Getting ‘Carded’

By Bob Nieman | Apr 15, 2009

Carter Rucker is a 19-year veteran of the self-service laundry business.

But he’s a wet-behind-the-ears rookie when it comes to laundromat card systems.

Rucker’s 2,800-square-foot laundry in West Chester, Ohio, features 30 washers and 30 dryer pockets and, until a few months ago, it also sported 60 coin boxes to empty and account for on a regular basis.

“It was a learning curve,” Rucker admitted. “But I wanted to be able to track my business, to prevent theft and to just keep up with all of that money.

“We were worried about losing customers over the switch,” he added, echoing a common sentiment among many laundry owners who are considering taking the card technology leap. “I think the worst-case scenario for us would be that we lost 5 percent of our business. But I don’t think it’s been that bad. Maybe we lost 3 percent. However, over the last month, we either got some of them back or there are just larger volumes that our existing customers are doing.”

Customer Acceptance

Customer acceptance in favor of cards will likely be stronger, as least initially, in newly built laundries.

“My store was brand new, built from the ground up,” said David Leighton, who owns a card-operated laundry in Ohio. “I advertised state-of-the-art equipment, so when people walked in, they expected it, and the card system went along with that. For me, it was very well-accepted.

“And I’m attended,” he added. “I think attended stores have better success with card systems than unattended laundries. It’s all up to the attendants, because it’s the attendant who is explaining it to the customer.”

If attendants are fumbling with the system and they don't understand why it does something or behaves a certain way, it comes across to the customer that your system is something that's complicated to do. On the flip side, if the attendant is a whiz and whips right through it, the customers will think, “If she can do this, I know I can do it, too.”

In fact, attendant training, as well as how a particular store owner presents the system to his customers, typically have more to do with customer acceptance than the specific demographic or ethnic breakdown of a certain marketplace, as many store owners originally thought.

“It’s not a big learning curve,” said George Polyzos, who, along with his brother Anthony, owns 15 card-operated Soaps ’n Suds in Virginia. “It’s taking the two minutes, showing the customers how to buy a card, how to add value to the card and how to use the card. Once you’ve done that, you’ve done everything. But you’ve got to stay with the customer for a little bit.

“When we introduced a new system to a store, we didn’t do it all at once,” added Polyzos, who retrofitted 13 of their stores from coin boxes to card systems. “We spent 30 to 60 days just doubling up on attendants, just to make sure everybody was comfortable. That’s the key.”

Even in heavily Hispanic and Korean areas, many owners are finding that it really doesn't matter. Success with a card system is based on how the customer is presented with this new way of doing business, which he may not be comfortable with. And the better the attendants are trained and the more they like it, the better they are going to be at selling it to the customer.

“My stores are fairly diverse,” explained Mark Lewis, who owns three card-operated laundries in California. “One store is 30 percent Hispanic, 20 percent tourist, and the rest is Caucasian. Then I have a store that is 90 percent Hispanic. I have a third that is probably 50 percent to 60 percent Hispanic clientele. And I’ve never had any problems with acceptance in any of those markets. Once they’ve done it once, sliding the card in and pulling it out is actually easier than dropping in quarters.”

“Most people, 80 percent, love the card,” said Allen Clasen, who operates two card stores in the Chicago suburbs. “But there are about 20 percent who are not as hip with it, because they’re very coin- or dollar-conscious – meaning if they have a quarter on that card, they want that quarter back in their hand. However, most people like the convenience. If you’ve got a washer that vends for $7.50 washer, sticking 30 quarters into that machine is crazy.”

Clasen had a suggestion for store owners looking to transition their customers from coins to cards.

“If they’re converting a store, they may want to have both card- and coin-operated equipment available, because that gives people the ability to be comfortable with the coin systems they are familiar with, while they begin to use the card-operated machinery, if they choose to,” he said. “If you’re a new store, it’s a different story – you’re going to begin capturing business right away. But you won’t capture the certain percentage of people who have got to have that cash in their hands.”

Susannah Robinson, who owns one card-operated laundry in Florida, has another way of assisting newbie card customers.

“We have a card that our attendant uses that has a set balance on it,” Robinson explained. “Our policy with new customers is to have the attendant say, ‘Here, let me show you how it works. I’ll use my card to start your machine, and you can just pay me the price you see on the machine.’

“That way, the customer sees how the system works, and they see that it’s easy. They become more comfortable with the technology. They feel taken care of and not so intimidated.”

“If somebody doesn’t want to buy a card, we will rent them one,” added Dan Mosher, who owns both a card store and a coin store in Las Vegas. “We keep a stack of rental cards for customers, and we’ll take either a $5 deposit or a form of ID. The customer can then put value on that card – and whatever is left on the card, we give them back, along with their deposit.

“We don’t want customers to walk out. Of course, if someone doesn’t have an extra $5 or identification, my attendants have their own cards and will use them to start the machines for those customers.”

The Systems

Briefly, there are two basic types of card systems: smart cards and magnetic-stripe cards.

Smart cards are thick, plastic cards that feature an actual microprocessor implanted on one side. These chips allow the card to act as its own miniature computer, talking to other "computers" like the card dispenser and the readers on each machine to add and subtract cash value from the card. Smart cards also offer a great amount of security for the user, and store information that can be used to generate dozens of different reports.

Mag-stripe cards are smaller versions of the standard bank-issued credit cards with magnetic stripes on the back. Mag-stripe cards can offer most of the accountability and pricing flexibility that smart cards can, at a much lower cost for the cards themselves. However, because the cards don't store information like the chip in a smart card, mag-stripe card stores need to be tied to a central computer.

System Benefits

There are a number of benefits to card-based systems:

• No more quarters. It frees up a huge portion of the store owner's time because he doesn't have to collect quarters.

“I handle coins with my vending machines and my video games and, to me, that’s a substantial quantity of time – and enough of a headache,” Robinson said.

In addition, the systems enable more flexible pricing. Price increases don’t necessarily have to be 25 cents at a time.

The Achilles' heel of the laundromat industry has long been that it is based on the quarter. To have a price increase of 25 cents at a time is huge jump, compared to, for instance, gasoline prices. For store owners, their challenge has been not being able to impact price increases as their costs continue to rise. And their costs rise in penny increments – utility costs, insurance, labor costs and so on.

Also, no quarters enable not only quicker but safer collections. “I can go into my two card machines, which are rear-loading behind many locked doors and security systems, and take care of that in the privacy of a secured office area,” Robinson noted. “With coins, you’re actually out on the floor in front of everyone.”

What’s more, no quarters mean less vandalism of your equipment. “Nobody is going to break into a card reader,” Lewis said. “I don’t have any machines vandalized.”

• Thorough business reports. Card systems are an excellent way to track the service history of your washers and dryers – when they go in and out of service.

They also can enable you to store all of your employee hours in a centralized system. In addition, you can have your attendants clock in and out of the system, as well as handle your payroll remotely.

And, with a card system, you can easily track which machines your customers are using. Sure, you also can weigh the quarters that come out of the 30-pounders versus the 50-pounders, but you can't easily translate that into hard numbers and turns. Plus, if you plan to build more laundries, card technology is a way to help drive what you're going to do equipment-wise next time. It offers good, solid information.

“I can look at my computer off-site, remotely, any time, in real time and know exactly what my store is doing,” Rucker said. “I know what machines are off or on, and what machines are being used. It’s unbelievable what you can keep up with that way, and I know exactly when my attendant takes money out. And I know exactly how much should be in her hands the very second it is taken out.”

“I’m someone who runs reports,” Leighton said. “I want to see what the customers are using from the small to large machines. I’ve got nine 45-pound machines, one 75-pound washer and one 75-pound dryer. And it’s kind of fun to see how much those are used.

“I can see either by numbers or by the graphs how they’re being used on a daily, weekly, monthly and yearly basis,” he added. “This also helps me with my vend pricing. It’s a domino effect. One thing leads to another. Then I can justify increasing my vend price on certain machines.”

“Obviously, the hidden piece of this is, if you’re ever audited, the government will know exactly what you’ve done,” Clasen explained. “If you’re keeping historical data, they’re going to know. For me, it’s not a problem, because I report what I make.”

To Rucker, this is the very reason why many laundry owners may decide against a card system.

“No more cash is a disadvantage to some,” he said. “With card systems, it’s total accounting of cash. You don’t have a hole in your money bag anymore. Many people get into the business because it’s a cash business. And that’s probably one of the biggest reasons some owners don’t switch over to cards – they will not give up that hole in the money bag.”

• Remote operation. Remote access is popular, especially with today’s new, more professional investors. One advantage of the self-service laundry industry is that it's not like a restaurant. The operator doesn’t have to spend 60 to 80 hours a week in his business. It's a great secondary income, a great part-time investment. And remote access has been a very big drawing card.

• Marketing benefits. Card systems can offer a number of marketing options. In addition, the cards themselves can become marketing tools, which may even include the name of the laundry on them.

“I offer periodic discounts on my drop-off laundry service,” Leighton said. “Instead of taking a credit card or cash, if a customer uses his or her card, I’ll give a 10 percent discount.”

Leighton explained that he also uses his system’s flexible vend pricing options to provide discounts on certain days for certain equipment. “My card system tells me where my slow days are – and even the slow times of my slow days – and I then give advertised discounts,” he said.

Leighton also can set his card system to automatically offer across-the-board discounts to firefighters, police officers, churches and organizations that help the homeless, he noted.

Clasen often uses his cards to provide laundry services to needy families in his marketplace. “Organizations will call up and say they want to buy $400 worth of laundry services,” he explained. “They’ll buy the cards for families that are underprivileged, and they can give out the cards knowing that they’ve got $99 worth of laundry services on them and the only place the cards can be used is at the laundromat.”

• Customer loyalty. Most customers aren't going to patronize another self-service laundry if they've still got money left on your store's card. Basically, you've locked them into coming back to your store.

• Float. The cash left unused on a card is referred to as “float.” And, for many operators, it’s the biggest advantage of all.

“The cool part about the card systems is that you know exactly how much float you have at any given time,” Clasen said. “You can run a report, and it tells you how much. It’s generally about 10 percent.”

“I know an owner carrying about $1,000 a month in float,” Rucker said. “Realistically, my goals are to carry $1,000 a month of float. So, after 12 months, it would be $12,000. It increases every month by $1,000. I’m not saying every store would do that. It would depend on the size of the store and the volume that the store is producing. But I think a good round number for the average laundry would be somewhere between $700 and $1,000 per month of float.”

Is It Right for Your Business?

This is not to say that card systems have no disadvantages. Here are a few of their widely perceived "cons":

• Persuading attendants and customers to "buy in." You definitely have to educate your attendants about this technology so that they, in turn, can teach (and "sell") the systems to your laundry customers.

Customers who walk in for the first time thinking that they're going to be using quarters feel like they showed up to the dance without a date. They feel like they're in the wrong place. And the store owner needs to be accommodating to those customers.

• Card, hardware and maintenance costs. You can consider the cards themselves to be disadvantages from the perspective that they are something you have to purchase on an ongoing basis for the life of the store.

Most mag-stripe cards are under $1 apiece, while smart cards typically cost $2 to $3 or more.

At one of his stores, Clasen charges customers 25 cents for his mag-stripe cards, while at his other, newer store, the cards are free.

“Most people take the attitude of why do I need to pay you for a card that I’m going to use and throw away,” Clasen said. “That’s their thought process. But it does cost me something.”

“I don’t charge for cards,” Rucker said. “In fact, we give a little bonus to anybody who puts $20 on a card – they get a 5 percent bonus. So they’ll get $21 on their card.”

“We pay just under 60 cents apiece for cards,” Polyzos said. “We issue about 7,500 free cards, and after that we start charging $1. Once you put a little cost to it, you’ll notice that your cards won’t all be accumulating in your trash can. Customers hold onto them because they perceive they have some value. When you give something for free, they don’t realize how they can accumulate bonus points and so on.”

As for other card system costs, “you ought to prepare to have some kind of technical support,” Rucker suggested. “You’re going to have some monitoring, some upgrading every year. So allow a number for that. Your main costs are your initial installation cost and your monthly costs – which are cards, your DSL or phone line, and then support or technical upgrades down the road.”

• Card systems are computers. “If you have no computer experience, you either have to have the desire to learn or you’ll need to hire somebody,” Clasen suggested. “Or you shouldn’t go with a card system.”

Although the systems feature many advantages, the vast majority of the self-service laundry industry still hasn’t embraced card technology.

Despite some manufacturers reporting that more than half of new-store business features card-based systems these days, the estimated (and generally accepted) percentage of self-service laundries with card systems remains in the single digits.

And, with the retrofitting of a coin-based laundromat with a card system in the $40,000-$70,000 range or even higher, many existing laundry owners have been less than enthusiastic to jump on the bandwagon. After all, the average store owner with a small to mid-sized laundry probably doesn’t have an extra 40 grand just lying around.

“The prime reason a store owner doesn’t want to invest in a card system is the cost to purchase that equipment,” Leighton said. “It’s not cheap. Another reason is that store is too small and doesn’t justify such a system. After all, a store with 10 machines doesn’t need a card system.”

“There are just certain people who don’t like change,” Lewis added. “Change is what makes businesses go up and down. I think people who are hesitant about a card system are probably people who refuse to embrace change and technology – or fail to look at what their time is worth.”

“If the demographics and marketplace warrant it and the store owner wants to bring his store up to the next level, he’ll justify it,” Leighton concluded. “Otherwise, he’s going to keep doing it the old way with the old machines that use all the water and all the electricity. And, in all fairness, they’re the ones who are going to go out of business. They just don’t know it yet.”