Clean clothes are one of the universal necessities of life. After all, a white shirt is a white shirt, and a clean pair of pants is a clean pair of pants – whether you’re in the United States or halfway around the world.
However, the establishments that enable individuals to carry out this task are not always so similar. In other words, not all laundromats are created equal – especially to the entrepreneurs running these businesses.
This month, we look at the self-service laundry industry in Canada – its challenges, its opportunities… and its future.
The Industry
“Coin laundries in Canada tend to be operated as a sideline or hobby, as opposed to a primary source of income,” said Robert Jackson of Harco Co. Ltd. in Mississauga, Ontario. “The store sizes tend to be smaller than in the United States. The average size is probably 16 to 18 washers and nine to 10 dryers, with few or no large-capacity machines.”
The typical laundromat in Canada is between 1,500 and 2,000 square feet, estimated Marcia Todd, editor and publisher of Fabricare Canada, a trade publication covering the country’s laundry and drycleaning industries. Of course, many are quite a bit smaller.
Professional self-service laundry operators do exist in Canada, but there very few, especially when compared to number in the U.S., according to Jackson.
Portions of the country have seen a heavy influx of immigrants. “Between the Koreans and other Asian groups, they represent about 50 percent of our coin laundry store-owner customers,” said Ian Gibson of Ontario Laundry Systems, who added that his company has built more than 100 self-service laundries in Canada, mainly in Ontario. “The Koreans dominate the convenience store market up here as well.”
“In the Vancouver area, over the last 10 or 12 years, we have gone through the East Indian community – now we’re getting a lot of Korean customers and we’re also getting them from Fiji,” said Ralph Acheson of Dyer Equipment Sales, based in Delta, British Columbia. “It seems that, when they arrive, they don’t have a lot of language skills, and an easy business for them to get into is laundromats.”
“I would estimate that Canada has probably 3,500 to 3,800 self-service laundries overall,” Jackson said. “I would further estimate that approximately 75 percent to 80 percent of these stores are unattended.”
He added: “It has been quoted that approximately 10 percent of the population uses coin laundry services on a weekly, repetitive basis. We feel in Canada that this number is closer to 5 percent.”
As far as vend pricing goes, at least in the larger cities like Toronto, a rule of thumb is about 10 cents per pound, according to Gibson. “They’ll get $2 for a double-loader,” he said. “A 30-pounder might be getting $2.75, a 40-pounder will get $3.50 to $4 and a 55-pounder is $5.50.
“We’re having trouble getting prices up in the city,” he added. “When I build stores in Ottawa or Hamilton, they’ll get at least 25 percent more than what is charged in Toronto.”
In British Columbia, away from the major cities, Acheson has seen $5 vend prices for double-loaders.
“Everything is inflated a little bit in Canada,” he reasoned. “Our gasoline price is about $4.48 an American gallon, so that tells you a lot. The store owners don’t have that fear of raising prices that Americans do. It’s not that competitive. You can raise your price and not get clobbered by your competition.
“We find that, if you don’t get greedy, you can go up a quarter at a time two or three times a year, and nobody is going to even notice it,” he added. “Just keep the store clean, modern, bright and happy. That’s the secret.”
Another pricing advantage (at least according to some store owners) that Canadian laundromat operators have over their American counterparts is the fact that Canada has popular $1 (Loonie) and $2 (Toonie) coins – and the system is working.
“Of course, the coin laundry owners had to invest in new coin changers, but having done so, they are now in a good situation,” explained Todd. “Instead of having to put four quarters into a machine, a customer just drops in a Loon.
“The thing they did here that wasn’t done in the States is they withdrew the paper money,” she added. “We don’t have any $1 and $2 bills anymore. You’re never going to sell the coins to the public if you give people a choice, because the coins are so heavy in your pocket. But the program has definitely helped the coin laundries.”
The Issues
Although utility costs are not as expensive as they are in U.S., Canadian business taxes are indeed higher, which tends to offset any utility cost advantage Canadian operators may enjoy. Indeed, water rates are expected to double in Toronto between 2005 and 2010, according to Jackson.
One of the biggest issues facing the Canadian coin laundry industry are retail lease rates.
“Our utilities are lower, but our rents are much higher, so it all evens out,” Acheson commented.
“Any good location, such as those in large cities like Toronto, will have lease rates exceeding $30 to $35 per square foot,” Jackson explained. “Only a few years ago, the same location could have been leased for $10 to $15 per square foot.”
Gibson agreed. “We have a huge problem with rents,” he concurred. “Because of the rents, we can’t really do the mega-stores that they have in the States. In Ontario, most of the larger stores, which are about 4,000 square feet, are located in vacation communities outside Toronto.”
Another issue facing laundry operators in Canada is the current negative perception of laundromats and of doing one’s laundry at such facilities.
“Canadians do not like doing their laundry in public,” Jackson said. “The home washer and dryer are ranked very high on the priority list; they rank as high as a television or a DVD player. In fact, most newlyweds won’t even move into a new home or condo until a new washer and dryer is installed. In addition, as an incentive to prospective buyers, condominiums now offer free washers and dryers.
“I cannot stress this absolute priority enough,” he added. “The last thing in the world most Canadians would want to do is take their soiled linen to the coin laundry. And, unfortunately, this negative feeling, image and perception have been reinforced over the years by absentee operators who provide old, out-of-date equipment in dismal, dirty and unsafe surroundings.
“The typical operator does not replace equipment in Canada. It is not uncommon for stores to be equipped with machinery from the 1960s, lacking even perma-press controls.”
“We’re getting a lot of Koreans and Vietnamese customers,” added Terry Miles of Midland Commercial Sales & Service in Winnipeg, Manitoba. “They all buy existing laundries that are 20 years old, but they don’t believe the stores are worn out. And they’re getting hit with repair bills.
“In Manitoba, they have to put up $70,000 if they’re going into a business just to show the government good faith that they’re really going to stay here and make a career out of it,” Miles explained. “So the owners put a lot of money out just to try to get re-established in a new country – and they’re broke. They don’t have operating capital. That’s a major hurdle.”
On top of that, the minimum wage in Canada is typically higher than in the United States, averaging at least $8 an hour. Therefore, wages and staffing can be critical issues for certain owners in some markets.
By contrast, however, the country also has quality, professional coin laundry operators who have long recognized this situation and have turned it to their advantage.
“Larger, fully attended stores offering multiple services have become more prevalent in recent years,” Jackson stated. “These stores, as in the U.S., provide services that cannot be duplicated elsewhere – including the household washer and dryer or the centralized laundry rooms located in multiple-housing dwellings.”
In some of the communities more heavily populated by immigrants, such as East Indians, Koreans or Chinese, there often may be four or five families living in one home, Acheson explained. However, “only one family is allowed to use the washer and dryer at home,” he said.
Such trends are certainly molding the country’s self-service laundry industry.
Another dynamic helping to shape certain laundry markets in Canada is the population.
“British Columbia is bigger than California, Oregon, Washington and part of Idaho put together,” said Acheson, whose company has built 168 stores in the province. “But we’ve only got 3.9 million people. We’re not like American cities. We don’t have a whole lot of low-income families in one area. I’m not saying we don’t have poor people, but they are spread out all over, not concentrated in one two-mile radius.”
The Trends
Due in large part to the high rents in the larger cities, most of the new store construction has occurred outside of major cities in smaller rural towns and villages, according to Jackson.
“It’s become harder to find locations,” Gibson said. “We do as many stores out of town as in Toronto.”
Another trend has been toward larger equipment.
“We put in the same equipment mix ratios as in the U.S.,” Acheson said. “We stay away from toploaders.”
“Just like south of the border, large-capacity washers in the 40- to 60-pound range, are needed to best handle larger items.” Jackson said. “And, in Canada, we have a lot of comforters, sleeping bags, boat covers and large specialty items like snowmobile suits and covers, due to the country’s climate. The operators who provide this equipment and these services can capitalize on this potential. Stores equipped with a high number of large-capacity washers are always busy, because those items simply cannot be handled at home with residential type laundry equipment.”
“Going back about 15 years, we used to put in more of the double-loaders, followed by triple-loaders,” Gibson explained. “Today, we’ll typically install eight double-loaders, six 30-pounders, six 40-pounders, four 55-pounders and even a couple of 75-pounders.”
And with the cost of energy in Canada rising (although not at similar rates to utility costs in the U.S.), more and more laundry owners are seeking out high-efficiency equipment, especially today’s popular high-extract washers.
“Coin laundry owners are not just renting a machine to their customers, they’re selling utilities,” Todd explained. “It behooves them to be sure to look for the greatest efficiency in electricity, gas and water, and the greatest extraction – and particularly to stay away from toploaders. As I visit stores, more and more they will have a token row of three or four toploaders, and then they’re going right to the bigger sizes of washers. That’s a definite trend.”
Acheson noted that most of his customers are actually much more energy-efficient than laundry operations in the U.S., pointing to the fact that his store-owner customers’ utility costs represent about 8 percent or 9 percent of their gross sales, versus about 20 percent to 25 percent in the U.S.
“We keep it down,” he boasted. “The venting, the engineering, how we lay out the equipment – we keep them at 8 percent or 9 percent. I can’t speak for the rest of the country, but I know what we’re doing here.”
“The environment is a top issue here,” said David Hillary of Hillary’s Cleaners, a drycleaners/laundromat operation headquartered in Ottawa, Ontario. “We’ve really gone green, and we’re talking about global warming. We’re recycling our water, which is big. If we can recycle it, re-heat it and reuse it, there is a lot of savings there – water reclamation.”
Canadian laundry operators also have embraced ancillary profit centers like drop-off laundry services in recent years.
“Whenever we build an attended store, part of our strong recommendation to them is that, to pay for those attendants, the owner can offer a drop-off laundry service,” Gibson said. “And if there isn’t a drycleaner in the plaza, the store operator can offer drop-off drycleaning, too.”
Acheson knows of some Canadian laundries where drop-off services account for a third of the stores’ volume.
Of course, as in the U.S., a store owner would be wise to study his market’s demographics carefully before counting on pulling in any substantial drop-off income.
“I know of a few stores with the right concept in the wrong place,” Todd noted.
Also, depending on the particular market, card technology is becoming more popular in certain sections of Canada.
“We have done a couple of card-operated stores,” Gibson said. “Some of the customers, especially the immigrants, didn’t like the concept of leaving money on the cards. However, all of these immigrants use phone cards, which is the same principle. So it’s just a matter of time before you see more and more card-operated laundries up here.”
“We now have a number of stores that are on card systems up here,” added Todd, who thus far has seen this technology mainly in high-crime, low-income markets.
According to Acheson, one of things driving the increased interest in card technology is the fact that the manufactures have now developed systems to accommodate smaller stores.
“We were always overpowered by the big superstores in the U.S.,” said Acheson, who builds stores as small as 800 square feet. “The average store here is 20 to 22 washers. But when they first introduced the card systems, they were for 100-washer stores.”
Since the new systems for smaller operations hit the Canadian market, Dyer Equipment Sales has installed a handful of very successful ones, according to Acheson.
“We have orders for five stores right now,” he said. “Three of them are card stores.”
The Future
“I think the coin laundry business has a healthy future here,” Gibson said. “When I visit coin laundries in different areas, I’m starting to see more and more people from middle-income backgrounds using the stores then did so 15 years ago. The markets and customer demographics are growing and widening.”
And the type of store owner is changing and broadening as well.
“With card systems, we’re going to see more multiple-store owners,” Acheson predicted. “It’s attracting a different type of investor. It’s not just the mom-and-pop store, but people coming into the business looking to put in eight to 10 stores – and maybe a little bit bigger stores than what we have now.”
“It’s a pretty stable business,” Todd stated. “If I was looking at going into some other kind of business, that’s what I might do.”