Ramifications Of A New Laundromat

[Adamski]

Guys,

Let's consider what happens when a new (never before existed) laundromat opens in your market. There are 2 possible scenerios.

A. If the market is being poorly served, the new laundromat:

1. Opens with high price leader pricing and is confident in its ability to compete on service rather than price.

2. Uses heavy advertising to entice customers from poorly-run competing stores.

3. Steadily increases its customer base by offering the customer better service at a fair but higher price than the existing stores.

4. Secures its share of the market by the 18th month of operation. Growth generally levels off by the 18th month.

5. Causes adjustments to the market. Some stores may close and others survive. There is no guarantee that the new laundromat will be one of the surviving stores.


B. If the market is being properly served, the new laundromat:

1. Opens with mid level pricing - lower than the best but higher than the worst competitors.

2. Tries to entice customers with daily specials because it has nothing to offer that is substantially better than what is already offered at some of the other stores.

3. Customers soon come to expect the special prices and management is reluctant to end the specials for fear of losing customers. The specials become permanent thus effectively lowering the new laundromat from mid level to low level vend pricing.

4. The original business plan, which was to offer a better laundromat at a mid level vend price has changed to offering a comparable laundromat at a discount vend price.

5. Causes adjustments to the market. With an additional discount laundromat in the market, pressure increases on other laundromats to reduce their vend prices as well. A price-war is likely. Some stores may close and others will survive. There is no guarantee the new laundromat will be one of the surviving stores.

I am very interested in what anyone else has witnessed or experienced with reference to a new laundromat being built in your market.

[surfflite]

Larry, that pretty much sums it up. Now that I have a couple of years under my belt owning a mat I really cannot fathom the idea of opening a new store from scratch. I just don't think there is any 1 location (on earth) that could justify doing so. I just met with the owner of a new mat in my neighborhood (he also owns the Ace Hardware store in the same plaza). There are 3 mats in my town, fairly spread out on locations. His is 2700 sq ft, all new Dexters. He took me on a tour and was picking my brain about his pricing scheme, drop-off services etc......He was running his tops @ $1.50, 40's @$3, 60's at $4 and 80's at $5, dryers (45lb stacks) at 25 cent for 7 minutes. Nice store but he said he was already struggling (been opened 2 months). I asked him how much he had in the place and he said $450,000+. He told me that his Ace Hardware store was basically bailing out the mat every month and he was starting to worry. By the end of our meeting he asked me if I would be interested in buying it from him. What? After he just spent the last hour telling me how he's loosing his shirt. I said, I have my own sinking ship to attend to..hahaha. I did recommend he up his prices a bit but I haven't been back to see if he did. The best part is, he told me his "distributor said this place would be doing 4-5 turns a day and he'd be rolling in the doe." Sound familiar?

I'm thinking that CLA should get on our side (the store owners, not the distributors) and we should "fundamentally change the laundry business." There has got to be a better way to set up a mat. I am convinced that distributors are about 1 notch below a shady used car salesman, some 2-3 notches. They always fluff up the numbers and basically all out lie to potential mat owners. I think it's safe to say that there are distributors out there that have completely financially ruined peoples lives and they should be held accountable for their actions. I want to be able to call Alliance directly and order my machines directly. What I don't need is a "pass through entity" that rapes me every time I am forced to call them. For Christ sake I want to be able to call ESD DIRECTLY and order my cards!!! Not have to call a distributor and have them tack on their additional charges to get stinking cards!! I want the guy who installed my mats equipment banned from the industry altogether! He has since worked for every distributor in town and is running out of job security. He invites me to an open house/ service school a few weeks ago. I arrive and he tells me who he is, and I am almost inclined to leave the class because HE is the guy who installed all my machines on those effed up channel bases I have posted here. 85% of my mats problems stem back to this distributor half assed install. I now have had 2 25's and 2 40's main bearings go out do to this BS install. I'm sorry, but main bearings should not be failing on 4-6 year old machines. It was all I could do to keep from punching this guys lights out at the open house. I even went as far as to show the entire class and the service guys giving it pics of my bases. They all cringed...then i pointed out that the guy who did this was "in the building"................and then you could hear a pin drop. The whole distributor things a scam IMO.

Ok, sorry Larrry, (rant off) got a little sidetracked from the issue. ;)

[CanCanCase]

Larry- Scenario A above describes my store #1 exactly! store two was a rehab on an old and successful place after the past owner saw what I was doing at #1 and didn't want to compete with me. It turned out to be that I bought the best location in town from him and my first store is easily the second best location in town.

The interesting bit in this town will be when the "new" place opens up... It was a dumpy mat in an area of town with 3 mats in close proximity. They closed about 4 years ago, gutted the place, and have sat on the property since. Even my distributor (protected Dexter territory) told the new/old place that this town couldn't absorb another mat.

I'm ready to outlast them with a cleaner nicer place for years. I wonder which of the remaining 2 "old" mats will now be forced to upgrade or die?

- Case

[MrMachine]

Larry- Scenario A above describes my store #1 exactly! store two was a rehab on an old and successful place after the past owner saw what I was doing at #1 and didn't want to compete with me. It turned out to be that I bought the best location in town from him and my first store is easily the second best location in town.

The interesting bit in this town will be when the "new" place opens up... It was a dumpy mat in an area of town with 3 mats in close proximity. They closed about 4 years ago, gutted the place, and have sat on the property since. Even my distributor (protected Dexter territory) told the new/old place that this town couldn't absorb another mat.

I'm ready to outlast them with a cleaner nicer place for years. I wonder which of the remaining 2 "old" mats will now be forced to upgrade or die?

- Case


Sometimes the old mats don't upgrade OR die....If there is enough "spread" in the pricing from costs, ie if the prices in your area are comfortably high, then the existing mats may drop their prices and still survive.

[chad]

I am doing a huge remodel and getting ready for the new 7,000 sq foot mat that is about to open.

2nd mat to open new in the last 2yrs.

I have 13 or 14 stores within 5 blocks.

[MrMachine]

I am doing a huge remodel and getting ready for the new 7,000 sq foot mat that is about to open.

2nd mat to open new in the last 2yrs.

I have 13 or 14 stores within 5 blocks.

That stinks Chad. You have a lot of competition there. It's very similar here in NY too.
I guess the big cities are totally over saturated. It's so hard to make a buck in this situation.
You can do everything right, run a great store, and some idiot newbie who didn't do his due diligence opens a new store right near you and ruins the whole market for everyone, including himself.

I remember back in the 80's it was SO much easier because there was so much less competition. Back then, you could be a dimwit and still make money (how do you think I survived all those years, lol).

I sincerely wish you all the best. I know the feeling....

[Super Clean]

I know of a couple markets that are underserved and Scenerio 1 would work quite well. Just waiting to find the right location to come available in these markets so I can move in.

[Adamski]

... It was all I could do to keep from punching this guys lights out at the open house. I even went as far as to show the entire class and the service guys giving it pics of my bases. They all cringed...then i pointed out that the guy who did this was "in the building"................and then you could hear a pin drop. The whole distributor things a scam IMO...

Kenny,

Good for you. We all remember your pictures of those simple channel iron bases (a channel along the front and a channel along the rear of the washers with no connecting channels, no grouting, etc.). I'm glad you called the guy out on his inadequate installation. I agree, that guy does not belong in this industry. I'll bet your fellow attendees will not soon forget that open house.

[CanCanCase]

I get to watch scenario B play out very soon too. A mat - we'll call it mat A - closed across the street from mat B about 5 years ago. Mats A and B are traditional, older quarter stores. Mat C opened up 1/4 mile down the street 2 years ago, and took the town by storm (not really) with an unattended EasyCard store.

Along comes Green Lightning Laundry last year and builds 2 stores 3 miles further down the road from A B and C and the market seems very well served. We've got a mid-level coin store, a struggling card store, and 2 super clean, modern Green Lightning stores.

Now it's announced that mat A has decided to re-open. I drove by yesterday to see the first of his new equipment arrive - a few tops and 2 single 30 lb dryers. Given the space and my understanding of the owner's situation, I can't see that he'll put in anything other than 20 or so tops and run quarters. He's also leasing, and when I inquired last summer, rent was $3500 nnn for 1500 feet.

How can mat A do anything but compete on price when they open? Sure, they'll get a new mat honeymoon like all businesses, but in a fully served (arguably over-served) market what other options does any store have?

- Case

[MrMachine]

I get to watch scenario B play out very soon too. A mat - we'll call it mat A - closed across the street from mat B about 5 years ago. Mats A and B are traditional, older quarter stores. Mat C opened up 1/4 mile down the street 2 years ago, and took the town by storm (not really) with an unattended EasyCard store.

Along comes Green Lightning Laundry last year and builds 2 stores 3 miles further down the road from A B and C and the market seems very well served. We've got a mid-level coin store, a struggling card store, and 2 super clean, modern Green Lightning stores.

Now it's announced that mat A has decided to re-open. I drove by yesterday to see the first of his new equipment arrive - a few tops and 2 single 30 lb dryers. Given the space and my understanding of the owner's situation, I can't see that he'll put in anything other than 20 or so tops and run quarters. He's also leasing, and when I inquired last summer, rent was $3500 nnn for 1500 feet.

How can mat A do anything but compete on price when they open? Sure, they'll get a new mat honeymoon like all businesses, but in a fully served (arguably over-served) market what other options does any store have?

- Case

Case,

Count your blessings that you do not yet have any real competition like we have in the big cities.

3 years ago, I had one new big store store open up 6 blocks away from me with 60 washers and 60 dryers, 4 80lber's and 4 50lb dryers, 24 hrs, air conditioned, etc. It was built by the same guys who started Blockbuster years ago (they've been building stores all over NY). It even has the same coloring as a Blockbuster video store (blue & yellow).
Now, ANOTHER new big store has opened by a Chinese syndicate.....75 Huebsch washers, 77 dryers, THREE blocks from THAT one!! A price war developed between them with 20lb wash now at $1.00 and drop off at .50 cents/lb, free nylon bags, free soap, the works.

I've been holding my prices, but I took a BIG hit.

Your stores may be nice and well run, but it doesn't matter, and that's what's terrible about this business. There are people out there who will "case" your store (no pun intended), and decide that:

1 - You are doing too much business
2 - Your prices are too high
3 - or both

And they'll put a huge million dollar store right across the street from you. I've seen this time and time again here in NY.
Some of these people are not "newbies", but rather very aggressive, well-heeled mat builders who have figured out how to take over a neighborhood.
It doesn't matter to them that there are other mats in the neighborhood. Hell, they actually PREFER that.
They have simply copied the same strategy that Home Depot did years ago when they put the local hardware stores out of business. It's called "the big box theory", and Home Depot actually copied it from Wall Mart.
Build a BIG BOX, cut prices until you have decimated the competition, then jack up the prices.

They could be on these boards right now. Some may be "newbies", and some may be bad distributors, and some may be pit-bull "Big Box" Mat builders.
This used to be a great industry here in NYC. Not anymore.

[CanCanCase]

Paul-

I thank the patron saint of housechores every day that this combined town of under 30,000 only has 5 or 6 laundromats. I chuckle at other mat owners and customers who think the competition is fierce and that we all must be trying to put each other out of business.

Want to know a little secret? That box store chain methodology works. On a much smaller scale, it's exactly what I'm doing out here. After my visit to SFO I realized I'd get my rear end handed to me if I ever bought a store in a real big city!

- Case

[MrMachine]

Paul-

I thank the patron saint of housechores every day that this combined town of under 30,000 only has 5 or 6 laundromats. I chuckle at other mat owners and customers who think the competition is fierce and that we all must be trying to put each other out of business.

Want to know a little secret? That box store chain methodology works. On a much smaller scale, it's exactly what I'm doing out here. After my visit to SFO I realized I'd get my rear end handed to me if I ever bought a store in a real big city!

- Case


Yes Case,

It's best to be the big fish in the little pond, so it sounds like you will be fine.

[Adamski]

Yes Case,
It's best to be the big fish in the little pond, so it sounds like you will be fine.

Paul,

Great analogy.

It sounds like the 2 big fish in your pond have decided to swim very near each other in a most threatening manner. So round and round they swim - each trying to sustain its existance at the peril of the other. Who will survive and who will die? Perhaps yet a third big fish, attracted by the agitation, will begin swimming there thinking this must be a good place to forage. Then what?

Doesn't NYC have large water/sewer hookup fees that would help prevent the over-population of laundromats?

[MrMachine]

Paul,

Great analogy.

It sounds like the 2 big fish in your pond have decided to swim very near each other in a most threatening manner. So round and round they swim - each trying to sustain its existance at the peril of the other. Who will survive and who will die? Perhaps yet a third big fish, attracted by the agitation, will begin swimming there thinking this must be a good place to forage. Then what?

Doesn't NYC have large water/sewer hookup fees that would help prevent the over-population of laundromats?


Lol Larry, That's funny!

It's funny you should mention it, but I was just thinking today that NYC should have a nice water/hookup charge of say....$5,000....no let's be generous...$10,000 per washer. I should contact the DEP and mention it to them. They LOVE to slap people with "environmental" fees.

I'm normally against that sort of thing, but ironically, that would be the best way to stop the "chum line".

[chad]

Guys a update on my remodel.....



Installed the new card system by ESD, Cyber wash with credit card.
Installed new machines

18 30s---27gal of water used
10 60s---59gal of water used
2 80s---85gal of water used
10 20s---22gal of water used
10 tops

All machines have a wash, and 2 rinses. @ 32min ea and 37min for .25 .50 or 1.00 more depending on machine.
Painted the store, built a room for fluff and fold, put up new signs.

New lights will be here monday.

I did not raise prices yet.

I did have to adjust the water leavels a few times to get it right.

My wash cycle on my machines is runnign at 11min and the rinses are 12 and then 9min.

The new big store next to me is set to open in the next few weeks, so i am very happy i was able to get everything done before the end of the yr. I will post pics later.

Its important i belive right now in the business to stay on top of things and make sure your store is always running in tip top shape.... Seems to me more and more customers are wanting a clean store with A+ customer service.

[Adamski]

...All machines have a wash, and 2 rinses. @ 32min ea and 37min for .25 .50 or 1.00 more depending on machine...

Chad,

So does the .25, .50 or $1.00 extra buy an extra rinse or an extra wash or what to make the cycle total 37 minutes?

[chad]

Good question larry, a extra rinse..... maybe i should make it a extra wash.... what do you guys think?

[CanCanCase]

Chad-

To me, an extra wash (or more time in the wash) is easier to sell as "heavy-duty for extra dirty clothes". As an educated laundry user, I'm not sure what I would gain by purchasing an extra rinse.

To a mat owner, it's all just extra water/time/electric. I like to look at each feature's advantages and benefits from a customer's point of view for clues about how to sell it.

- Case

[chad]

I will talk to my speed queen rep and see what they say.... for a rinse it doesnt cost me much... Its cold water and i do see it wrong, i should be offering a extra wash, i dont want to cal it a prewash... We dont have pre wash anymore.

wash
rinse
rinse.

[Adamski]

Chad,

I guess I lean toward calling it an Extra Wash if you have the option of selling only one or the other. As an Extra Wash, you could program it for Warm water and be sure to program it to flush the soap compartments when it fills for that bath.

[chad]

I am just happy to be saving about 47% on my water bill... it was 53% but i did raise the water level here and there a little bit.

We have finally started to see rain down here in so cal, its been pretty dry and water prices have gone up along with gas.

[Self_Suds_WV]

Chad, just curious, what are you doing to save 47% on your water bills?

[chad]

Took out pre wash and a rinse.

[Self_Suds_WV]

I removed pre-wash trying to save water but it was a bad mistake, looking back I think its primary function is really to get rid of excess soap. After three days I added it back because I have trouble convincing customers that 1/3 of a cup of detergent is plenty. I had so many over-suds it was amazing. Added it back - no problems.

Also, I my wascomats have three rinses, first can be disabled using a jumper. When my water rates raised last year by 12% I disabled the first rinse to offset the cost without a price increase and have had no problems or complaints.

[CleanSpot]

for once I am reading about the REAL laundry business. I've been in this business 30 years and CLA and others always quote how much money there is to make. In reality most laundries make money but not a lot and many never reinvest. I totally agree about distributors! my pet peeve is all the articles where distributors tell laundry owners that "customers are always right". They should practice a little of what they preach.

[Bizman]

When I investigated the laundry business at a CLA seminar, they gave numbers based on demographics that if you get so many renters and have so many members per household and if the incomes are a certain amount, you should be able to achieve so many turns and make so much money. No guarantees of course. So I went for it. Built a new mat.

After 3 years in business, I'm only 40% below that number. Not bad for pro forma, hey. Wish I would have gone into another business. I'm doing nothing but paying down debt. But then again, I'm just thankful I'm able to pay down debt.

The little guys are going out of business, but recently a 7,000 sq ft mat opened a couple of mile away and we'll just see what happens.

What a great business.

[CanCanCase]

Larry-

How about the scenario where the well-branded-big-box-types buy the only mat in town and close it down for a retooling and beautification?

-Case

[MrMachine]

When I investigated the laundry business at a CLA seminar, they gave numbers based on demographics that if you get so many renters and have so many members per household and if the incomes are a certain amount, you should be able to achieve so many turns and make so much money. No guarantees of course. So I went for it. Built a new mat.

After 3 years in business, I'm only 40% below that number. Not bad for pro forma, hey. Wish I would have gone into another business. I'm doing nothing but paying down debt. But then again, I'm just thankful I'm able to pay down debt.

The little guys are going out of business, but recently a 7,000 sq ft mat opened a couple of mile away and we'll just see what happens.

What a great business.

Sorry to hear that Bizman. You can take some solace in knowing you are not alone. This business is VERY misleading from the outside. To a person who does not know this business, it's looks great....until they actually have to RUN a Mat, which for many is a sobering experience. That's why so many newbies come into it and overload the market with new stores.
And it never ends....they just keep on coming.....

[Mchale]

I am doing a huge remodel and getting ready for the new 7,000 sq foot mat that is about to open.

2nd mat to open new in the last 2yrs.

I have 13 or 14 stores within 5 blocks.

Chad,
What machines are you putting in? Never mind it looks like SQ.
I'll probably go with Dexters but my distributor is cutting down on my 13 juniors to 11 20lb's and going with all 40lb and three 60 lb. So the mix will be
11-20lb
12-40lb
03-60lb
anybody have any thoughts on this mix?
my store is about 1800sqft

[Adamski]

When I investigated the laundry business at a CLA seminar, they gave numbers based on demographics that if you get so many renters and have so many members per household and if the incomes are a certain amount, you should be able to achieve so many turns and make so much money. No guarantees of course. So I went for it. Built a new mat.

After 3 years in business, I'm only 40% below that number. Not bad for pro forma, hey. Wish I would have gone into another business...

Gary,

When looking for a location to build a laundromat, one must look at demographics but, more importantly, one must also evaluate the location, size, number and quality of existing laundromats that are already serving the market. A new laundromat cannot replace the existing stores. It will be competing with those stores for market share. One ignores the existing stores at his own peril.