Industry Roundtable: What’s Next for the Laundry Business?

By Bob Nieman, CLA Member posted 04-26-2018 11:44

  
Leading Manufacturers Weigh In on the Current State of the Vended Laundry Industry – And Where They See It Headed

What’s ahead for the vended laundry industry?

The resurgent U.S. economy of recent years has strengthened and grown the laundromat business in nearly every marketplace. The last few Clean Shows – which is the industry’s biennial trade exposition – have set records both for attendance and exhibition space sold. And laundry equipment manufacturers continue to develop new technology to provide store owners with “smarter,” more energy-efficient and management-friendly machines.

So, what does all of this mean for the future of the business? What’s trending? What business opportunities – and threats – await today’s laundry operators? This month, we posed these very topics and others to an all-star panel of some of the industry’s leading manufacturers.

Our expert panel includes:

Gary Gauthier
National Sales Manager, Vended Laundries
Milnor Laundry Systems

Kevin Hietpas
Director of Sales
Dexter Laundry, Inc.

Joel Jorgensen
Vice President of Sales
Continental Girbau, Inc.

Nick Koukourakis
Senior Product Development Manager
Whirlpool Corporate Commercial Laundry

Hannes Saeubert
Vice President of Sales, North American Commercial
Alliance Laundry Systems


What are the most pronounced trends you’re currently seeing in the laundromat business?

Kevin Hietpas: With regard to stores and locations, there is clearly a trend that older locations (especially larger ones) are attractive for rehab and redevelopment. With the cost of “ground-up” new locations continuing to increase, this has made older stores in good locations attractive for redevelopment.

With regard to store operation and management, we see tremendous interest in remote management and store operation technologies. In the recent past, these capabilities have centered on card systems, but with the internet-of-things and systems like DexterLive, controlling more aspects of your store has become as easy as a few taps on your smartphone or tablet.

Inside stores, the trend toward installing more and more larger-size equipment continues. While the initial acquisition cost is higher, the greater revenue potential, combined with higher level of energy efficiency, makes them a great investment for most store owners. We also see operators taking advantage of innovations in LED lighting to improve both the lighting quality of their stores as well as improving their level of energy efficiency.

Gary Gauthier: We’re continuing to see store owners look for payment system alternatives. Even those customers who eventually go with traditional coin vending solutions are at least considering other alternatives, such as credit card systems on a portion of their machinery.

Joel Jorgensen: The number-one trend we’ve noticed is that owners are replacing a couple of smaller washers with super-sized washers. Owners want more 60- to 90-pound-capacity washers and large reversing dryers in their stores. It’s all about maximizing revenue per square foot.

Hannes Saeubert: The vended laundry business is benefitting from a strong economy. One need only look at the high-dollar buildouts we are seeing. New investors are seizing the opportunity to raise the bar in terms of customer experience. That has driven existing owners to do likewise. Our industry is reinventing itself and improving the public’s image of what a vended laundry looks like – bright, modern and built on machines that help customers simplify their laundry chore. Additionally, advanced machine technology, cutting-edge payment systems, and laundry management systems are driving a more professional approach to operations.

Nick Koukourakis: Technology continues to evolve within the industry and prove to be an integral component of growth – cloud-based, wireless management systems that allow owners to manage their laundry facilities remotely via computer or mobile devices, such as Maytag Connect 360º technology, which provides data and insight to help business owners focus on increasing operational efficiency and profitability.

Certainly, the last few years have been strong for all segments of the vended laundry industry. How long do you expect those “good times” to last?

Gary Gauthier: Our industry is a reflection of the economy, and we’re seeing forecasts calling for small- to moderate-growth going into 2021. At Milnor, we’re planning to take advantage of growth in the vended laundry industry.

Hannes Saeubert: Those who reinvest during the good times will do far better than their competition in all economic conditions. Additionally, this business is historically strong, even in recessions. We have plenty of runway left in this economy; we expect the good times to continue well into the future.

Kevin Hietpas: The industry continues to have a bright future. The need for clean clothes remains a basic part of a healthy and productive life. As an industry, we help people do that, and we help them do it quickly and efficiently. The industry has a history of developing new ways to assist customers with this basic necessity, and I believe we’ll continue to do that. As an equipment manufacturer, it’s our job to give store owners more tools and options to help them deliver a great experience to their local customers.

Nick Koukourakis: It’s definitely an exciting time to be in the vended laundry business. We’ve seen various changes, including an increasing number of multi-store owners who are choosing to grow their investments and expand to include two or three more stores.

In addition, there has been vended store growth in high-traffic areas. In an effort to meet growing needs for self-service laundry, this is likely to continue.

Older facilities also are getting a new lease on life with new owners taking possession and conducting complete facelifts on outdated stores. As part of these renovations, owners are installing newer, energy-efficient equipment, which is a trend that has remained constant in recent years. Energy-efficient equipment, which appeals to eco-conscious patrons, also helps to reduce utility costs and can help increase a store’s bottom line.

What are the greatest areas of growth and opportunity that you see for the vended laundry business?

Joel Jorgensen: I feel vended laundries will grow greatly in terms of the services they offer. This has been a trend that’s catching hold. More and more are offering wash-dry-fold, along with commercial laundry services and drycleaning. It’s a way to bring in more revenue using the equipment and staff on hand.

Hannes Saeubert: Opportunity in our industry will come with leveraging technology as well as using social media to communicate with a store’s customer base. Smartphone usage is high in our customer base, opening up new opportunities for payment systems, direct marketing and communication. Branding of laundries will continue to expand as owners replicate the quality they offer in multiple locations. Expanded services, such as drop-off, commercial accounts, and wash-dry-fold will help stores expand offerings and revenue streams. Meanwhile, we see opportunity in the way that retools and new stores are raising the bar in this industry. Vended laundry customers are expecting more, and it forces all store owners to raise the bar as well. It’s truly exciting to see our industry’s image improving.

Nick Koukourakis: Technology will continue to drive vended laundry in the future. More and more customers will see the growth of improved payment options, such as mobile payment, which removes unnecessary friction from the laundry payment experience. As technology evolves, so will the opportunities for owners to drive traffic into stores, to help increase turns and profits.

Gary Gauthier: Commercial services, in my opinion, are a great area of growth for vended laundries not currently doing this work. There are a variety of companies looking for this needed service, ranging from beauty salons to party rental to veterinary clinics. My advice to any laundry operator considering this work is to grow carefully. Secondly, don’t grow for the sake of it; take on business that you want and that wants you.

Kevin Hietpas: Harnessing new technologies and innovations to allow store owners to spend more time and energy on their business and on their customers is a huge area of opportunity. There are only so many hours in a day, so whether the innovation is in the area of greater equipment reliability (problem prevention), quicker and easier response to customer complaints, quicker and easier access to collection, or improving the speed and efficiency of actual collection activities by the adoption of a card or mobile payment system, it will free up time for store owners to spend less time working in their business, and more time working on their business.

By contrast, what do you consider to be the greatest threats to today’s laundromat operators?

Nick Koukourakis: Replacing older equipment can be a large undertaking for owners. Although it’s never easy, investing in new, energy-efficient equipment can help increase operational efficiency and boost customer satisfaction and retention, while also helping to positively affect the bottom line and reduce utility costs.

Joel Jorgensen: The biggest threats are competition and utility costs. Utility costs bring down your profit margins. Older, inefficient equipment takes a real toll not only on your store’s efficiency, but also its popularity. You can’t compete without updated equipment.

Gary Gauthier: I’m seeing budget shortfalls in nearly every city, state and community around North America. Sales taxes on vended laundry services are a looming issue in many areas, and they’re taxes that many of our customers can’t afford. This is one of the reasons why the Coin Laundry Association’s “Stop Laundry Tax” efforts to address this issue are so important.

Kevin Hietpas: I’m a believer that the biggest threat to any business is complacency and the unwillingness to adapt. The rate of change in this world continues to accelerate. Businesses that refuse – or are too slow – to adapt to change are often swept away by it. At Dexter, our newest generation of controls has the ability to be updated and reprogrammed with new firmware to allow for the addition of new, not-yet-conceived capabilities. And the design of these controls also allows them to be retrofitted backward onto older products. We believe store owners will feel better about making important investments if they are confident that the investment is less likely to be rendered obsolete before it has even paid for itself.

Hannes Saeubert: Higher rents. The strong economy is a double-edged sword, while revenue increases, rents climb and the availability of suitable store locations can decrease. Those seeking the status quo will be passed up by more progressive store owners. We are also keenly aware of the negative impact that any legislation that increases or adds a tax on laundromat operators would have.

As an equipment manufacturer, where do you see your company’s greatest areas of growth going forward?

Hannes Saeubert: Alliance’s growth will be in advancing technologies that enable progressive owners to more efficiently operate and optimize their business. That means transitioning into a true innovator in our industry, dedicated to leading performance.

Gary Gauthier: Milnor has a strong international program, and we’re looking forward to expanding our sales in overseas markets.

Kevin Hietpas: Our industry has been around in North America for more than half a century, and there will be continued new store growth and store redevelopment activity here for many years to come. As a manufacturer, our challenge will always be to deliver innovations that store owners find valuable. We also see a bright future for our business outside of North America. Here in North America something we don’t always think about is the amount of personal space we all have in our homes or apartments. In other parts of the world, living spaces are significantly smaller, and space for laundry equipment isn’t as readily available. In those situations, a great option to do laundry quickly and efficiently is an idea that continues to gain acceptance. Like here in North America, our goal internationally will be to help store owners deliver a great laundry experience to their customers.

Joel Jorgensen: Continental provides a vast offering of washers, dryers and ironers for vended laundries. We will continue to see huge growth numbers in our soft-mount ExpressWash washers, Express Laundry Centers and flatwork ironers. First, the ExpressWash washers are freestanding and generate up to 400 G-force extract speeds for more moisture removal and shorter dry times. This combines for lower utility costs and greater customer turnover. The Express Laundry Center package is a branded and turnkey vended laundry offering that is available to vended laundry investors. It’s a proven package that appeals to many investors and will continue to do so. Finally, more laundries are offering commercial services. A flatwork ironer gives them the means to iron sheets and table linens for hotels and spas. This is appealing and the profit margins can be unbelievable.

From a business standpoint, what are you most concerned about?

Gary Gauthier: Unfortunately, my biggest concern is an area where we have no control. Utility costs have been relatively stable for a long time, thanks to a variety of factors. However, energy costs can be affected by things as simple as the weather or as complex as a political event. Our industry is in the daily practice of reselling utilities, and any interruption to this practice creates trouble for all of us.

Joel Jorgensen: We are concerned about impact fees and regulatory oversight, because they have the potential to greatly threaten business growth and industry progress.

Hannes Saeubert: The health of the economy certainly drives investment, so we definitely want to see a strong and growing U.S. economy to continue. As a company focused heavily on developing new technologies, we are quite aware of the competition for top level talent. Alliance must remain competitive in attracting and retaining the best and brightest in the technology sector.

How has your strategic plan and focus changed in recent years? And what are the reasons for your current direction?

Joel Jorgensen: There’s real opportunity in the market for expansion into multi-level services and revenue streams. This drives our strategic plan. That’s why Continental continues to innovate new technologies, products, and equipment capacities. We want to support this expansion of services and help vended laundries appeal to a broader demographic. It fits perfectly into our diverse commercial and industrial laundry expertise.

Kevin Hietpas: Nothing has changed about our company mission for many years. Our company mission is to help people and business process laundry faster and more efficiently. With regard to why, the answer is simple, because we don’t believe that the desire for improved speed and efficiency in laundry processing is going to diminish any time soon. If anything, we see the need for greater speed and efficiency continuing to increase.

Hannes Saeubert: Alliance Laundry Systems remains focused on growing the vended laundry business model globally by providing not only the equipment, but systems, expertise, and marketing assistance to ensure success. This current direction hasn’t shifted much from past years, but rather placed increased emphasis on developing new technologies that strengthen Alliance’s leader status. We are reimagining the laundromat experience through innovation of our machines, including aesthetics, and what technology can help them accomplish. In addition, with our distribution partners delivering expert advice in their local markets, investors and current owners are assured of the best support in the industry. Our company also has revised its brand identity, mission statement and strategic pillars. Included in that framework is an emphasis on helping store owners achieve success in serving their communities.

Nick Koukourakis: Our high standard of performance is rooted in years of experience and expertise. This expertise has allowed us to focus on designing and engineering equipment that addresses today’s coin laundry needs for operational efficiency, reliability, and advancing technology.

Gary Gauthier: Third-party technologies – everything from payment systems to security components – are driving changes to how vended laundries operate. Our goals at Milnor are focused on ensuring that our machinery is able to operate efficiently and cost-effectively in these increasingly automated environments.

What are you noticing with regard to the caliber of new investor you see entering the laundromat industry these days?

Hannes Saeubert: We are seeing qualified business owners/investors seeking underserved opportunities. Today’s investors are highly capitalized, seeking diversity and focused on scaling their business with multiple locations. We think the high net worth of today’s investors is a great indication of the returns our business is able to deliver in a variety of economic conditions, as well as the overall health of our economy.

Kevin Hietpas: The addition of new technologies has allowed existing laundry owners to add locations and to grow the size of their business, and it has also made the industry more attractive to investors who are looking for a business that has the ability to scale to a large size. In general, we have seen an increase in the number of investors who come to the industry with a definite desire to get larger more quickly than investors we might have seen in the past.

Joel Jorgensen: There’s been an acceleration in the type of investor for years. They are more sophisticated, have higher expectations and want to plan and execute projects with multi-store development in mind.

Gary Gauthier: New investors are definitely focused on the technology that our industry can provide. It’s a testament to the youth and education levels that are being attracted to our industry.

New equipment and technology have always helped drive the laundromat business into the future. What types of resources do you devote to research and development, specifically with regard to vended laundry?

Gary Gauthier: Our recent focus has been on a modernized design for our cabinet machines. We introduced this at Clean 2017 and will continue to take feedback from customers and dealers in how this product line evolves. Another area of emphasis for us is cost control, considering the escalating price of vended laundry machinery.

Nick Koukourakis: Over the past few years, Maytag Commercial Laundry has continued its deep commitment to dependability through heavy investment in the facilities, products, and services that will move the commercial laundry industry forward. This includes Whirlpool Corporation’s acquisition of ADC’s Fall River, Mass., manufacturing facility – thus, allowing Maytag Commercial Laundry to add sophisticated, customized manufacturing capabilities.

This investment has led to the latest innovation to the Maytag Commercial Laundry lineup of solutions – the configure-to-order, rigid and soft-mount Maytag multi-load washers. Hitting the market later this summer, the Maytag washer can be configured in hundreds of different ways, enabling owners to choose among different water heating, electrical connection, controls, drain, water inlet, and construction options. Featuring Maytag Connect 360º technology, this washer gives users a full-color LCD interface with simple, intuitive screens to guide them through the various settings, while at the same time providing owners with revenue-enhancing options. All component subsystems were designed to handle tough loads and consistently deliver a thorough clean.

Joel Jorgensen: We dedicate time, research and dollars into the development of flexible control systems, equipment efficiency and product capacity ranges. We always keep an eye on processing technology and evolution as well, to ensure that our products and control systems can accommodate them – bead technology, ozone, automatic chemical injection, etc.

Hannes Saeubert: As a company, we have committed more than $300 million toward research and development and manufacturing over the last five years. Leading performance in the vended laundry industry is no longer just about durable, efficient washers and dryers. Today’s progressive laundry owners demand excellence in systems that streamline operations and improve profitability.

Kevin Hietpas: As an employee-owned company, we believe people are the more important resource within any business. In recent years, we have added people across all areas of our business – engineering, customer support, manufacturing, marketing and sales, etc. To support their development, in our recent factory expansion, we added a state-of-the-art training center. This center allows for greater collaboration among all of our team members, as well as customers and suppliers.

What new technology can laundry owners expect to see from you in the coming months or even into 2019?

Kevin Hietpas: When DexterLive, our cloud-based store management system was introduced at the Clean Show in Atlanta back in 2015, we promised that the platform would continue to get better with the ongoing development of new capabilities. That is exactly what we’ve delivered and what we will continue to build on. As promised, store owners running DexterLive have seen the regular addition of new store management features and reporting capabilities. In fact, the growing population of DexterLive owners is a critically important part of the evolution of DexterLive. With greater visibility to what is happening, in real time, inside the store, the possibilities are almost endless when it comes to what we can make the system do next, and store owners are the ones driving “what’s next?” with their feedback and input.

Joel Jorgensen: Continental has long been the leader in advanced control and process management technology. The tech trend of today is the internet of things. It’s a system of interrelated devices that enables the transfer of data over a network without human-to-human or human-to-computer interaction. We are heavily invested in this technology and working to utilize it as part of our equipment control systems.

Gary Gauthier: We’ve broadened our line of washers this year to include a new 80-pound model. On-board control features will be a focus for these machines moving into 2019.

Nick Koukourakis: Maytag Connect 360º technology empowers vended owners with data, insights, and access they need to manage their businesses 24/7. This cloud-based technology allows operators to optimize profitability with time-of-day pricing, cycle modifiers, and revenue reports. In addition, owners can remotely program machine settings, get notifications, and receive machine usage information. Flexibility such as this can help owners – especially multi-store operators – manage their laundries and reduce equipment downtime, if a machine requires servicing.

Hannes Saeubert: In the next 12 months, laundry owners will no doubt see Alliance Laundry Systems taking the lead in management systems, user-friendly controls, networking, and payment systems.

What’s the biggest reason for today’s laundromat owners to be optimistic?

Joel Jorgensen: We are in the midst of a strong economy – maybe the best laundry economy in history. The market is demanding business and services diversity, which can only make vended laundries stronger and more profitable.

Hannes Saeubert: Our industry continues to offer a low-labor, easy-to-operate, recession-resistant business model that provides a strong cash-on-cash return. In addition, improved Section 179 and bonus depreciation tax laws are encouraging laundromat owners to reinvest in their businesses. The combination of all these elements against the backdrop of a strong economy bodes well for owners. The tax benefits alone should catapult owners on the fence about upgrading into full retools.

Nick Koukourakis: Continued growth and continued demand. According to the Coin Laundry Association, there are about 29,500 laundries in the U.S. that brought in approximately $5 billion this past year. This indicates growth.

Gary Gauthier: We’re benefitting from a stable economy that shows signs of slow but steady improvement. I’m telling everyone to plan for growth.

Kevin Hietpas: It’s impossible to make someone optimistic, but I’m a believer that having options should give a person reason to be optimistic. We have a healthy and competitive industry, with a lot of options. There are options with regard to equipment, payment systems, store layout and design, and marketing and advertising strategies – not to mention social media strategies. Store owners looking for a leg up in attracting and keeping customers have more options than ever before.

Overall, where do you see the vended laundry industry headed?

Kevin Hietpas: At Dexter, we believe that this industry is headed forward. While we will remain a “basic service” industry, the way that service is provided will continue to evolve. Our challenge is rolling out and adopting new technologies that make it easier, faster and more efficient for store owners to take care of customers. The store owners who do the best job of connecting with customers and delivering a service and experience that meets and exceeds their expectations will win. Our goal is to develop products that allow them to do that.

Hannes Saeubert: We see the negative laundromat stigma that has persisted for decades is on its way out. The industry is in the process of getting a facelift, as many store owners are offering a better experience for their customers and we, in turn, are reimagining the equipment that helps them do that.

Gary Gauthier: Vended laundries are continuing to shift from utilitarian environments to true retail platforms with a strong emphasis on customer service. Those laundries that will perform optimally will be dual-purpose enterprises, providing a strong retail storefront for self-service and wash-dry-fold business, combined with an active commercial account program.
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