Grand Opening Promotions?

[SuperWashnDry]

What have you experienced guys done for Grand Opening promotions? .25cent wash? two for one? 1/2 price wash?

[Howard]

Why would you want to do that - didn't you tell us the crowds are already looking in the windows salivating and asking when you will open?

I would do nothing for the first month or so until you get all the "bugs" ironed out and then after than maybe do something like you suggest.

[SuperWashnDry]

Always a joy to hear from you Howard /ubbthreads/images/graemlins/wink.gif

[JamesD]

OK so Howard has a few rough edges, but he is right on the money.

Don't do anything special until you and your staff are fully trained and you are sure that everything is working. I have built stores from scratch and Murphy's Law definitely applies. You can expect several issues at the beginning and you want to work your way through them before you have a mass of people to contend with.

You know the old adage, "You never get a second chance to make a first impression". Considering that your distributor is handing you a turnkey store, it is even more likely that you will get some unintended little features. I am not knocking distributors, but nobody is perfect and you don't know enough yet to notice problems until they hit you in the face.

[super]

I have only been in the buisness for six months. In the planning stages and purchase I have found this forum to be great. I have asked many questions, sometimes they agreed with me,,,,,,great. but somtimes they did not. We have to remember these guys who have been so sucessfull and so much experience know so much more then us newbies do. These guys are doing this out of the goodness of their hearts and have nothing to gain from it. We as newbies will benifit by being willing to learn from them. Ive had many enployees in my life and found that the most sucessfull ones are willing to learn from evreyone, no matter their status or if I agree.
Ive been waltching the last few days of post and we should keep in mind the above statement. We as newbies need to try to keep respect in our comments and if they agree, great, but if we disagree, we as buisness owners should take it as constructive critisism and try to figure out what they are saying from their veiw.
I appreciate all the comments from Howard, Adamki,Larry,Chad and all the others who unselfishly help us when Im sure they have better things to do. We may not agree,,,,,But this fourm is invalueable to us, and would be non-exsistant with out them. thanks again Super dave

[SuperWashnDry]

Super, couldn't agree more. Love constructive criticism, just don't like un called for bashing. I have a business degree, and have been a very successful self employed business man. Not having to have myself or wife work for the last 4 years, and living in one of the most exclusive areas in the US (live in Del Mar) mat is in Chula vista can attest to doing something right. Don't have to be a brain surgeon to run a mat, basic business principles apply to any business. I do realize I don't know the ins and outs of the machines, advertising in this industry, but do know the clientel as my insurance agency was all high risk, with 50% of clients hispanic and blue collar. But I treated them with respect and as though they were white collar, and do more business by referral than you can imagine. I do appreciate the experienced guidance in regards to the particulars of a mat, just not putting them on a pedistal as business geniuses as you are. Distributor is the one saying you need to run a .25cent wash to get people coming in for a month, and I feel I should just open at full price, and maybe just offer give aways and free soap etc. so that I don't lose clients once I raise prices. That was the feedback I was looking for, not a sarcastic response.

[chad]

Here is what i would do..... Give away a few things, every cutomer that fills out a customer info sheet would get a raffel ticket do it for the whole month and hold a raffel, like a Tv and a few other things, also GIVE OUT LANYARDS!! there cheap and ppl love em.... Give free sope on some days other then that i would not discount washes or anything.

[chad]

at the end of day we are all here to help each other, I for one thank this fourm and all the great ppl that have helped out its great to see a place like this. Knowlege is power, and there is plenty of it here.

[SuperWashnDry]

Tell me more about the laynards? Do you hole punch and after so many washes, they get a free one? How many before a free one? Or what do you do with them exactly? Thanks, Chad

[SuperWashnDry]

I see, I just searched lanyards on the internet. So you just give them as freebies with you company name on it, customers wear them to hold their car keys, etc.? No card hanging from it to hole punch or anything?

[SuperWashnDry]

Customer info sheet? Asking name and address? So that you can send marketing materials to their houses?

[petefritz]

I agree with Howard. There will be bugs to work out, and you need some perspective from a few customers to know what will entice more thru the door. In the long run FREE wash or 1/2 price as a marketing gimmick does not build loyal traffic. If you picked a good location keep it clean and working machines is all you need. I had a 50% off washers sale 1 year after I opened my new store as a thank you to the customers. I did it becuse it is such a poor area I wanted to really thank them. I am very much against discounting to gain business.

[SonomaJoe]

Play to the strengths of your mat, availability of machines, cleanliness, safe environment. Don't train your customers with discounts.

[Howard]

[ QUOTE ]
.... Distributor is the one saying you need to run a .25cent wash to get people coming in for a month, and I feel I should just open at full price, and maybe just offer give aways and free soap etc. so that I don't lose clients once I raise prices. That was the feedback I was looking for, not a sarcastic response.

[/ QUOTE ]


As a self proclaimed smart business man you know that the distributor is not your friend - he is there to make money selling equipment or a turn-key store. That said he has a selfish motive in telling you to offer 25 cent washes. Sure it will get people into the store, but those are the price-loyal customers, who will most likely leave your store when you put the price back to its normal level. BUT, you will generate lots of turns per day and then if the store does not pan out and you try to go after the distributor he can point to the fact that the store did meet turns per day projected at one point and you the owner have messed up the business so it is not his fault.

Further, 25 cent washes may be good for the distrutor but they screw up our business. What do you think the response will be from your competitors? Thats right, a likely price war.

The last thing you want to do is start a price war - remember you have a note you have to payoff for somewhere around $500K, just the interest on that is somewhere in the area of $40K or so. The old rundown store that you hope to compete with is likely owned free and clear with no equipment or carrying costs. When he sees cashflow drop he can beat the pants off you lower price if he wants to. Be careful you judge your crappy competitors correctly.

You won't be happy when he goes to full time 75 cent washes.

[SuperWashnDry]

I do appreciate sound advice Peter and Howard, as I don't claim to know what works in the laundry world. I never liked the idea of a .25cent wash. But you really don't believe in offering even a 1/2 off wash say for a week? That way new customers are drawn in, and would then know what your "true prices" would then be after the week was up? Signs would state for 1 week, or limited time only? Or do you all honestly think, just start out at full price offering TV drawings, free soap, free BBQ, entertainment, etc.? Distributor is going to put out 10,000 door hangers a mile radius around the store, and I also plan on running 1/2 page ads in the penny saver for 6 weeks, 1week before opening and 5 weeks after. Then flyers, mailings, etc. continually.

[Howard]

If you really are better than everyone else then why give it away? Why not see what you get at normal price and work out the kinks, train employees, etc... Then after a month run a special for a short time. I like the idea of buy one get one free or something like that better than 25 cent wash. Don't let people get the idea that a wash costs a quarter.

Remember that this is a business where you are basically using expensive equipment to markup water, gas, electric and sewer service - high incremental costs.

Also, people need to wash the clothing they wear - but only once in a given period of time. I state this because it is very different than when WalMart has a sale and you draw people in that buy multiples of the item and then buy other things while at the store. People will not wash their clothing once and then put the clean clothing back in the machine because it is cheap that week.

Since I have a card system I use a hook in a frequent washer program where for each 15 washes on the same card they automatically get a free wash. This builds loyalty and has very little cost.

[Adamski]

Howard,

"... you will generate lots of turns per day and then if the store does not pan out and you try to go after the distributor he can point to the fact that the store did meet turns per day projected at one point and you the owner have messed up the business so it is not his fault."

I think the distributor is merely trying to create a large buzz at the laundromat's Grand Opening with that 25 cent wash price. He wants everybody in the neighborhood talking about how "you can go over to that new laundromat and do your whole week's wash for just a few bucks." I don't really think that he's just trying to cover his own butt with a week or two of high TPD's.

Of course, like you, I disagree with the use of such tactics. I think they're reckless and potentially counter-productive as one never knows how the competitors will react.

I prefer to slowly seduce my competitor's customers into my laundromat with subtle improvements and customer benefits rather than selling my services below cost to encourage a rapid migration that may result in a price war. But hey, that's just me.

Larry /ubbthreads/images/graemlins/cool.gif

[JamesD]

Super,

Larry, Howard, Pete and I speak from years of experience and you seem to have your initial marketing ideas set. I strongly suggest you relax and take a wait and see attitude.

We all know that you are making a major investment and you want to get up to speed ASAP. If you store and location are as good as you say, then you may have to do nothing.

Go ahead and give away some promotional items - key chains, lanyards?, pens, laundry bags, etc. with your logo and store info.

The key here is that according to the CLA Surveys and most experienced owners, price is not even in the top 5 reasons that your customers will come to you. So, why make it an issue. If things go well the first few weeks and you want to send out some coupons to take it to the next level, then go for it.

As Howard mentioned, certain promotions that make sense in retail business don't apply here. Loss leaders just don't work. Supermarkets can sell eggs and milk below cost to draw customers in because they know that most customers will buy many other items to make up for the loss.

We don't have that option. We need to make a profit on our main services - washing and drying. We are value-added resellers of utilities - nothing more, nothing less.

Save your marketing $$ to retain existing customers and occasionally market to new customers. The most successful marketing in this business is word-of-mouth which as you know costs nothing. Treat everyone coming in well and you will do fine.

[SuperWashnDry]

Thanks JamesD, but I just finished reading the Gold Book that CLA mails you after joining. And they say for a Grand opening one of the best things to do to generate buzz at your store is to do a "price promotion". So some of you tend to disagree with CLA apparantly, yet quote them as agreeing with your views. They even state to do it for a month, then end it, and raise to your normal price. I believe I will offer 1/2 off for 1 month. That way customers will know what to expect as far as prices go when "promo period is over". They do state, to open first for a week, get the kinks out, then do a grand opening, making a big splash on a weekend, with free hot dogs and soda, give aways, etc. I personally feel that will create a lot of buzz, yet won't make me get into a price war by offering .25cent wash. Signs will state for "limited time only", therefore competition will to know that once promo is over they will know what my prices will rise to as well, and won't fret.

[Howard]

[ QUOTE ]
Thanks JamesD, but I just finished reading the Gold Book that CLA mails you after joining. And they say for a Grand opening one of the best things to do to generate buzz at your store is to do a "price promotion". So some of you tend to disagree with CLA apparantly, yet quote them as agreeing with your views. They even state to do it for a month, then end it, and raise to your normal price. I believe I will offer 1/2 off for 1 month. That way customers will know what to expect as far as prices go when "promo period is over". They do state, to open first for a week, get the kinks out, then do a grand opening, making a big splash on a weekend, with free hot dogs and soda, give aways, etc. I personally feel that will create a lot of buzz, yet won't make me get into a price war by offering .25cent wash. Signs will state for "limited time only", therefore competition will to know that once promo is over they will know what my prices will rise to as well, and won't fret.

[/ QUOTE ]

Well as James has said you have your mind made up, so be it. You were getting advice from some seasoned owners. The CLA is made up of owners, equipment manufactures, and distributors. Many of the latter have a lot to do with the book you discuss. So, think about what successful owners are telling you.

[SuperWashnDry]

So "Great Howard of all Wisdom" you never did any price reductions in your mats for promotions. I've read now all 338 pages of posts, and somewhere back in 2003, I guy posted that a new store down the street from him did a half price wash for a month and just about closed him down after being in the same spot for 2 years? Once again, is it you don't like the "new flashy stores" coming into your "old" neighborhood and taking business from you? I can't see the negative to a one month promotion period!

[Howard]

No comment, you know everything about this business even though you are not in it yet. Listen to what those have told you that have been in it for quite a while. Forget what I have told you, look at the response from other seasoned owners since you don't like my opinions.

[Jkincaid]

I'm a newbie too, but I would recommend starting off with some basic advertising, with some giveaways and free detergent. No need to give away your profit, its a new store, so if the market is there, that should be enough to get the customers in.

Again, I'm new to this, so take it for what its worth, but I have ran other business including residential rental property, gas stations, and courier/warehousing company...and I've found the same thing with all of them, provide good value (price/service) and you'll be successful.

Your store looks great though.

Jeff

[SuperWashnDry]

Thanks, pictures don't due it justice, the inside one shows only a small portion.

[JamesD]

[/ QUOTE ]

Well as James has said you have your mind made up, so be it. You were getting advice from some seasoned owners. The CLA is made up of owners, equipment manufactures, and distributors. Many of the latter have a lot to do with the book you discuss. So, think about what successful owners are telling you.

[/ QUOTE ]

I'm with Howard. I give up. Super, don't ask for advice from people who have been there, done that and then say that we are wrong.

I have seen people do 1/2 price or less promotions and start price wars many times before. The most recent one was meant to be a 1 month 1/2 price deal for a new store. The existing store around the corner went to 50c 20 lb wash and they have been there for at least a year - great idea!!

Keep in mind that your competition probably has lower costs than you and they will most likely not go away no matter what you do. Be careful out there and lighten up!

No matter what you may think of Howard, he is a seasoned professional who has experienced many of the things that you are just thinking about now.

As I mentioned before (not that I owe you any justification), the CLA Annual Survey lists price as #7 or so on the list of reasons people go to a particular laundry and they have reflected this for years.

The Gold Book is a general guide and may not apply in major metro areas with intense competition. I would bet that the NY Metro area is not much different than Southern Cal.

[SuperWashnDry]

But do the rules apply to opening a "brand New, never before opened store" vs. buying an existing store. If I bought an exisiting store, I would never think of doing a price promotion. But since with a new store, you have no customers, so does it not make sense to create a buzz and get people into the "new store"?

[Duane]

Before doing anything, do as the others have suggested and operate the store for a month or so to get the bugs out. The last thing you need to do is have a big promotion and pack the store then have problems that upset customers. Those customers will then spread a bad word about the store.

Once the store is running smoothly then do what ever promotion you think you need to pull in customers.

Duane.

[brucehwalker]

SuperRookie- Been reading your posts and you seem quite eager. That is a good thing. so keep the fire burning.

Do a soft open- very little fanfare for 1-2 months. Make sure you have a clue in otherwords. Then join the chamber of commerce, run an ad in the paper, doorhangers, hotdogs, free donuts, banners, etc.

You aren't listening to everyones comments about price. PRICE IS NOT THE ONLY REASON WHY PEOPLE SOME TO YOUR STORE. It isn't even the main reason for most people.

The number one thing I'd do is find the right people to attend your store and train them on how to sell a card. It is all sales! You will run through 5,000 cards in 2-3 months so stock up. Give me your number and I'll visit with you in detail. bruce@washitkwik.com

[SuperWashnDry]

Bruce, I do understand PRICE is not even in the top 5 reasons people attend a particular laundry, and I expect to charge a price that is in accordance with competitors or slightly higher once up in running. Only want to create a buzz in the beginning, thinking get a bunch of people to come try the new equipment, see the service, the tv's, the video games, the cleanliness, the brightness, etc. So that they can see the difference in quality and then continue to come to my mat after I raise the prices to the everyday price. What I don't understand is how does the CLA and distributors BENEFIT by telling people to have a price promotion for a month to create a buzz? IT DOESN'T HELP THEM IN ANY WAY! Lastly, don't get the card thing, as I'm a coin operated store? Do you mean a punch card where they get a free wash after 10 washes or something? Appreciate your feedback W. My wifes from Dallas /ubbthreads/images/graemlins/laugh.gif

[SuperWashnDry]

Forgot to mention the distributor told me they will run every single machine to check for potential leaks, problems, etc. I understand there will still be some problems, but a lot? You recommend opening for a month "soft opening" at FULL PRICE, then do a Grand Opening and offer HALF price wash or something to that effect? Thanks again.

[SuperWashnDry]

Bruce, 858-342-0044, thanks, Dave

[JamesD]

[ QUOTE ]
But do the rules apply to opening a "brand New, never before opened store" vs. buying an existing store. If I bought an exisiting store, I would never think of doing a price promotion. But since with a new store, you have no customers, so does it not make sense to create a buzz and get people into the "new store"?

[/ QUOTE ]

Wow, you really are something else. You have gotten comments from people who have opened brand new, never existed, in a new spot stores before - present company included. What am I missing here?

Let me try this one last time (summing up mine and several others main comments):

1- Price is NOT that important and any big, initial price reductions may backfire

2- Things can and will go wrong for a while, so take it easy when you open

3- Your competition may have lower costs and they won't go away, so don't underestimate them

4- Give away promotional items for a while

5- Focus on training yourself and your attendants

6- Treat customers like gold and you won't have to worry too much about outside marketing

7- If you have a prime store in a prime location with brand new equipment, then you have already done your initial marketing. You have mentioned that people are already beating down your door!

Are you going to tell us about your plan for 1/2 price washes now?

[SuperWashnDry]

Have I mentioned, I'm going to do a price promotion when I open? /ubbthreads/images/graemlins/grin.gif Just kidding, I'm starting to understand, I would love to just open at my regular prices, and just have give aways and drawings for things, etc. Why CLA and Distributors state otherwise, and some owners in past post years ago, that I've read on this board disagree with the "5" of you? No one has answered that question. How does CLA or a distributor benefit from ME having a price promotion vs. not having one? /ubbthreads/images/graemlins/confused.gif

[epic02]

less then 3 years ago a new card store opened up less then a mile away from me. The new owner had his people put his fliers in my mat on my bulkheads. He wanted war I was going to give him war. When I went to confront him he told me he had nothing to do with it and that he didin't no I even had a mat at the location. I said bull*#$! you invested over $800,00.00 dollars and you didin't check out your competition, your a liar. Then I really scared him when I told him that I own my Mat and property free and clear and could go down to .25 cent wash and free dry if I wanted to , and put him out of business. Anyway I never had to sinse he opened my volume has increased he sold his business to another and has been sold again. It allready changed hands 3 times they have happy hour durring the week and are constantly doing promotions to keep there exsisting customers happy. All the while I just rasied my price not to long ago. If your going to buy a mat or build a new one you should check out your compitition and do your homework see if they own or lease. just to see if you can even compete with them on a level playing field.

Now just last month about 2 miles away from me another brand new card store has opened I'ts over 3'000 square feet on the first day they did a half off promotion on all there machines for a month grand opening. When I went buy there they had one customer inside and 4 employees working. Now that the month has passed they have a new sign outside saying low prices. I don't now how its going to make any profit. This is the case where the distributor made alot of money putting a laundy in a bad location.

1 mile from there there was another card laundy with a big chain name that was only opened a little more then a year has been burned now for about 4 years and now it's just an abandoned building. I think there still investigating if it was arson, and the insurance companies are not paying.
I don't know why any one would want to put a new mat in a place that already has plenty, just to try and take piece of the pie if there lucky it's a huge gamble. Super whatever happens good luck wish you sucess, let us no your progress. Now if your were becoming my new neighbor I wouldin't be saying that.

Chad went by you place looks great.
Kenny

[SuperWashnDry]

Thanks for your insight Kenny, do know my competition, and they are ALL in strip malls, so unless they OWN THE HOLE MALL (which they could i guess). I shouldn't have to worry about any competitiors dropping their price to .25cent. Also why not put in a Brand New Laundry in a city with over 250,000people, that hasn't even had a new one built in over 10-15years? Just upgrading the service and quality of machinery for the locals to enjoy. Finally spoke with Bruce on the phone from Texas, and I think I will just open my doors at full price with a soft opening for a month. Then have a blow out Grand Opening with free food, raffles, giveaways, AND NO PRICE REDUCTION! If I'm going to be the best than charge the best and don't look back! I do believe you guys way more than any distributor, don't get me wrong. I know they are looking out for one thing, and thats themselves /ubbthreads/images/graemlins/tongue.gif

[chad]

you already have to much expense to give things away for almost free. Trust me make a few raffels and be you rollen. yes ppl like almost free things and they get used to it.

[Howard]

[ QUOTE ]
Thanks for your insight Kenny, do know my competition, and they are ALL in strip malls, so unless they OWN THE HOLE MALL (which they could i guess). I shouldn't have to worry about any competitiors dropping their price to .25cent. Also why not put in a Brand New Laundry in a city with over 250,000people, that hasn't even had a new one built in over 10-15years? Just upgrading the service and quality of machinery for the locals to enjoy. Finally spoke with Bruce on the phone from Texas, and I think I will just open my doors at full price with a soft opening for a month. Then have a blow out Grand Opening with free food, raffles, giveaways, AND NO PRICE REDUCTION! If I'm going to be the best than charge the best and don't look back! I do believe you guys way more than any distributor, don't get me wrong. I know they are looking out for one thing, and thats themselves /ubbthreads/images/graemlins/tongue.gif

[/ QUOTE ]

Wow intersing decision - isn't that what I suggested and then you attacked me? You really need to relax, lets agree to play nice and accept advice as it is intented - to help.

Have a nice day /ubbthreads/images/graemlins/smile.gif

[epic02]

Superwash once you lower you prices It's hard to go back.
Because customers always expect it and once you raise them
it makes them mad and thats when you loose them. You'll will
see in time when you raise your prices a quarter, How the customer reacts. The raffle idea is so much better with free food and giveaways. Give them a good first impression. And if you in a good location and not alot of competition you cant go wrong. Just be ready to put in alot of hours. And learn to fix your own machines.
Kenny

[JamesD]

Super,

Congratulations! It sounds like some advice is finally sinking in. Don't think that just because someone is in a large strip that they don't own. I am in a very large strip and I don't own the strip. However, the building went condo a couple of years ago. I had built a good relationship with the owner and he sold me my space before selling the rest to a large real estate co.

[neal]

You guys all have good points but I think price matters to a lot of people. I would never tell anyone to give the store away with give away priceing or free dry. Both are really bad ideas. But I think haveing low prices and working machines and a clean store are not bad things. I have some of the lowest prices in town and enjoy a good business . Its different with new stores because of the debt they have. Mine are all paid for. Good luck

[Ned]

SWD,

You'll be fine... Think of the soft opening as a "shakedown cruise" that most boats/ships undergo when first launched. Take the boat around the bay before venturing out into the ocean.

For instance, you may find that running all the washers simultaneously creates a drain problem you won't find when they're tested individually. Humidity in the store, backdrafts in the venting systems, plumbing lines that haven't been properly flushed during installation, water hoses hooked hot to cold, bill changers that jam after the first 30 bills because the stackers need adjustments - laundromats are still basically machine mechanisms that obey the laws of physics & hydraulics - not to mention Murphy.

BTW, one promotion to consider: by a nice bike, suspend it from the ceiling, have the customers ogle it, and raffle it off after the first month. Each time in the store, the customer gets to throw another raffle ticket in the fishbowl for the drawing..

Best of luck!

Ned

[Duane]

Neal,

You should read this months Journal article about turns per day. If you are providing a clean store with good equipment, why are you so cheap?

Duane.

[SuperWashnDry]

Thanks for all the replys and encouragement, I think its definitely the way to go /ubbthreads/images/graemlins/laugh.gif

[petefritz]

I think this is a riot! You know ZIP about the biz and knock all the advice, unless someone agrees with you. If I was blowing 900k I would want everyone to agree with me too!
You are the " seminar target". Enjoy the tax write offs and cash flow losses. I hope you got big bucks pouring in from "other concerns" Post back 5 months after you open and tell us how things are really going. Nobody ever does..

Acid test;
ratio renters per sq mile vs mats per sq mile
ratio age renters/family per sq mile vs mats per sq mile
average mat size and gross per sq ft in immediate marketplace
average rent per Sq ft

the first one will be the deciding factor in the success of your mat or not, no matter what anyone here tells you or if you bother to follow anyones' advice.
You may have picked the nugget of gold or coal in your location, it goes either way. 80% chance it is coal, just the way the numbers work out. If you want to listen maybe some owners here will help you thru the mess you are about to get into. It IS not that easy!

[SuperWashnDry]

Pete, you of all people should talk. I read your posts from 2002, you own trailer park mats, that do 40K-50K gross, and your "big mat" does 100K gross, you might as well run a gumball machine territory. I should just buy all your mats with my down payment /ubbthreads/images/graemlins/shocked.gif

[Howard]

[ QUOTE ]
Pete, you of all people should talk. I read your posts from 2002, you own trailer park mats, that do 40K-50K gross, and your "big mat" does 100K gross, you might as well run a gumball machine territory. I should just buy all your mats with my down payment /ubbthreads/images/graemlins/shocked.gif

[/ QUOTE ]

Why are you attacking Pete over the size of his mats, that makes zero sense. While you may not like his strategy it works very well for him. While there are some economies of scale in owning one big mat, there is also much risk. You may find this out in two or three years when one even bigger than yours is built two blocks away. Pete has divirsified his risk away by having many small stores. Further, he is less open to new competition as he says because in his neck of the woods people build new mats when they see large big ones doing well. I leave it to Pete to attack you on this, I'm just pointing out the facts.

[brucehwalker]

Super Rookie- Ease up. I know you are getting flamed by the vets here but you won't have anyone to come back to for advice with comments like yours.

It isn't about how much you spend or even gross. It is the net result that we get to keep as our prize!

[BUTTERHEAD]

I have not been in the business as long as many of you, but I do have some thoughts.

I have been in the business for close to 2 years now. I have built a new store from the ground up, opened it, operated it, and flipped it. I then rolled this money into an existing store that does as much on Saturday and Sunday as the other store did in seven days.

At the store I built from scratch, I opened it with regular prices: $2 tops, $2.75 for 25# washers, $3.50 for 30# washers, $5 for 60# washers, and $1.25 for 32 minutes for 30# dryers, in a very poor neighborhood. I also offered free soap Thursday.

The people griped about the wash prices (while they continued to put their money in) and griped about the "odd" pricing on the dryers. When their wash was done they told me how much they loved the place, how clean it was, and they would be back next week. No one cared a lick about the free soap. What they cared about it was the cleanliness of the store and bathrooms, and did all of the equipment work when I hauled all of my clothes from my house to the laundry.

In my new store, I am priced slightly higher and I have 38 washers versus 22. I also have some 45# dryers as well. When I bought the store, I installed a camera system, added wireless internet, increased the wash times, added a second change machine, and opened the store for 24 hours per day. I also raised the prices at the same time. I also plan to raise my prices on some of my larger machines after the beginning of the year. Once I raised prices the first time, the attendants barely noticed it.

I have a promotion where you can enter to win $100. The people who do 30 loads of clothes are the people who end up winning most of the time, and believe it or not, there are not as many people enter as you would think. Last month I had 23 people enter the drawing, but I still keep getting business.

In short, the promotions are good, but they are not what is keeping or getting customers. The super clean store, all of the equipment working, friendly staff, magazines to read, A/C, etc.; that is why they come to my store.

Not that this has not been said, but I would never run a promotion that promoted lower pricing. It will be hard to get away from that going forward.

[SuperWashnDry]

Why do I attack him? Why don't you guys read Pete's post without your "veteran glasses on" or "rose colored glasses". HE'S ATTACKING ME, BUT I GUESS THATS OK FOR A VET TO ATTACK A NEWBIE. Pete states "Enjoy the tax right offs and cash flow losses. I hope you have big bucks coming in from other concerns." He is STATING IN BLACK AND WHITE THAT I WILL FAIL! How in the hell does he know that, when he doesn't know my location, demographics, business apptitude, background, dedication, and determination? WTF? Lastly attacked him because he's running this little stores, unattended, I've run a huge insurance company, started from SCRATCH AND SOLD TO A PUBLICLY TRADED COMPANY. Don't see that happening with his trailer park mats? Also I have a business degree from a top California University, not a degree from Laundry world. IF HE CAN DO IT, SO CAN I! Don't understand the hate you "vets" have toward NEWBIES, you all were one once as well? I have only been harsh towards those that attack my ability and credibilty to succed, the ones that have offered constructive criticism and sound advice I have thanked and cordial with. I will post back in 6 months, and somehow will make sure all you NAYSAYERS see my tax returns in 2009 to prove it.

[SuperWashnDry]

Bruce, you and I spoke on the phone, you know I'm not this egotistical guy, yet I'm not going to sit back and take this crap from some people (2-3) of them. I would hope you, Chad, Adamski, Sonoma, Duane, etc. would continue to help? /ubbthreads/images/graemlins/confused.gif

[SuperWashnDry]

Congrats Butterhead on your obvious success from a Newbie to a 2 year vet! Sounds like the way to go, as I'll be starting with new everything, and I do know how to treat blue collar customers as white collar ones, as I did work with these people for 15 years in the insurance business and was very successful in that. No price reductions, just good service, clean, new machines, I will have free wifi, security cameras, 5 tvs, magazines, will bring in donuts everynow and then, as well as pizza's for lunch and dinner every once in a while. Like the idea of the "dirty dozen", free wash after 12 washes as a hook to keep then coming back as well! Thanks for advice without attacking my ability to succed!

[Howard]

[ QUOTE ]
Why do I attack him? Why don't you guys read Pete's post without your "veteran glasses on" or "rose colored glasses". HE'S ATTACKING ME, BUT I GUESS THATS OK FOR A VET TO ATTACK A NEWBIE. Pete states "Enjoy the tax right offs and cash flow losses. I hope you have big bucks coming in from other concerns." He is STATING IN BLACK AND WHITE THAT I WILL FAIL! How in the hell does he know that, when he doesn't know my location, demographics, business attitude, background, dedication, and determination? WTF? Lastly attacked him because he's running this little stores, unattended, I've run a huge insurance company, started from SCRATCH AND SOLD TO A PUBLICLY TRADED COMPANY. Don't see that happening with his trailer park mats? Also I have a business degree from a top California University, not a degree from Laundry world. IF HE CAN DO IT, SO CAN I! Don't understand the hate you "vets" have toward NEWBIES, you all were one once as well? I have only been harsh towards those that attack my ability and credibilty to succed, the ones that have offered constructive criticism and sound advice I have thanked and cordial with. I will post back in 6 months, and somehow will make sure all you NAYSAYERS see my tax returns in 2009 to prove it.

[/ QUOTE ]

Maybe you think you are getting attacked because of the attitude you have. While you may not like my words, the intent is to help you as a newbie out. I enjoy helping people which is why I post here.

You have come across as a big bragger that tells us how much money he has made in some other industry, how much money he is spending on this big killer mat, and what a great education he has. Big deal. Who cares. I have a BS ChE degree and an MBA and worked for over 15 years in management consulting for some of the biggest global companies - but I have never posted that here because it has nothing to do with helping people in our industry. There are a hell of a lot of people with great pedigrees and lots of money that fail in this industry because of their know it all attitude. This business runs very differently than the corporate world, which is part of the reasons there are few chains and many have failed.

Tone it down and we would be glad to continue to offer advice. Stop attacking what Pete does, he does it very successfully and knows more about the business than I and most others and definitely more than someone that is not yet in it.

No one knows if you will succeed or fail, and no one here hopes that you fail. All advice is given in an effort to help you, so relax and either take it or don't but don't have such an attitude.

[SuperWashnDry]

You still don't see it do you Howard? Pete, flat out stating I will not succed! Only telling of my background as I feel I have to defend myself against the constant attacks! Not looking for a fight, just self defense. You guys could be more cordial with your advice.

[Howard]

[ QUOTE ]
You still don't see it do you Howard? Pete, flat out stating I will not succed! Only telling of my background as I feel I have to defend myself against the constant attacks! Not looking for a fight, just self defense. You guys could be more cordial with your advice.

[/ QUOTE ]

Fine maybe we could, but maybe it is your approach that just gets us going. You are probably a fairly smart person, and we really hope you succeed. Let's all just tome it down. I hope you live up to what you said about keeping us informed how things are going down the road.

I have a question for you - do you think you are getting a good price for what you are buying based on the actual cost. What I am asking is have you sat down and tried to figure out what it would actually cost to build this mat if you did it from scratch yourself rather than buy a turnkey operation. It just seems to us "vets" that you are paying top dollar for what could be a large risk. I assume you would agree it is one thing to pay 5-7 times net for an existing mat than to pay that 5-7 times pro forma projected net for a new store.

[SuperWashnDry]

Yes, I have, I'm currently paying 5 times net, for an "unproven" location. I've come up with costs of $300K for laundry machines, another $100k for vending machine, changers,soap dispenser, automatic locks for two sets of doors, video survailance, 3 Large signs on the exterior, 3 large indoor neon signs, 5 tv's, water heater (529gallon),folding tables, 6 large benches, artwork, 15laundry racks, and miscellaneous things such as toilet paper, 1st case of soap, broom, mop, bucket, stainless cleaner, aprons, scale, software, etc. Then around $200k for buildout of interior AND exterior. Completely gutted (used to be a video store) brand new floor, wall of windows added, new electrical, plumbing, gas lines, paint and patch exterior walls, installation of equipment, brand new bathrooms (wheelchair compliant),bulk heads, cooling system, etc., etc. Then impact fees of $2500 per machine, thats $100k. I'm up to $700k, finally what price do you put on a 25year lease? I know thats huge, my initial 5 years is at $1.50 per sq ft, and in California thats a steal, then it only rises every 5 years, not every year by cpi. Then theres permits, they are going to pass out 10,000 door hangers, provide banners and flag streamers for grand opening, consulting and training. So I would estimate around grand total of $750K, which means they are pocketing around $150K. To some thats overpaying I'm sure, but for me not to do any of the above work (especially being a newbie) as mastercard states "its priceless". To be perfectly honest, I am trying to have them renegotiate the price based on 4.5 turns per day, vs. the 5 times per day that they base their projections on. That would price the store around $810k, due to the fact that some of their stores are not performing up to projections. Unfortunately I did not find this out until after signing ALL paper work. I do have a good friend of mine (attorney for a large firm) seeing if I have any angle based on their continuing to sell stores based on 5 turns of day, well knowing stores are not hitting that number. They have not been upfront about financing either, etc. I had to do a lot of leg work, like getting a prime plus 1.5% loan, vs. the 10.75% they told me was the best a person with good credit could get through Alliance. Mine now is at 8.75% with the latest rate cut and will surely go down next year to probably 8% if you follow the markets /ubbthreads/images/graemlins/grin.gif Have found out they are snake oil salesmen for sure.

[chad]

super give me a call

818 822 6272

i will hook you up with hanmi bank i got prime plus 1% credit was ok and iam 24!.

Lsn for everyone out there i paid 880k for my store i do not think you overpaid for yours, you will do fine.. yes iam young iam new to the business but i didnt live off moms and dads money to own my own place. anyway i can help you out with a few things. like i siad i know ur place pretty well. You got a good price and i hear ur location is great. Just wish you would have gone card /ubbthreads/images/graemlins/smile.gif this is a fun place to post, everyone here is great and trust me without the insight we get from other ppl on this place it would be hard to learn this business. like others i am here to help and learn from not just the newbs but from everyone, just because ur a newb doesnt mean u cant add something we dont know. Lets all get along and play nice becuse we are all here for the same reason...

[Howard]

Superwash - glad to see you did that analysis. I consider $150k a huge premium, but if it is worth it to you then you are paying a fair price - if the projections work. I think their profit is higher than that as they are making profit in the cost of the machines as well.

When you say rent at $1.50 per SQFT I assume you are talking about per month, versus a square foot rent in the east which is spoken about on an annual basis. That rent is cheap for my area - our rents are double that in good areas.

Since you most likely (correct me if otherwise) will have to give a personal guarantee on the loan why not use a home equity, mortgage or margin loan instead which should have lower costs. Money is money so I would always get the cheapest money. I assume you are doing this as an S-corp or LLC.

[chad]

almost impossible to get a HELOC.. problem is not your credit score but the problem is the apprasil value if your home. I boguht mu home for 730k 1yr ago or so and spent a fortune upgrading it and 6 diffrent lenders came back with a 700 or under apprasil. There are plenty of banks in cali that finace a laundry mat, Hanmi bank is one of them. They are a great bank and they work close with PWS. I had to put my house down to secure the loan because i went 40% down, if i was to do 50% down i would not have to do it. I can still sell the house anytime i want but i do have to pay the loan down 10% if i do. A few months ago getting a money out of your house was golden now its not even a option. Also use some credit cards that give you 0% interest. I had a few with high limits that gave me 0% interest for 1yr.

[SuperWashnDry]

No personal guarantee, and doing it as an S-Corp, per my accountant, $1.50 per sq foot/month. Very cheap for Cali, its like 5 year ago prices. Due to crash of real estate, high forclosures in Chula Vista as well, so there will be more renters /ubbthreads/images/graemlins/grin.gif

[SuperWashnDry]

Thanks for the offer Chad, but have already signed loan docs, and feel good with prime plus 1.5%, as even SBA told me 9% fixed and would do it without putting up property etc. and 50% down as well vs. my 45%. Might call you for picking your brain for other things though.

[Adamski]

Dave,

Here is why I cannot relate to California: rent is $18.00 per square foot and your vend prices are $1.25 for toploaders and $6.75 for 80 lb frontloaders ... and this is cheap rent.

Compare this to Michigan: rent is $10.00 to $15.00 (including triple net) per square foot and toploaders range from $1.75 to $2.50 while 80 lb frontloaders range from $7.50 to $9.00.

What invisible force is holding laundromat vend prices so low in California?

Larry /ubbthreads/images/graemlins/cool.gif

[SuperWashnDry]

Larry, like I mentioned in an email to you personally, I believe people are afraid, lack of someone taking on the role of leader. I will be charging slightly more than the competition to begin with, and hope to raise it again after a year under my belt, maybe sooner, depending on business.

[Ned]

Larry,

One contributing factor is the tremendous amount of overbuilding in the LA market. More and more stores every month and no sign of it slowing down. Usually, a given distributor will NOT sign an "exclusive" on a new store whereby they promise not to be build another store within the same neighborhood. Even if they did, there are 4-5 development houses aligned with other distributors who would fill the vacuum.

BTW, typical mark-up on machines from distributors is 30%. So basically, street value machines of 300k, might cost the distributor 230k. More than that though, the distributor often doesn't pay for these machines in advance. Basically, when new spec stores are built, the equipment manufacturer often maintains ownership, and the spec store is treated as just another warehouse storage location. In this way, the big developers don't even have to ante any money up front for the machines..

SWD: Have your lawyer check - some of the big brokerage houses have been involved in many, many lawsuits over these kinds of issues relating to misrepresentation in California & other locales. Your lawyer may discover that some of these brokerage houses used to advertise 25-35% ROI cash-on-cash, and now have tuned it down to 15%-25%. I believe this is the consequence of prior lawsuits. On a personal note, even though the CLA surveys state that the avg TPD is 5, my own personal experience is that they are often much, much lower. Good for us all to distinguish between average & median prices. The average weight of a bear and rabbit may be 1200 pounds - it doesn't tell you too much about the weight of the rabbit.

All this aside, can I suggest we all take a deep breath and relax? We're all here for the same reason, I hope - to help each other succeed. Can we maybe all relax a little bit and enjoy some camraderie?

Ned

[petefritz]

[ QUOTE ]
Pete, you of all people should talk. I read your posts from 2002, you own trailer park mats, that do 40K-50K gross, and your "big mat" does 100K gross, you might as well run a gumball machine territory. I should just buy all your mats with my down payment /ubbthreads/images/graemlins/shocked.gif

[/ QUOTE ]

and you would be guaranteed a great return! I am down to 3 mats now, looking to retire in the next year or two, but having trouble letting go the next couple stores. I plan to keep the real estate I own at each one and live off the rent and invested money as I travel the world with my wife. My first store grossed 50k and made 25k a year. I paid $55k for it. That was in 1996. I still own it, though I moved it across the street in 2000 in a building I bought. I have done OK, I know others who have done VERY OK. All have followed the same business model. It was not building new stores. I know markets are very different. What TPD is here is not in NYC or LA. The final result is always return on investment.
I would not snub your nose at a 45k gross store, I had one, net about 23k a year. A smart guy came in and built a shinny new one in the shopping center across from me. Spent 420k. His water usage never went above 77000 gallons a month. ( that would be about 80k a year in coin) Rent was $3000 plus cam and he was fully attended. That was 5 years ago. I sold my store, the owner still make money, and the other guy is trying to pitching his mat for 250k and it still does not make any money. He learned at a seminar and was given the 5 TPD spreadsheet.. I told him not to put the store in after he signed a lease but before anything was done. He had a chance to walk from it. This business is not about being smart with marketing or inventory control or degrees from Ivy leagues. It is very different that any other, it is all chance, at least when buying new. Locations are gold or coal, and can be as few as a mile within each other. Hopefully you are lucky and the place does at least average. A stand alone building is very nice, 2 of my mats are stand alone, 1 is in a small strip center I own. I will say you got that going for you in a big way. I have no idea the average TPD of other mats in your area, I am sure you did the calcs and ratios I mentioned. I think there is money in gumball routes, why else would you see them around?

We obviously got you thinking, why else bother to try and lower the price, talk to lawyers, etc. This is good, even though you did not want to hear it. I only gave you statistical numbers, though the tax write off comments may have been harsh, still from what I have seen and heard from newbies who buy new stores in saturated markets, it may be the truth. I have a HS degree. I bought my first business when I was 19. I have never worked for anyone but myself since then. I do have a very high math background, it is helpful analyzing stores I have bought over the years. I work an average of 5 hours per mat per week. My trailer park mat is sold, I had about 100 calls on it and 2 backup offers. It was situated in a an area with high impact fees and no room for comp to move in. And a nice lease. It grossed 81k last year and net 45k. I paid 40k for it in 1997. I hated to sell it, but I am going to retire soon as mentioned. It made alot of money for little work, that is the name of this game, at least for me.