to advertise because everyone knows about them are either naïve, lazy – or both.

Some laundry owners utilize only in-store advertising. Unfortunately, to attract any business from apartment tenants, you have to let the people outside of your store know what you have on the inside. After all, many of those living in nearby apartment buildings may not even be considering your store as an alternative.

Consistency and repetition are the keys to successfully advertising to the apartment market, as well as backing up your grandiose, advertised claims. Walk the walk. Word-of-mouth advertising will be positive only if you deliver what you have promised. For example, if you advertise “The Biggest Washers in Town!” make sure you have plenty of your biggest frontloaders in service and available for when those apartment-dweller customers show up with a week’s worth of wash.

When you ask potential customers to try your coin laundry, you are asking them to change the way they’ve always handled their laundering – be it at home by themselves or through another store’s wash-dry-fold service. To break such an ingrained habit, you have to give them a good reason to do so.

Coupons are always effective, as well as advertising a special feature of your store or a particular service. Direct-mail pieces, flyers and local newspaper inserts are all relatively cost-effective vehicles to get the word out about your coin laundry.

Of course, don’t forget your store’s exterior signage when evaluating your advertising strategy, especially when trying to lure apartment residents through your doors.

Focus on what you can do better than the competition. Zero in on “solution marketing” – such as handling large loads, no waiting for machines and “getting it all done at once.” Promote your store’s benefits, rather than its features.

Also, perhaps research how other products and services try to reach renters in your market and “borrow” those ideas you think might work for your situation:

• Flyers

• Door hangers

• Local publications

• Local billboards

• Targeted direct mail

• “Welcome Wagon”

• Cross-promotions with other local businesses

And don’t neglect the internet. Many of the services aimed at renters are heavily promoted via the internet. Surprisingly, for households with access to the internet, studies have shown that those with lower incomes tend to spend the most time online. For more ideas on reaching out to renters, visit such sites as rent.com, move.com, forrent.com, apartments.com, apartmentguide.com, apartmentfinder.com and selfstorage.org.

Above all, be sure to set an advertising budget as a percentage of sales and commit long-term; consistency is a must in the face of high turnover ratios among renters.

Renters will never know the benefits of using your store unless you tell them. And don’t forget that each new customer is likely worth $500 to $1,000 per year to your revenue stream.

A Bigger Slice of a Bigger Pie

So, what’s keeping renters from patronizing their local laundromats in droves – getting that pesky laundry chore knocked out in just hours, saving big money and having more time for their families?

Perhaps the biggest obstacle is the fact that apartment laundries are generally under-priced, because the owner of the complex is providing the utilities for those washers and dryers. And they don’t have a feel for how much utilities on those machines are costing them. Their utility bills are combined with the cost of running parking lot lights and other things around the complex.

Plus, some of them have the attitude that they’re just offering laundry facilities as a convenience for their customers; it helps them to rent out their apartments quicker so that they have a lower vacancy rate. Many of them don’t even care if they break even on their laundry business. They just want to reduce their vacancy rates. Laundry is not their livelihood.

Of course, some of the obstacles to reaching this market are of the laundry owners’ own making. It’s about making the decision to have attendants, to have a clean modern store, to have larger equipment and to advertise – all of the things that some laundry owners – especially in the past – typically haven’t done.

But these renters are definitely reachable. Isn’t it time to redirect the focus toward making the “pie” bigger for everyone? As an industry, it’s essential to begin growing the market for coin laundries, rather than obsessing over the cannibalization of existing business from one another.

If the industry could capture just a small percentage of those households currently doing their wash in apartment laundry rooms, the increase in sales volume would be in the hundreds of millions of dollars annually.

“A laundromat with a savvy owner will affect the local apartment communities,” MLA’s Marsden admitted. “It will become a competitor – no question about it.”

Perhaps the only question is whether or not you’re really willing to compete

#Public #PlanetLaundry #BusinessManagement #CoverStory #Article

Share This

Subscribe to PlanetLaundry Magazine

Get PlanetLaundry, the most widely read and accessed source of news and information in the coin laundry industry, FREE!
This monthly magazine is written specifically for today’s self-service laundry owners, operators, managers and potential laundry investors.
Subscribe for your free print edition to be delivered to your door, and get the online edition, our weekly newsletter, and periodic eBlasts sent directly to your email inbox.