By Bob Nieman | Apr 15, 2009
When you first considered getting into the coin laundry business, finding the “right” location was the only goal… dense population, apartment complexes aplenty, high-traffic thoroughfare, urban setting, a Wal-Mart on the corner, and on and on.
You studied demographic report after demographic report until you were seeing double. And you became an expert in what types of locations make winning coin laundries – and where within your town such sites existed.
But hold on. Your coin laundry education is only halfway complete. You’re on to the next phase – building your laundry. And when it comes to breaking ground and swinging hammers, you’ve got an entirely new set of questions and options.
What Are Your Options?
“You’ve got the option of starting totally from scratch, versus buying an existing store and gutting it,” said Gary Gray, who owns 16 laundries in Arkansas and also operates a successful distributorship. “Of course, there also is the option of building a brand new store in the same space where an existing store used to be; to me, that is the number-one choice. You’ve got some form of customer base. You’ve got people in the area who are accustomed to coming there to do their laundry. Those businesses always ramp up quicker.”
Such projects also tend to save money on utility infrastructure, because the old stores normally had plenty of water and sewer capacity, as those laundries used more water than today’s stores.
Moreover, building on the site of a former laundry offers less in the way of bureaucratic headaches due to the fact that the former laundry owners already took care of at least most of the required licensing, permitting, zoning and other necessary paperwork.
“The next best thing is to find the perfect site and go from the ground up,” Gray stated. “The advantages here are that you’re not affected by how someone has previously laid out a store. You can design the perfect floorplan, and then you build it that way. It’s normally more expensive this way, but you’re going to have the perfect layout.”
With a new store, it’s in some ways easier because you’re not modifying an existing facility. You’re starting from the ground up, and therefore you can kind of build around your needs, rather than having to change the building’s structure to meet your needs.
“When you go from the ground up, you’re going to have all of the construction there designed for the laundry,” concurred Dick LaMaina of Equipment Marketers in New Jersey. “You’re not going to have to rip up a parking lot to bring in water, sewer and gas lines, which are usually needed. It can all be brought in before construction and as the project goes along. You can really design the laundry better.”
On the other hand, with a buildout of an older, existing space, the main challenge the owner faces is modifying the utilities for a coin laundry, including making sure the store has sufficient water and gas lines, ample drainage, proper electricity capacity and so on.
“Ninety-five percent of the time, all of those utilities have to be upgraded,” said Doug Grise of Teeters Products in Ohio. “You may have had a shoe store or a pet shop in there before. Who knows what could have been in that strip center? Therefore, they just did not have the utilities necessary for running a coin laundry.
“Generally, it’s a major upgrade of the utilities, cutting the floors and putting in drains. Also, building out a sufficient air exchange for the dryers is generally the largest obstacle to overcome.”
“Certainly, new is the way to go,” said Don Tomasian of D&M Equipment in Chicago. “But we have built many stores in existing buildings. Unfortunately, once in a while, you run into one that has a basement and then you have the consideration of concrete pads, supports and columns.”
Time-wise, building from the ground up typically takes about 60 days longer than conducting a buildout of an existing space, according to Grise. Most buildouts require 90 to 120 days.
“But it seems like that process is now taking longer due to permits and all kinds of things that the government is adding to slow the process,” Grise said. “To build from the ground up takes six to nine months.”
Gray estimated that, in his experience, “it’s running 50/50 between buying an existing store and gutting it and building totally from scratch.”
“About half the stores I bought were existing laundries that I retooled,” said multi-store owner Keith Griffin of Arkansas. “For the other half, I went into a shell building or actually built the building.
Griffin admitted that he’s enjoyed greater success revamping older, rundown stores.
“It seems as if people are creatures of habit,” he said. “They keep coming to the same store. And, once you retool it, you’re getting more efficiency.”
Van Merrill of Sparklean in California is seeing “virtually no laundries being built out of the ground” these days.
“With petrochemical dollars being so expensive and that rippling into all of the raw materials and the transporting of those raw materials – especially with China and some of the other developing countries taking so much of the raw materials like copper and concrete – prices have gone through the roof,” Merrill explained.
All of that expense translates to a per-dollar per-square-foot construction cost, making pulling a new laundry out of the ground extremely difficult in certain markets these days, according to Merrill.
“We look real hard for potential total rehab candidates, and we buy any of those that we can find and buy reasonably,” Gray said. “We match them up with an owner or, in some cases, we keep them ourselves.”
Building Your Store: From Doing It Yourself to ‘Turnkey’ Operations
Keith Griffin likes to go the do-it-yourself route when building his stores, acting as his own general contractor and lining up the plumbers, electricians and carpenters himself.
“I have some prior construction experience,” Griffin explained. “Typically, depending on the size of the project, you’re getting anywhere from 5 percent to 12 percent for a contractor’s fee. And when you build a good-sized store in the $600,000 to $700,000 range, those costs can add up. I’m trying to save that.
“I use laundry distributors just for their portion,” he added. “They bolt down the bases and set up the machines. All the plumbing and electrical is already there waiting for them.”
Some laundry owners, like Griffin, will look to save money by constructing their stores themselves. Of course, without construction experience (and specifically coin laundry construction experience), such a decision could cause problems down the road.
“We have customers who might say, ‘My brother-in-law is a good carpenter, and my friend is a plumber,’” Tomasian explained. “That’s fine. If they have some connections or resources in the trades, in many cases they can save some money that way.
“I’m open to other people doing the work, provided they do it with a set of plans that we approve, and the project is done according to all specifications, to make sure the machines are going to work properly. However, in many cases, the customers’ friends may be contractors, but, unfortunately, they may have never done a laundromat before – then we get into problems.”
Self-service laundries required an extreme amount of detail, from the electrical wiring on down to the plumbing considerations.
Most distributors have worked with contractors, electricians and plumbers who specialize in laundromat work or at least have a lot of experience with self-service laundries. As a result, these workers can do the job much more quickly. It’s not a guessing game to them. On the flip side, if you use someone who has never worked on a laundromat, there will be quite a bit of work to that project.
In addition, with do-it-yourselfers, the question of responsibility can arise.
“If the owner hires his own people and the job isn’t done correctly, there is the game of who did what wrong,” Tomasian explained. “Whose fault is it – the distributor’s or the contractor’s? But, when the distributor takes responsibility for the entire project, and he does the whole job with his plumber and his electrician, there is a bit more of a comfort zone.”
“I would say the majority of my customers are hiring a general contractor, and then they work directly with that contractor,” Grise said. “As a result, if they don’t know the answer to a question, the general contractor calls me.
“I know a couple of guys who are laundry owners who used to be general contractors,” he added. “They left that profession and got into the laundry business. But, because of their past history, they will elect to do projects themselves. However, for the most part, we work with a general contractor every time.”
“We’re best off working hand-in-hand with potential investors, where we don’t ever take ownership or control of the property or the development of the property,” LaMaina explained. “We will bring contractors in where necessary, or work with the store owner’s contractors.
Of course, Equipment Marketers gives its customers a lot of input as to the demographics of the marketplace and what type of equipment would best serve the customers likely to patronize the new store.
“We make those recommendations and alter them to the owner’s request and layout a laundry,” LaMaina said. “Then we provide them a proposal as far as how much the project is going to cost them.”
“We’ve done a few turnkey stores,” Gray said. “But I’ve elected to stop doing them because people weren’t willing to pay me the price for the effort it took.”
Beyond the price, the major disadvantage to a completed laundry is the fact that the buyer is not as involved in as many (or any) of the decisions about the business, because the person doing the construction is making those calls.
“Then again, the people I know who are doing turnkey stores know how to build a store,” Gray added. “So there’s not likely to be any mistakes made.”
Another option is to buy a “spec store” that a distributor has built and run for a year or so.
“The advantage to the buyer is that the store has already proven its numbers.” Gray explained. “However, the disadvantage is that they buyer might have to pay a little bit more for it; after all, the person who took the risk should be rewarded for it. With the economy like it is right now, I hear more discussion of spec stores among distributors than I have in a while.”
Potential laundry owners can purchase “spec stores” at all different phases – anywhere from while it’s still under construction to after it has opened for business and proven its ability to attract customers.
On Time, On Budget, On Target
Once your laundry construction project is underway, the trick is to keep is on deadline while also not breaking the bank.
“I do a financial budget for the project,” Gray said. “And one way to keep the project on target is to provide a contingency for unexpected items. I typically can get by with a 5 percent contingency, but in the early days, I used to use 10 percent of the total project cost. For example, if you think you’re going to spend $500,000, you ought to have a contingency line of $50,000 for the unexpected. To me, that has been the key to meeting my financial goals.”
Gray added that he tries to use the same contractors store after store, which helps in the budgeting process.
“I can say, ‘Do you remember when we built such and such store over here?’” he explained. “If I’m going to build a store 80 percent of that size with the same contractor, I can use that history to create a new set of budget numbers.”
Once a month during the construction process, Gray will reexamine budget estimates.
“At least once a month, I revise my budget to see where I’m going to end up,” he said.
As far as finishing your project on time, it’s crucial to prepare a detailed construction schedule.
“Coordination with all of the trades is important,” Tomasian said. “Certain things have to happen at certain times. The plumbers have to go in first and do their underground work and so on. As long as somebody is communicating well with everybody, you’re OK. That’s what distributors are for, scheduling equipment deliveries and installations, and knowing what everybody is doing.”
“We put on our schedules which contractor is going to do what on which day for the entire project,” said Gray of his production schedules. “We also then have a page that lists the name, address and contact information of everyone involved.
“And when I present this to the contractors, I tell people, ‘If you’re not going to be ready on time, don’t call me. Call the next guy on the list that you’re going to screw up.’”
A major roadblock to opening your new store can be waiting for gas connections, electrical services and other utilities. Therefore, it’s important to contact the utility companies that will be providing service to your coin laundry immediately.
“We’ve had more delays with utility companies than contractors,” Tomasian noted. “I’ve had to take four or five months to get gas connections and permits.
“The first thing you do is acknowledge who the utility suppliers are,” he added. “You have to correspond with them. I do it in writing to let them know how much gas load and electric load I’m going to need. And I do it in writing so that it’s documented.”
Common Pitfalls to Avoid
The number of things that can backfire during your new construction, store buildout or retooling project is staggering. Here is just a short list of the more common mistakes that laundry owners can make:
• Not matching the store to the location. “Sometimes the location won’t support a laundry as large as the owner wants to build, or the laundry is way too small for the location,” Gray said.
• Failing to secure the required permits. For your business to operate, a Certificate of Occupancy may be required by your city or town. So be sure to check. The permits that you and your contractor initially file with your local authorities are the documents which, when final inspections are completed, will facilitate your store's being granted the Certificate of Occupancy. Make sure you receive and maintain copies of these permits. Contractors sometimes fail to file for such permits, even though they have collected the appropriate fees from you prior to beginning work.
• Improper equipment mix. It takes some experience to lay out a laundry correctly – the right amount and capacity of machines, along with ample aisle space, customer service areas, etc.
• Not making sure you have adequate utilities available. If you don’t have utilities close by, it can be almost impossible to open your laundry.
Your store's utilities are the lifeblood of your business in many ways. After all, water, gas and electricity are, in essence, what you are truly providing your laundry customers. Therefore, whether you are building a store from the ground up or converting an existing building into a self-service laundry, you'll need to know whether you can get enough of each of these utilities to meet your business' needs.
Typically, a letter to the utility companies that supply these essentials will be answered within a four to six weeks and will provide you with information on availability, procedure and estimated costs.
• An insufficient set of architectural drawings. “Those drawings need to show isometrics of plumbing, plumbing sizes, electrical service and ventilations,” Tomasian said. “It shouldn’t be just a couple of pieces of paper scratched out showing some machines here and there. There should be some detail.”
• Not having enough money left over for your grand opening. You can’t spend your entire budget on just the construction phase alone.
“Money is not going to come in that fast when you first open up,” LaMaina explained. “You’ve got to have extra cash. Some people misjudge how much it really takes to get into a laundry. It’s very capital-intensive, even without owning the building – just the leasehold improvements are a big factor. And it’s not that easy to finance leasehold improvements. In fact, about one-third of the total cost of a laundry is those improvements you put in to make it a laundry.”
It’s not wise to attempt to get into this business on a shoestring.
“When you build a new store, it needs to look like a new store,” Griffin said. “You don’t want to put in all new equipment and then have an unsightly or dim lighting. I see people go into business and either don’t have enough capital or they spend it somewhere else. They get 90 percent completed and they’re out of money. Then they’ve got a store that doesn’t appear as if it is new.”
• Creating bulkheads that are too narrow. Although you design the store mainly with the customer in mind, don't forget about the person who must maintain your washers.
When designing a store, it's always in the back of your mind that you're making dollars per square foot, so you want to put as much money-making equipment into the available square footage as possible without compromising the workflow. However, in doing so, some laundry owners end up compromising the size of their bulkheads.
On paper, a three-foot bulkhead looks like it would be easy to get into to repair a machine. But the plumbing comes up through there, and pretty soon three feet doesn't seem like all that much. In fact, four feet sometimes is not enough.
• Not allowing for a sufficient amount of makeup air. This will cause the dryers run inefficiently and can even ignite a fire.
As a general rule, one square foot per dryer pocket is considered sufficient for the proper combustion of your dryers. However, falling short of this figure and depriving your dryers of makeup air is an all-too-common problem.
There are two things to keep in mind. First, if you have multiple floors above your store, you have to ventilate the dryers all the way up to the top, not just out the back. Second, you must be sure not to exhaust the dryers right on top of the air conditioning unit because it will clog it up.
A related tip is to install internal air filters on the HVAC unit, in addition to the filters already on the units themselves on the roof. That added layer inside the store can be changed weekly and decreases the number of times someone needs to head up to the roof.
• Installing inadequate floor drainage. Floor drains are something that several laundry owners tend to skimp on, and it's something you need to have. You're in a place that invariably is going to have water on the floor – sometimes an inch or two – and you've got to have somewhere for it to go. Floor drains should be on a separate line than those that hook into all of the washers.
• Undersizing the utilities. “We recently opened a store, where the gas company sized the main supply incorrectly,” Grise related. “When the store wasn’t really busy, the dryers were heating up. But, all of a sudden, as the store got busier, all of the dryers were running and the water heater was running – and we weren’t getting any hot air. We had to close that store, and it delayed the project by an extra week.”
• Shortchanging the project, as far as the quality and thickness of the concrete. “If you start bolting down machines to concrete that’s not the right thickness or quality, and the bolts start pulling up, you can have real problems,” LaMaina warned.
• Inadequate floorplans. “We’ve gone into stores where they’ve actually designed aisles as narrow as four feet,” Grise said. “Spending time on the blueprint is a key. I’ve seen architects make mistakes. Recently, a guy made a mistake of six feet on a project, which stopped everything for about two weeks until everybody could get together and get it worked out.”
• Working with uninsured contractors. There shouldn’t be anybody allowed to work on the project unless they have a certificate of insurance and workers’ compensation insurance, especially if the store is on the investor’s property. If there were to be some sort of accident or injury on the site, there could be serious liability for the owner. Proper insurance is a must.
• Overlooking any toxins on the property. What’s the history of that location? Are there any toxins left over from a previous drycleaning business or a former gas station? Do your research.
Love It, Live It!
Above all, ask questions – as many as you need. When you begin work on a coin laundry construction project, there are many questions that need solid answers. Ample water supply? Sewer lines? Building codes? And on and on. Ask, ask, ask. And if you don’t get the information you need, keep asking until you do.
Communication, time commitment and “loving the project” are the three big things to a successful construction, according to Grise.
“As a distributor, I’m constantly talking to that customer, even in the very early stages,” he said. “I want to know when I can be getting my bases in, when I can be getting my bulkheads delivered. Visiting the location and working with the general contractor and the distributor closely – if possible on a daily basis – are very important for a store owner.
“You’ve got to make it your life, for those six months – you’ve got to eat it, breathe it and live it.”