‘I Have a Great Passion for the Business’

By Bob Nieman | Mar 10, 2010

Karl Keefer has spent nearly 20 years in the laundry business, as both a manufacturer’s representative and a distributor. In addition, for the last five years, he’s also been the co-owner of two Chicago area self-service laundries.
 
Westfield Laundromat is located in Bridgeview, Ill., and Antioch Laundry Service is based in Antioch, Ill.
 
Furthermore, Keefer – who spent 21 years in the military, including 14 years in the Army Reserve – is the current president of the Illinois Coin Laundry Association.
 
How did you eventually become a coin laundry owner?
 
Due to my involvement in the industry on the distribution side, I had helped a number of people through the years get into the business as laundry owners. I built laundromats and consulted with operators.
 
Then, about five years ago, I helped out a gentleman who needed assistance managing his store in Antioch. He asked if I could join him as a partner, and I did that.
 
With the Bridgeview store, it was a similar story. I actually retooled that store for another group of investors. However, the group fell apart, leaving just one of the gentlemen by himself. Eventually, his job transferred him to Las Vegas, and he asked me to get involved as a partner to help out in that scenario.
 
Although it was always a desire of mine to be a laundry owner, it wasn’t like I found a location for myself and built a laundromat. Basically, my quest to help others brought me into partnerships with others. I came as a partner, rather than finding a partner and then building a store.
 
Partnerships have their advantages, don’t they?
 
Financially, it was easier to get into the business. It carries lower risk, because now I’m sharing risk.
 
Although partnerships in general are a challenge in this industry, as I have seen over the years. It’s hard for most people. As I say, you have to be equally yoked. All partners need to have equal commitment to the business to make a partnership succeed. Otherwise, you have to be committed to knowing that you’re going to be carrying the brunt of the business and just accept that role.
 
A partnership is a marriage, and both sides have to work equally toward the success of that marriage.
 
What attracted you to the self-service laundry business?
 
The attraction developed by noting the success of others. I came into the business as a manufacturer’s and distributor’s representative, and I saw the successful laundry owners in this business, and that intrigued me. I have a great passion for the business in general, and when I was working with others, I could share input I received from more successful storeowners with operators who were looking to become more successful. I very much enjoy identifying where improvements need to be made within coin laundry operations.
 
In helping others, I always had a desire to actually do it for myself. Certainly, the partnership opportunities I took on have facilitated that.
 
Can you point to any mentors along the way – anyone who guided or inspired you as a laundry owner?
 
Actually, there have been a few.
 
On the manufacturing side, there is a Swedish gentleman named Bengt Bruce, who founded BMC Technologies. Although he doesn’t even know who I am, he’s a self-made man who I have crossed paths with on occasion. He started with Electrolux and helped UniMac develop its coin-operated cabinet machine. I’m inspired by his energy and perseverance.
 
As far as laundry owners, Chuck Hanson, who passed away last year, was a huge influence. He identified with his customers. Chuck could walk into his laundromat, and he always knew if something wasn’t right or if something was out of place. He was on it. His attention to detail was phenomenal, and he very successful in the Chicago market.
 
Across the nation, distributor Lamar Thomas in North Carolina has impressed me with his strong character. Also, Bill Mitchell, an operator out of Michigan, introduced the idea that large washers are “family load washers,” not “rug washers.” In fact, he was instrumental in changing the coin laundry industry with respect to more of what we seen today – frontload washers, big washers. He helped change the mindset.
 
Locally, Neil Polifka does a phenomenal job for the Blue Kangaroo chain of laundries. He has a great talent for understanding demographics and selecting sites. He has certainly influenced me over the years.
 
What are the keys to success in this business?
 
A major key is being very careful not to over-leverage yourself. It’s very easy to get wrapped up in a mindset of “Oh, I need one of these. I need one of those. We need bigger. We need better. We need… whatever.”
 
It’s wiser to phase in those kinds of things gradually, rather than to just go in and do a total rehab, for example.
 
It’s also critical to connect with your clientele. The more successful operators – the ones who relate to their customers and the customers know who they are – develop a relationship with their customers. Those owners are more successful than somebody who simply who collects the quarters, sweeps the floor and gets out of there.
 
Pay attention to your costs, including rent. Also, be conscious of your revenue per square foot, but be sure that your customers have freedom of movement within your laundry. Equip your store with machines big enough to give you healthy revenues per square foot and a solid return on investment.
 
You’re also the president of the Illinois Coin Laundry Association. What are some of the hot-button issues you’re dealing with there?
 
The biggest one currently is House Bill 174, which calls for a service tax on self-service laundries and many other businesses in Illinois. We have hired a lobbyist who is representing us in this fight. We’re lobbying to gain an exemption for laundromats. That’s certainly a very hot issue for laundry owners right now in this state.
 
In Cook County, which encompasses Chicago, the tax is 10.25 percent, and that goes against a laundry owner’s gross receipts. Of course, we have no way of taxing the consumer other than raising our vend prices.
 
An issue on the start-up side involves a number of communities that are slowly enacting environmental impact fees for storeowners who are looking to open new laundromats. We’re seeing that more and more.
 
In addition, our industry is very much affected by higher real estate taxes we are experiencing. With our triple-net leases, it ends up as part of our rent. And rent has always been a hot issue. Once you’ve got all of your equipment and infrastructure in a building, the landlords feel like they have the leverage.
 
As president, what are your goals for the association?
 
My personal goal is to build value into the association to get former members back into the fold and to attract potential members to get involved.
 
There’s strength in numbers. For example, the more members we have, the better opportunity we have to negotiate natural gas prices, which we’ve done in the past.
 
Also, due to our proximity to Chicago, I think many laundry owners see the Illinois CLA as more of a “Chicago entity” than a statewide entity. I’m very conscious of that. In fact, we’ve done some educational webinars to try to reach out to laundry owners who live downstate. That is another goal of mine, to reach out to people across the state and not just address the concerns of those in the Chicago area. We don’t want to exclude anyone.
 
What current trends are you noticing in the industry?
 
In general, stores are getting bigger and bigger. The washer offerings are getting larger. Years ago, when I first became a representative for Speed Queen, I remember talking to owners at the time and telling them that they really needed to consider installing a couple of 50-pound washers. Many people were like, “What? Are you kidding me?” They rejected it.
 
Today, that’s pretty much the norm. Most operations have 75-pound washers. Even I have 75-pound washers in my 2,300-square-foot stores. Years ago, I would have thought that type of washer capacity was only for those big stores.
 
Another trend on the equipment side is the emergence of soft-mount washers.
 
On the dryer side, I see more and more laundry owners going to full-cycle vend pricing – charging $1 or $1.50 to dry, as opposed to a quarter for six minutes. In my Bridgeview store, I’m at $1 for 40 minutes. It was a challenge to get to that, to change people’s mentality. In fact, when I first did it, I charged 25 cents for 40 minutes as a promotion. Customers just couldn’t comprehend that.
 
However, if the industry can get to full-cycle pricing – coupled with soft-mount washers than can now achieve 350 Gs to reduce drying time by 50 percent – I think we can get to where we would be charging $1.50 for 20 minutes.
 
Ultimately, that will reduce our natural gas prices. I think we’re still a bit away from that, but we’re slowly changing the culture and getting to that point. And I think the industry will be well served once we get there.
 
Do you have a business philosophy that guides your decisions?
 
Trust but verify. There’s a lot of disinformation out there in this industry, such as the four to five turns per day “national average” that nobody has been able to substantiate.
 
Back when I used to work in the foodservice industry, if you asked a restaurant owner what his food cost was, he’d always give you 33 percent of his plate cost – because that’s what he knew it supposed to be or what somebody told him it was supposed to be.
 
But I don’t think any of them really knew. A lot of times in this industry, you’ll ask owners what their turns per day are, and they’ll say they’re doing four or five a day because they have heard that’s a national average.
 
You should qualify all of the information you hear, taking into account the uniqueness of every laundry location. If someone’s in Georgia, what’s his or her rent -- $6 per square foot? OK, I’m in Chicago, so I’ve got probably twice the rent.
 
Some people will say you should never build a laundromat with toploaders. But if I’m that person in a market where I’m paying only $6 a square foot in rent and I can get a $3 vend price on my toploaders and my return on investment is 33 percent, why not have toploaders?
 
Again, trust but verify. Qualify the information you take in. One thing I’ve learned is that there is no cookie-cutter approach to this business. Always consider on what others are basing their opinions.
 
How are vend prices in your market?
 
As operators, we’re slow to raise our prices. I wish I could be like the gas station on the corner – where when my natural gas price goes up so does my dryer vend price. Today, I could be at $1 to dry, and tomorrow it could be 50 cents.
 
I wish I could react that way, but we don’t. We tend to hold our ground, even when our own costs go up. That’s probably one thing that plagues our industry – we’re not as reactionary as we should be. We’re always afraid to raise our prices.
 
We need to realize that, yes, we’re competing with the store down the street, but more than that, I think we’re competing with apartment owners who see their washers and dryers more as an amenity, not necessarily as a profit center. Apartment owners are simply looking to offset their cost of natural gas and electric, not necessarily looking for a big profit. They’re just offering washers and dryers to help rent out apartments.
 
That’s our biggest competition, and that does more to keep our vend prices depressed than necessarily the laundromat down the street.
 
What have utility costs been like in your area?
 
On the natural gas side, the price has been decent for us in this market. If anybody is going to lock in prices, now is the time to do it. At the Illinois CLA, we’re considering publishing a lock-in price for our members to use as a gauge.
 
For me, I once quibbled over gas prices: “Gee, it’s 55 cents a therm today, but I bet it will be 53 cents tomorrow.” However, when you think that natural gas was about $1.45 per therm just two years ago, that puts it in perspective. These days, I’m happy to pay even 60 cents a therm.
 
What’s really hurting laundry owners in the Lake Michigan area is that, three years ago, the water department mandated a 14 percent to 15 percent annual increase going forward over four years. When that caps out this year in 2010, it will have doubled water costs in this market. That is a sensitive issue for us. Those who purchase Lake Michigan water have seen their prices doubled over the last four years.
 
Are you a big believer in advertising and marketing?
 
I prefer in-store merchandising – giveaways and “bring a friend” types of programs. For me, it goes back to building that relationship with your customer base, solidifying your base and letting them go forth as ambassadors for your store. Getting right out there with the people is usually the best.
 
I’ve tried Val-Pak and placing coupons on the backs of cash register receipts from the local supermarket, and I have not been pleased with the results. Then again, one thing I’ve learned with marketing is that it’s very market-specific. For everything that I’ve not had success with, I can point to laundry operators who have enjoyed tremendous success with the very same type of program.
 
In your opinion, when a coin laundry fails, what are the most common reasons?
 
In recent years, the stores I’ve seen failing are smaller stores that try to compete on price. You’ve got to price your store where you have to be, deal with the results and then work on the relationship with your customers.
 
Often with smaller stores, another store will come in and the small laundry will lower its prices. Do not do that. You will get your customers back by price. Most of the laundries I see fail are smaller stores getting hit with higher rent, higher water costs, higher taxes, and then trying to lower their revenues to make it up in volume – and they never get there.
 
I’ve also seen owners go in with big stores and big dreams – and they get over-leveraged. I’ve seen the cycle – a new store gets built, they spend a half-million dollars building it, they struggle, they struggle, they struggle, and they finally take a hit and sell it for $300,000.
 
People go in too heavy, too hard, too fast – and with 100 percent financing. When owners start to lose revenues, they lower their vend prices. And they never recover.
 
What’s the biggest mistake you’ve ever made in this business?
 
When I first got involved with the Bridgeview store, I over-leveraged myself. I saw the opportunity and jumped in. The store was over-financed at the beginning, and it didn’t quite have the business to support the financing.
 
What are your business goals for the rest of 2010?
 
I want to increase my vend prices on my dryers. I’ve been at 75 cents for 40 minutes as a promotional price. I want to go to $1 and, after a few months, go to $1.25 on the dryers.
 
I also plan to address employee training and work a little closer with my attendants.
 
What advice would you give to a potential laundry owner?
 
Don’t fall in love with a given location. You’ve got to try to remove your emotions from your business decision. If you lose one opportunity, another opportunity is going to come around, and you’ll be just that much more experienced and educated to make a good decision going forward.
 
Too often, people will jump into this business and then I’ll get a phone call after they’ve already bought – and I’ll know in my heart that they paid way too much money. They didn’t do their homework, and now I’m trying to help them recover and grow their business.
 
Also, use the Coin Laundry Association. Pick the brains of others who have gone before you. Get references from your distributor – who else have they worked with? Use all of the resources before you, and don’t just leap into this business. Nothing in this business is cheap, especially if you overpay in the first place.
 
Is the coin laundry business still good a good business to get into?
 
Absolutely, but only if you properly qualify the location.
 
I’ve seen some strong laundry markets become more gentrified, with six-flat apartments converted to condos with in-unit washers and dryers. However, in such cases, I’ve seen the wash-dry-fold business flourish.
 
Also, with the economy recently, I’ve see some of those condos turn back into apartments. So, there’s an ebb and flow to it, and opportunities will present themselves.