Laundry Utility Advice

[Jhill]

I have been researching the laundry industry for several months and am now to the point of buying. I'm evaluating a laundry using income information and utility bills. I've read several books and feel like I understand all of the calculations. Question, the laudry that I am looking at has utility bills that total at least 39% of the income with the W/D/F income included in the income figure. I thought that the rule of thumb is about 25%. Machines are fairly new. Does anyone have any ideas about why this could be?

Thanks,

[BUTTERHEAD]

Where are you located? My utilities run me about 17% of gross. I only have control over one item where I am and that is natural gas, which I watch very aggressively.

What is the owner paying for natural gas? I have seen owners who are out of touch with what they are paying for this service.

[Jhill]

The laundry is in Georgia. The natural gas bill is about $800/month($1.149/therm). The water bill is about $1800. Overall the owner is paying $3000 a month in utilities and reporting $6000 coin and $900 W/D/F.

[BUTTERHEAD]

Interesting...I am in GA as well, and you should be able to get your gas bill much, much lower than that. See if the current owner is locked into a long term contract. This months bill for me will have me paying $0.6129 per therm.

Where are you located?

[Jhill]

I'm in Atlanta, maybe it is just the cost of utilities then. I looked at my home gas bill and it is 1.199 per therm. Thanks for the info.

[Howard]

You guys need to be careful that you are comparing apples to apples here. You need to look at the total gas cost which is both the cost of commodity and the cost of transport / delivery. If the number seems very low it is probably only what an alternate supplier is charging for the commodity and does not include what the local utility is charging from bringing it from the city gate to your store.

[Jhill]

OK, thanks for the advice. Can you give me a quick idea of how I can do that?

[BUTTERHEAD]

In GA there are a few charges, just like most anywhere else.

1. Commodity charge, which may have a margin adder (mine is NYMEX +)
2. Sales tax
3. Base charges charged by the gas company
4. Pipeline transportation, which is normally a price times your DDDC
5. Service charge (normally 5 or 6 bucks)

These extra costs can add up to 20% of your total bill. In many residential accounts, the pipeline transportation is added in. You cannot get around the base charges, and the sales tax, and it is very hard to get around the service charges. I like to have mine broken out so I can see what I am paying.

I can recommend the two best providers here in GA. I have a relationship with them and they can give better rates than you will see published on the web, or through a phone call.

My primary job is in the electric and natural gas industry. You can contact me at tcgllc@comcast.net for any off-line questions you may have.

[MGS]

My guess is that you have one of two situations, or both.

1) A gaggle of top loaders. This will cause you to use a lot of water versus stores with a lot of front loaders. I do a little more than $200K per year, and while my gas cost is nearly double yours, my water cost is less. I have 25 washers, and only 3 are top loaders, and my top loaders are a water efficient model. My utilities cost is 19% of revenue, and I am in New England - so I pay much more for gas to heat the building than you do.

2) The prices are too low. This will also cause the percentage of revenue versus utilities to be high. Make sure you are not the cheapest laundromat in town. If you raise prices, and loose customers, you could maintain the same revenue while decreasing your utility costs.

If the mat you are looking at has these 2 problems, consider yourself lucky. They are easy problems to fix, and presumably you are buying the mat at a good price versus what it will be worth after you increase the profitability. Raise prices, and buy some larger machines to replace the top loaders. Large machines earn more revenue per sq ft, while using less utilities.