The Year in Review

By Bob Nieman | Nov 25, 2009

In most odd-numbered years, very few events within the coin laundry business can steal the spotlight from the industry’s biennial Clean Show.

However, as we all know, 2009 was not like most.

Yes, Clean ’09 in New Orleans went off without a hitch. And, yes, the show was indeed the industry party it always is, taking center stage this past June and serving as a major highlight of the business year – with exciting new offerings from the major manufacturers, a busy trade show floor and more than 40 hours of educational sessions for today’s progressive laundry operators.

But, with the country mired in a recession of historic proportion, laundry owners from New Orleans to New Mexico to New York City had only one thing top of mind all year – the economy.

It’s the Economy, Stupid

According to Bryan Maxwell of Western State Design in Hayward, Calif., coin laundry owners seemed to respond to the struggling economy in two dramatically different ways.

“Progressive owners took advantage of manufacturer price incentives and tax incentives to upgrade their stores,” Maxwell explained. “It seems they almost refused to accept the recession. They were proactive with remodeling their stores. From relatively inexpensive upgrades like new paint, folding tables and fixtures to complete equipment replacement, they realized that this was the time to build market share. They realized that the extra incentives from the equipment manufacturers and the government provided them with a unique opportunity to build their business and upgrade their equipment. As a result of this progressive approach, their business continued to grow.
 
However, Maxwell said he also noticed a fair share of a different type of laundry operator in 2009.

“Scared owners seemed to be paralyzed by the economy,” he continued. “Many looked for ways to cut costs, not grow their business. They seemed to spend more time listening to the news than trying to maintain and build their customer base. They did not maintain their stores, and they refused to market their business. As a result, their business suffered, and their fears were realized.”

“There is an inability for so many to get financing for refurbishing or additional capital just to pay the bills,” said Beverly Blank, a laundry owner in Los Angeles and the president of the Southern California Coin Laundry Association. “As a result, I've spoken with several store owners who have lost their stores or are seriously considering a ‘short sale’ of their businesses because the economy has negatively impacted their cash flow.”

Ralph Daniels of Daniels Equipment Co., Inc., in Auburn, N.H., has seen deals with new investors dry up due to today’ stringent financing requirements.

“This has been a ‘challenging’ year, to say the least – for all Americans and in almost every industry,” Daniels said. “We have had substantial investors ready to purchase a coin laundry, but who want to finance the transaction, for obvious reasons. However, to receive financing has been – and continues to be – a real albatross. The requirements – some reasonable, some unreasonable – are deal-busters, because the prospective investor that once was ‘hot’ cools down very quickly when faced with the requirements.”

In fact, Harvey Kantor, who had financed laundries through his company, Triumphe Leasing, decided to walk away from that segment of the business in 2009.

“After 29 years of financing coin laundries, I am exiting this area of business,” said Kantor, who also owns Market Square Laundry in Wayne, Pa., just outside of Philadelphia. “There is little competitively priced money available for new or re-sale stores, plus the credit criteria has increased markedly. I don’t see any easing in the near term.”
 
In addition to the lack of financing, the unemployment rate escalating to all-time highs also has impacted many people's ability to have enough income to wash clothes as often as they have in the past, noted Craig Kirchner of Whirlpool Corp., in St. Joseph, Mich.
 
Of course, some areas of the country were hit harder by unemployment than others.
 
“Since most of the laundries in our area lost a lot of the Hispanic trade, and South Carolina was among the top three states in the nation in job loss, the normal income in the state was down about 30 percent to 40 percent,” explained Bill Gilbert of Service Laundry Machinery in Belton, S.C. “The loyal customers that were still in need of a coin laundry were cramming the lower-priced, smaller-capacity washers in an attempt to save their money for their other important needs. Some of these coin laundries responded by slightly raising vend prices on the smaller machines and generating the extra income that was missed from the larger machines.”
 
Clearly, everyone – from the largest equipment manufacturers to the weekly laundromat customers – has been impacted.

“The first half of 2009 had many people scared to death,” Maxwell said. “The real and psychological impact of the bad economic news could be felt everywhere. The fall of stock prices and fall in real estate values impacted the net worth of our clients and had a tremendous impact on sources of capital. Fortunately, for laundry owners, most manufactures responded with great factory financing, additional price discounting and solutions to help people respond to the negative economic data.

“In 2009, there were many changes in equipment distribution on the West Coast,” he added. “Some distributors downsized significantly, and others completely closed offices. Some distributors expanded into new markets. The distribution channels on the West Coast are substantially different in December 2009, compared to the December 2008.”

On the Bright Side…

Looking at the glass as half-full, the economic downturn has required all segments of the self-service laundry industry to take a hard look their respective business practices.

“The economy has forced owners, distributors and manufacturers to think, act and respond differently,” Kirchner said. “Owners need to review pricing efforts, marketing efforts, utility costs and costs in general in order to maintain customer base, as well as to draw new customers. Distributors needed to focus on replacement business, versus new store development. The emphasis is on utility savings and how new product will save the store owner in the long run. Manufactures needed to focus marketing efforts on replacement business, locating financing sources and developing energy-saving products.”

At SLM in South Carolina, Bill Gilbert was quick to make the necessary tweaks to his distributorship.

“Our customers were still in need of making improvements to their businesses, but a majority found that, with the decrease in the laundry's income, it would to risky to purchase new washers and dryers,” he explained. “ But they were interested in purchasing used, repossessed and even ‘reconditioned’ machines now and, when the recession was over and business picked up again, they would continue the improvements with new machines. So, of course, we started making ‘lemonade.’

“Our stock pile of trade-in machines were reconditioned and sold. Also, a couple of our customers elected to close struggling laundries, and we paid off their debts to save their credit and then resold those washers and dryers.”
 
And, at the laundry owner level, many store operators also were looking on the bright side – and taking what was given them under the circumstances.

“If a vended laundry operation was already relatively healthy in 2009, there were many factors that probably contributed to making that store healthier,” said Illinois Coin Laundry Association President Karl Keefer, who owns Westfield Laundromat, LLC, based in Downers Grove, Ill. “In some markets, tenant occupancy is up due to a decline in homeownership, whereby condominium buildings are regressing in that units are being converted back to rental units. Otherwise potential homeowners have remained tenants or abandoned their homes for apartment living and have enhanced vended laundry markets.”

Also, because of the high inventory of retail space in many markets, rents are being forced lower than they have been in 15 years, Keefer pointed out. For individuals poised to expand or build, there is probably no better time to secure a location.

In addition, many recently downsized corporate professionals have begun to look toward the laundry industry as very viable option, thus pumping new blood in the business.

“Younger, business-savvy entrepreneurs are stepping up to the plate and actively participating in the CLA, prior to purchasing their laundromats,” Blank noted. “They are reaching out to other successful owners to grow their businesses. This, in turn, helps to reverse the common negative perception of self-service laundries across the nation.”

And, although the “recession-resistant laundromat” theory continues to be tested, it’s not all gloom and doom on the front lines, to which Harvey Kantor can attest.

“Our coin laundry in Philly increased revenue 18 percent for the first 10 months of 2009 and continues to grow each month,” he said. “2008 was up 10 percent over 2007, too. Our wash-dry-fold business is up 25 percent and now represents more than 30 percent of our revenue. In spite of a big rent increase and some unexpected equipment repairs, profits are up 15 percent.”

Kantor attributed this growth to three things: (1) location – now and always, nothing is more important; (2) consistent marketing – he spends 2 percent of his revenue on marketing and works at it everyday; and (3) customer service and reputation – nothing beats a clean store with working equipment and pleasant, well-trained attendants.

“All of the credit for this goes to my wife, Shirley, and her great staff,” Kantor added. “I just get to keep the books.”
 
Party in the Crescent City

In June, the industry took a deep, collective breath and re-focused its vision, as nearly 10,000 people attended Clean ’09 in New Orleans.

And the attendees who traveled to the rebuilt, revitalized city were rewarded with access to the products and services of 412 exhibiting companies showcased over 192,640 net square feet of floor space.

“It was the smoothest Clean Show ever,” said John Riddle, president of Riddle & Associates, which manages the trade show. “New Orleans was prepared and hospitable. We couldn’t have asked for better cooperation from everyone involved, and it helped make the show a success.”

Officially 9,902 people registered for the show, including 1,229 people from 72 countries outside the U.S., such as Canada, Mexico, Italy, Germany, Brazil, the United Kingdom, Spain, Australia, the Netherlands, Colombia and Japan.

Riddle said both attendance and exhibit space were down from Clean ’07, but this was anticipated given the state of the world’s economy.

“We were very pleased with the turnout. Much of this drop was because participating companies sent fewer people than in previous years,” he added.

“Although the attendance at the Clean Show was down, I was very pleased with the interest of those who attended,” Daniels said. “I can say this first-hand, because my company had three booths, which were very busy most of the time.”

New from CLA

As with the rest of the industry, the Coin Laundry Association was heavily in proactive mode in 2009, looking for even more ways to serve and educate its members during these challenging times.

Here a few of the highlights the association unveiled within the past year:

• DIY Direct: Basically, DIY Direct is the CLA’s “online marketing center.” CLA members simply log in to coinlaundry.org, select a template, customize the copy, and add or rent a mailing list. The system then prints, addresses and mails the advertisement. DIY Direct features nearly 100 templates with advertisements touting drop-off laundry services, the time-saving conveniences of self-service laundries and the benefits of card stores, as well as advertising messages geared toward new movers and grand openings. The pre-designed and pre-written templates include postcards, door hangers, business cards, print ads, brochures and interior signage.

“Too often, we heard that laundry owners didn’t know where to start or what to say on postcards,” said Brian Wallace, CLA’s president and CEO. “To alleviate that concern, the CLA created professional templates for members to customize and send – directly from their home computer.”

• PlanetLaundry.com: To compete in today’s marketplace, laundry owners need the most up-to-date information at their fingertips. PlanetLaundry.com is that source. The newest Web site from the Coin Laundry Association hosts everything from classified ads and news articles to a robust suppliers guide and blogs.

“It was time to take the laundry industry to the next level in terms of content and the delivery of information,” Wallace said. “PlanetLaundry.com offers daily, refreshed information with multimedia that includes videos, podcasts and gas price updates.”

Sectioned into six areas of laundry management, it has something for every stage of laundry ownership. Potential investors can access “Laundry 101,” while the more seasoned owners can review articles, blogs and bulletin board posts in the five most commonly searched subsections: Equipment, Utilities, Store Operations, Sales & Marketing, and Business Management.

• New CLA Insurance Carrier: CLA Insurance has partnered with a new insurance carrier for the state of California. Participants in the Custom California Insurance Program (CCIP) have access to affordable rates from a carrier that meets CLA Insurance’s rigorous standards – and the outstanding customer service for which CLA Insurance is known.

Many California self-service laundries are 24-hour operations and/or are unattended. Traditionally, these laundries have been difficult to insure due to higher risk exposure. By providing another carrier, CLA Insurance now has more options to present to its clients. Even if a coin laundry does not fall into either of these categories, the added carrier gives owners more options on pricing.

• LaundryWeb Network: To help its members get online, the Coin Laundry Association is building Web sites for members – for free. The association unveiled its newest member benefit – the LaundryWeb Network – at the Clean Show to an overwhelming response. Every laundry-owner member is entitled to a free Web site, as well as free hosting for the site.

Members simply complete a short form and, in less than four weeks, their site is up and running – at no cost to the member. Each site contains vital store information on every page – location, hours and a map with driving directions. The four initial pages include store services, photos and a contact form. In addition, every Web site is networked in the backend.

“After three months of working on my custom Web site, this was super easy,” said Chris Balestracci, who owns Super Wash Laundry. “It only took me 20 minutes.”

“The expansion of the CLA offerings beyond insurance – to include PlanetLaundry.com, DIY Direct and Web sites – presents the members with a variety of value-added venues,” Blank said.

What Lies Ahead?

“As the economy continues to drag along, it's going to be survival of the fittest,” Blank explained. “If you're financially secure, you'll be able to cope. On the flip side, many of the owners who have not upgraded their equipment, furnishings and vend prices are really being challenged by the innovative competitors who view this as a for-profit investment and will pull out all the stops with creative marketing, maximizing the Internet and the social media, and generating additional sources of revenue.”

Maxwell concurred: “The key to a successful 2010 for all of us is a proactive approach. We must develop a real plan and work it. We cannot passively let the economy control us. The economy should continue to recover; however, we cannot wait for external economic conditions to improve. We must take a step back and evaluate our businesses to determine the best course of action to improve them.”
 
Perhaps one of the silver linings to come from the struggles of 2009 is an increased emphasis on running an energy-efficient operation.

“I believe the ‘greening’ of our industry has come of age, and this will be the catalyst to drive responsible laundry owners to purchase new equipment,” Daniels said. “Store owners who have already installed energy-efficient, environmentally friendly equipment are realizing significant savings in the reduction of energy consumption and have proven themselves to be good stewards of our natural resources. This is what I see as a ‘bright light’ for our industry in 2010.”

All in all, Keefer remains positive heading into 2010.

“Despite the challenges that seem to be plaguing the industry in 2009, my sites are optimistic for 2010,” Keefer said. “I am pleasantly surprised by some of my customers who seem sympathetic to me as a business owner. Raising washer and dryer prices is never an easy task, but I use the negative business news of the day to educate my customers on how it affects them as consumers. Our industry is typically slow in keeping up with inflationary trends as it is, and I plan to be a pricing trendsetter and leader in this regard.

“The opportunities I see in 2010 are to increase vend prices and work harder on growing and maintaining good customer relations. To do this, I am committed to retaining my employees in spite of any legislative burden that may befall the business and will merely adjust pricing accordingly.”

Meanwhile, Gilbert seems to be channeling the Spanish poet and philosopher George Santayana, who once said, “Those who cannot learn from history are doomed to repeat it.”

“As we look ahead, we find ourselves looking back and learning from our misfortunes and realize that, even though we thought the laundry industry was exempt from a recession, we were not – but we survived better than other industries,” Gilbert said. “It will take a while for people to feel like they can open their wallets a little wider. The reality is something we should all accept, learn from, adjust and move on.”