2008: The Year in Review

By Bob Nieman | Apr 15, 2009

Clearly, 2008 was a mixed bag for all in the self-service laundry industry – store owners, distributors and manufacturers alike. There was plenty of “good” to go around, but certainly more “bad” than anyone would prefer.

And what next year holds for the industry is still anybody’s guess. Nonetheless, we thought we’d examine a few “educated” ones anyway.

The Good

First the good news. Despite the fact that even-numbered years lack the glitz and glam of the laundry industry’s crown jewel – the Clean Show – 2008 clearly was not lacking in new business ideas, education and networking opportunities for today’s store owners and potential investors. In fact, the Coin Laundry Association provided three days of it at the 2008 CLA Conference in Chicago this past summer.

The conference was held in July at the historic Millennium Knickerbocker Hotel. The location was ideal, as the hotel is situated directly off the city’s famed Magnificent Mile, giving attendees an ideal opportunity to tack on a family vacation and take in the sights and sounds of the city.

“A lot of great ideas were thrown around,” said Brad Spink, a multi-store operator from Framingham, Mass. “For me, it was the reminder to look at your business as if you had just bought them [the laundries], and to question whether or not it is appealing to the customer, as well as efficient. How does this translate to profit, and what must to be done right away to make it happen?”

The conference’s speakers included a mix of newer presenters – such as Jason Wentworth of Enviromat, LLC – along with some well-known industry leaders and association contributors like Mike Floyd of Continental Girbau, Inc. and Journal columnist Jeffrey Barman of Wonder Wash Laundry.

“The CLA continues to evolve brilliantly under Brian Wallace, his staff and the Board,” said Jim Whitmore of WSI Laundry Corp. in Gloucester, Mass. “I have been impressed with just how dynamic our leadership is, and by the constant reinvention of the organization with new and talented staff.

“Also, 2008 marked the first time in its history that the CLA included “green” practices as a step toward good stewardship and, not surprisingly, increased profitability, with store owner Jason Wentworth leading an educational program in Chicago this summer.”

On an industry level, the higher cost of utilities that impacted store owners, especially toward the beginning of the year was certainly a challenge; however, the silver lining was the fact that it led to significant increases in vend prices in 2008.

“The cause of those vend price increases was a negative, but the end result was a highlight that will carry into the next couple of years,” explained Brian Wallace, president and CEO of the CLA.

“It seems that a good number of store owners have increased their vend prices,” agreed Dion Marcionetti of Laundry Concepts in Addison, Ill. “Unfortunately, not all of them have.”

Marcionetti added that he’s also witnessed a major move on the part of store owners toward menu pricing that encourages customers to pay for the specific services they receive, and which ultimately means higher profits for the laundry operator.

“Overall, we’ve seen a continual improvement in both store operators and their facilities,” Wallace added. “We are seeing more stores in 2008 reequipping for the future, which is an important step for them to be taking.”

Other good news is that it’s fairly quiet on the legislative and regulatory front. There were no major pieces of adverse legislation facing the industry.

The Bad

Of course, there is no way to ignore the economic downturns this past year, especially as we headed into the end of the third and the fourth quarters.

“At the very best, this brought uncertainty to many store owners,” Wallace explained. “At worst, it brought additionally challenges. Some found themselves facing shrinking customer levels, especially those who were in areas where unemployment or reverses in the immigration trends cost them additional customers.”

And, as mentioned, the wild utilities ride continued in 2008 and, in many markets, accelerated.

“The cost of utilities, as well as fixed costs, has risen,” Marcionetti conceded. “A major challenge will be to maintain a satisfactory level of service to keep current customers happy and to attract new customers. I think that in a service business you must maintain excellent service and that means increasing vend prices, rather than lowering dry temperatures or lowering water temperatures, which could result in unhappy customers.”

Distributor Bill Gilbert of SLM, Inc. in Belton, S.C., also pointed to the challenges his laundry-owner customers have faced due to high utility costs, adding that the price of metal tripled, the cost of gasoline doubled, the housing market plummeted, unemployment increases, and in South Carolina, 40,000 illegal immigrants were deported, delivering a huge blow to the industry in the Southeast.

“But people need clean clothes, and if they can’t afford washers and dryers, our coin laundries are a necessity,” Gilbert explained. “I recommended that our customers increase their vend prices to offset the utility costs, and all of those who did rarely heard a complaint from their customers.

“Our challenge is to accept the things we cannot change, which is the rise in costs. We can either adapt to the economic changes or close our doors. We choose to stay open.”

Unfortunately, many laundries did not. “We did see a significant number of stores close,” Wallace noted. “Granted, those were largely the marginal stores that were perhaps not being operated in the best possible fashion.”

Around the Industry

During the ups and downs of the past year, some of the laundry industry’s biggest company’s made big news in 2008. Here’s a recap of a few of the past year’s major headlines.

Herman Named Wascomat President: Wascomat promoted Howard Herman’s to the position of company president. Herman has worked for Wascomat for 36 years and, most recently, served as vice president of sales and marketing for the company.

“Howard has been a major factor in Wascomat’s success,” said CEO Neal Milch. “His dedication to the company has been enormous. He started with Bernie Milch 36 years ago, and his experience in every phase of the business is invaluable. We rely on his expertise and keen insight into the business every day. I respect and admire him – and I’m looking forward to another 36 years.

Mac-Gray Acquires Automatic Laundry: Mac-Gray Corp. acquired Automatic Laundry Company, Ltd., for a purchase price of $116 million, consisting of approximately $106 million in cash and a $10 million unsecured note subject to certain post-closing adjustments.

Based in Denver, with nine branch offices throughout the country, Automatic is a division of the Pace Companies in Fort Worth, Texas, and is estimated to be the fourth largest laundry facilities contractor in the nation.

The acquisition enables Mac-Gray to increase its operational density and, therefore, efficiency within several key markets including Denver, Phoenix, Seattle, Dallas and Birmingham.

Whirlpool Wins Two ADDYs for Maytag Campaign: Whirlpool Corp. received two Silver ADDY awards from the New York Chapter of the American Advertising Federation for its recent marketing and advertising work with the Maytag brand. This is the first time in the brand's 100-year history that it has won this prestigious award.

The first award was received for the "Search for the Next Maytag Repairman," a national, fully integrated effort that allowed average Americans to audition for the chance to become the next person to wear the famous blue suit and become the face of the brand.

The second award was for the advertising campaign titled, "What's He Been Up To?" which showcases the brand's quality and dependability by portraying the Maytag Repairman keeping himself busy by plying his trade as a repairman by fixing things other than Maytag appliances.

Dexter Laundry Featured on Discovery Channel Series: Beginning with this summer’s new television season, Dexter Laundry products were on center stage, shown all over the world via the Discovery Channel’s popular “Factory Made” series. The series visits factories around the world to learn how products consumers use are made – and about the companies that make them.

A Discovery Channel crew of four visited Dexter’s headquarters in March to film three days of footage in the company’s laundry manufacturing facility and foundry, which produces grey and ductile iron castings, including several components in Dexter washers.

Continental Opens Regional Distribution Center, Partners with Sparklean: Continental Girbau opened Continental Girbau West, located in Santa Fe Springs, Calif., which is the company’s first regional distribution center. A subsidiary of the Wisconsin-based manufacturer, CG West serves the California vended and on-premise laundry markets with equipment, parts, service and training, according to Continental President Mike Floyd.

Key to CG West’s formation is a partnership with Sparklean Laundry Systems, a coin/card laundry development company. Sparklean is a former Continental distributor responsible for on-premise and coin/card laundry equipment distribution in southern California.

“The partnership is a win-win,” Floyd said. “Sparklean can now focus exclusively on vended laundry development and the immense detail involved with creating successful stores. Simultaneously, CG West will provide foundational services, parts and equipment for those customers.”

Maytag, Whirlpool Open Testing Lab: Maytag and Whirlpool opened a new 28,000-square-foot facility in St. Joseph, Mich., featuring a state-of-the-art commercial laundry testing lab.

Featuring 35 test stations, the new 3,250-square-foot lab is capable of testing both single- and multi-load products to the power requirements of most countries around the world. Twenty of the test stations are automatic, computer-monitored life test stations, and the other 15 are manual and developmental test stations.

Heading into the Future

“We are fortunate to be in the industry we are,” Whitmore said. “As worldwide economic woes erode the public’s willingness or ability to spend and consume, we are an essential service. I would assert fourth in the pecking order: (1) food, (2) shelter, (3) clothing and (4) clean clothing. This is a shakeout time, and we are not immune I expect that we will lose some highly leveraged and/or less-adept operators, distributors and manufacturers, too. Store owners will grapple with correct pricing, overloaded topload washers and maybe insolvent landlords.

“This will be a foundation-laying year, setting the ground work for the years to come. ‘Green’ is no longer political; it’s is practical. Conservation and good stewardship of resources will reward the early adopters.”

“The economy looks weak in 2009,” Marcionetti added. “Traditionally, when the economy is down, the laundries are not dramatically affected. Fewer families will purchase a new washer and dryer, or repair their existing units. It's the opportunity we need to show our well-run businesses to new customers. So it's imperative to make sure that our service is the best that it can be.”

The card-operated store will become more popular, according to Marcionetti. “The ability to market your services and keep up with cost increases easily will become an ever-increasing reason to install card systems,” he explained.

As for Gilbert, he predicted that the self-service laundry business in 2009 will exhibit slow new equipment sales, perhaps not as many newly constructed laundries as in the past, and an increase in the number of store owners “holding on” to their existing machines, or purchasing rebuilt, repossessed or used machines.

“The laundry industry has seen economic challenges in the past, and the ‘bump in the road’ may be a little larger this time,” he said. “But operating efficient washers, dryers and water heaters to keep your cost down, will play an important part in keeping your doors open.”

“The best years of the industry are ahead of us,” Wallace said. “But most stores, to take advantage of it, still need to re-equip for energy conservation and customer service. Most need to adjust their vend pricing to the reality of today’s costs. And, more than ever, laundry owners must begin to effectively advertise and market their stores to take advantage of tomorrow’s opportunities.”

Fortunately, to that end, plans are already well underway for the industry’s next big event – the Clean Show. The CLA and its partners will host the laundry industry’s largest exposition in the always vibrant city of New Orleans. Mark your calendars for June 18-21.

And, if 2009 turns out to be anything like 2008, no successful coin laundry owner can afford pass up being in New Orleans next summer.