‘This Is Not a Short-Term Investment’

By | Apr 27, 2009

Norman Lynn’s main business priority is real estate. However, since 2003, that real estate has increasingly come in the form of self-service laundries.

Later this year, he plans to open three more new laundry facilities, including a 7,000-square-foot mega-store.

How did you get involved in the self-service laundry business?

I’m also in the real estate business. I own several shopping centers, and in one of those shopping centers, one of the tenants was a coin laundry. One day, he came to me and told me that he wanted to sell.

I knew that it was a very good store, and since I owned the shopping center, I was the natural buyer. In fact, I still own the shopping center and the laundry today.

Is real estate still your main focus?

Yes, real estate is my primary business.

Over the years, what else has attracted you to the self-service laundry business?

For me, it’s an interesting investment. The difference between me and a lot of laundry owners is the fact that I haven’t made my stores my primary business.

And I don’t work in the stores, which is critical. I have developed a strong management team, and that’s very important.

Another piece to this puzzle is that all of my stores, except for the first one, are card stores. This makes a huge difference. There is no way I would ever be interested in being on the coin side of this business. I’m not into taking quarters out of cash boxes.

My management team and the card technology are really what have allowed me to do what I do. I saw this business vision with Cliff Curtis of Mac-Gray. He’s been in the laundry business for more than 20 years, and he and I put together the business plan. That’s what has allowed us to succeed.

With the card systems, there is a lot of opportunity there. There is a lot of control. Of course, we can run specials on certain days and/or times of the day. For instance, we just recently opened up our first laundry in a mall-type setting that also has an arcade element to it. And we play off of that.

It is a nice-sized arcade operation that dovetails with the laundry business, and the both work off of the card system. We were able to utilize the card system with the arcade and run special promotions off of the laundry, which allow customers to take advantage of the arcade.

What are the keys to running a successful self-service laundry business?

First of all, you have to have the best equipment. Next, you must have a good management team. And you really have to have controls on your expenses.

You’ve got to have financial staying power. If you’re going to be a slave to the business you probably can get into the business on a shoestring. But I don’t see how you can open up a big store on a shoestring. It’s just way too expensive between the hard costs of the equipment and the soft costs of construction.

Obviously, January and February are historically slower months. The weather is not conducive to people going out. They don’t get as dirty during the winter. So you have some limitations there, which you need to adjust for.

Lastly, and perhaps I’m stating the obvious, but a self-service laundry needs to be kept clean and well lit – on a consistent basis. I feel this is a basic necessity for all laundry operators, and it is at the core of our daily operations at all of my stores. I hope that I can help further convey that message to this industry as I lead by example in this area.

How was your management team put together?

When we started out, we did the preliminary interviewing for a manager for one of our first stores – and that person evolved and was able to become a solid manager. Now, we have a general manager for all of the stores and, under that person, we have a manager for each of the stores. There is full accountability, and the systems are in place to ensure that accountability. That becomes the structure.

As we grow, we will bring in either co-general managers or one will report to the other. We’re currently in the process of evolving that hierarchy. It’s a foundation we need, so that as an owner, I don’t have to deal with the day-to-day operational issues. Thus, I’m able to focus more on the big picture, on a more global basis.

What are some of the hot-button issues for laundry operators in your marketplace?

I would say that laundry owners have got to be sensitive to utility costs. They are a major part of the business today, and in that regard, you have to be a little bit smarter in terms of how you deal with your utility costs. In addition, you have to have the best, most energy-efficient equipment on the market.

And I think that’s been the key for me and my stores. You’ve got to have the best equipment so that you’re dealing with the least amount of repairs and the highest efficiencies.

You should try to streamline your operations as much as possible. And by not having a lot of machines go down, you’re able to expand, because you’re not dealing with all of that nitty-gritty.

What are some of the other issues affecting laundry owners?

I think basic customer service is a huge issue. When you have a customer come in, you want that customer to have a positive experience in your store. That’s a safe environment and a clean store that makes them want to come back again. That’s the key. Once they come and experience your business and have a positive experience, that crucial word-of-mouth promotion will grow. They’ll tell their family and friends.

What major trends are you noticing in this industry, particularly in your marketplace?

First of all, when we look at a market, we try to analyze that market and determine if we can be a major player in that market. If we cannot be a major player and have a major impact on that market, we probably will not go into that market.

So we’re looking at our competition. We’re looking at demographics to support that store. Those become the critical issues.

And, regarding trends, you have to be able to build a large store. We feel that when we go into a market and there are number of older, smaller stores, in our opinion it’s just a question of time before those stores will have to shut down. There is no way the smaller store can survive today. They can’t be competitive because they probably don’t have the best equipment and they’re typically energy-inefficient. What’s more, their design is most likely a very tired design. And, if you don’t have an up-to-date design, you’re going to have problems.

Certainly, another trend is that the self-service laundry industry is getting more professional. Today, there are all sorts of marketing questions and other issues. If you’re going to get into this business, more and more you have to treat it as a real business.

Obviously, the crossover is the prevalence of card technology. Card systems have totally reduced the amount of time an owner is spending on the day-to-day minutia of running a store.

What is the biggest concern you hear from customers in your area?

I would say that the only concern that we run into is probably vend pricing. People are always going to be very sensitive to price.

Of course, you offset this by offering a positive experience from the moment they arrive at your store and there are no breakdowns in the equipment. If a customer goes into a laundry and, all of a sudden, they’ve got an equipment failure in the middle of one of their cycles, that would be frustrating.

At New Laundry locations, we provide a comfortable environment. We have full vending at all of the stores. You can get a cup of coffee and something to eat. We have tables for the customers to sit at. We have televisions. It’s a very comfortable environment and a positive experience.

What’s the greatest technological advancement you’ve seen since you’ve been in the laundry business?

The card systems are certainly a great advancement. Then, obviously there is the continued improvement in the efficiency – the utility utilization of washers and dryers.

Those become the critical issues. Obviously, if you can save on the energy and still be able to raise your prices, that’s a win-win.

Another interesting example of technology and energy efficiency can be found in our water heating systems. Traditionally, larger stores have required big mechanical rooms filled with huge, elaborate heating systems. However, my stores feature small, non-ASME systems, and I never run out of hot water.

Do you have a business philosophy that guides your decisions?

Every time you look at a business venture you should try to look at what your downside is. Once you look at what your downside is, if you can handle that, then you should try to look at what your most realistic results will be. That’s the key.

Take your worst case scenario first. In this business, if you can generate enough revenue to cover your expenses and then deal with your capital expenditure and figure that into the mix, that’s really the key to the business.

What are your thoughts on vend pricing?

I think vending pricing is lower than is should be. It really becomes a question of where your competition is at. We’re fortunate enough that, in one of our stores, we really have no competition, so we’re able to be at the higher end of the vend pricing spectrum. But, again, to a certain extent, it becomes a question of competition.

Are you the price leader in your markets?

We’re definitely at the higher end, because we feel we’re providing a better service. To be at the higher end, it becomes the point that we’ve got better equipment. The difference is marginal. We do feel we provide a better experience, but we also feel that the customers’ clothes do get cleaner. That’s for real. There is a difference in the quality and the performance of our machines.

How big of a role does competition play in the setting of your vend prices?

For us, we have an idea where we would like our vend prices to be, depending on the size of the machines. We’ve been very fortunate in the markets we were in, because we really have had no competition. In other words, by no competition, I mean stores that are more up to date. And where we have older stores competing with us, we feel that it’s just a matter of time.

In fact, in one market in particular, during the construction period, one of our competitor’s leases must have come up for renewal and they just shut down. They knew they weren’t going to be able to compete. We’ve seen that across the board.

Obviously, you’re not going to so overprice yourself, but you do need to be sensitive because you do need to work through a return. That’s why you need to have somewhat of a long-range horizon. You can’t get your money back that quickly on the investment side.

With eight stores, you must have a good number of attendants?

Our stores are all fully attended. We have both 17-hour stores and 24-hour stores. Our preference is to be open 24 hours. We have anywhere between four and five attendants at each store.

At the bigger stores, we’re starting to see that we may need to have two attendants on the weekends, because there is that much business – to stay on top of the cleaning that needs to be done. We have a very strong policy that all of the machines must be wiped out once a customer completes a load.

When hiring attendants, we try to find people who have smiles on their faces, friendly and who are willing to work. We look for people who enjoy what they’re doing. We’ve been lucky. We don’t seem to have as much turnover as some of our competition.

We give our employees some independence and some ability to make decisions themselves. But, above all, they need to be friendly and provide customer service. That’s critical.

How do you handle the marketing and advertising of your laundry operations?

We are very sensitive to that, especially for new stores. We definitely will market our business in the first year of operation for sure. We have a fairly aggressive marketing program.

The key is the card system. Because the cards are interchangeable between stores, we list all of our stores and their locations on the backs of the cards so that we can cross market and they can be used at our other laundries.

Of course, the key is to get your name out into the marketplace – and you can’t rely on word-of-mouth advertising alone. And we follow up with our customers when they come in. We ask how they found out about us. We like to have that type of information.

In your experience, when a self-service laundry fails, what is the most common reason for that failure?

My guess would be that you have an old store and that you haven’t kept pace with the changing marketplace. If you’re too small and/or your equipment is too old, I don’t think you can make it. I would say owner indifference. If you’re terribly inefficient those inefficiencies will bleed you.

Even in the older store I have – the first one that I purchased – I’ve replaced all of the equipment. That store is more than 20 years old and, within the last couple of years, I’ve replaced all of the washers and dryers.

However, in that case, we had a reasonable design. The design of that store – which is a 4,000-square-foot facility even though it is more than 20 years old – allowed us to implement the larger machines that we required. Even though that design isn’t perfect, and we probably wouldn’t do the same thing today, it was a reasonable design. And that was a plus for us.

Personally, what’s the biggest mistake you’ve ever made in this business?

First of all, the difference is that this is not my bread and butter. If I don’t make money in a store, it’s not going to change my life. The laundries are a real investment for me.

With that said, I think the biggest mistake I’ve made is not moving up my vend prices as quickly as I need to.

There are some markets I’m in where, between the rent and the utilities, I should have higher vend prices. In one market in particular, the cost for the water is just out of sight. In fact, I recently sent an e-mail to my partner saying we have to boost our vend prices immediately. The water costs are just insane.

Obviously, Cook County, which encompasses Chicago and its surrounding suburbs, is an expensive market in which to do business. That’s probably the weakest thing. But, again, that was a balance of competition, too. You can’t go into a market priced so high that you turn off your customer base. This is a business where customers are price-sensitive.

From a business standpoint, what are your goals for 2008?

Hopefully, we’re going to be adding three stores this year. We have found three additional markets in the greater Chicagoland area that we’re going into. These are three brand new stores in three brand new locations.

One of the stores will be 7,000 square feet. It will be our biggest laundry yet. We will open two of them by the end of this year for sure – maybe three. That’s our goal for 2008.

What advice would you give a new store owner just getting into the business?

This is not a business for a single-store owner. Then again, if you’re going to work the business yourself, that becomes a different issue. That’s a whole different philosophy than what I have. If you’re going to work it yourself, then you probably can be a single-store owner.

However, if you’re viewing the self-service laundry business truly as an investment, you’ll need to have a number of stores to spread the overhead over.

I’ve only seen three new stores open in the time that I’ve opened up. That’s it. And I’m not even in one of those markets yet; I just know about that store because I own a shopping center in that marketplace.

Actually, we were considering going into that market, but there was a huge tap-in fee and then that new store did open up. Obviously, someone paid a big buck for the impact fee. That was probably about $70,000.

In your marketplace, is the self-service laundry business still a good business to get into?

Yes. I feel that if you really do your analysis, there are still some markets that you can get into that will be a good long-term investment. But, again, this is not a short-term investment.