2018: A Look Back

By Bob Nieman, CLA Member posted 17 days ago

Recapping the Past Year… And Taking a Glimpse into the Industry’s Future

It’s that time of year again – a time to reminisce about the 365 days gone by – and to try to predict what the next 365 have in store.

Everyone does it – from the largest television networks to the most niche bloggers. This month, we will be inundated with all that 2018 had to offer in the way of politics, sports, music, movies, literature and so on.

But what about the vended laundry business?

“A strong economy positions the industry for growth, and 2018 seems to have been an example of that,” said Nick Koukourakis, senior product development manager for Whirlpool Corporate Commercial Laundry. “The upward momentum has led to vended store growth in high-traffic areas and many multi-store owners choosing to grow their investments and expand to two or three more stores.”

He added that older facilities also are getting a new lease on life, with new owners taking possession and conducting renovations as needed.

“As part of these renovations, owners are installing newer equipment with new technologies,” Koukourakis continued. “This newer equipment can help owners reduce utility costs and improve a store’s bottom line – trends that do not appear to go out of style.”

“The economy is doing well,” concurred multi-store owner Michael Finkelstein of Associated Services Corp., based in Danville, Va. “Definitely, I’ve seen a positive impact on my business because of less regulation and tax cuts. Less regulation and less taxes put more money in people’s pockets. When people have more money, they spend.

“At the same time, when the economy is doing well, it’s more of a challenge to retain good employees,” he added. “Salaries were impacted. Then again, if I’m making more, I’m paying more to my staff members. A rising tide lifts all boats. Obviously, I’d love to see things continue this way in 2019.”

Russ Arbuckle of Wholesale Commercial Laundry Equipment SE in Southside, Ala., also saw the strong economy impact the types of laundries being built.

“With the growth of the economy and consumer confidence, more investors are looking at the vended laundry business – and at building larger, state-of-the-art stores,” Arbuckle explained. “Hopefully, the continued trend toward these large, high-quality laundries will reduce the number of tired-looking, outdated stores and create a better image for the entire laundromat business.”

In addition, 2018 was the year in which the laundry industry finally seemed to truly embrace technology.

“All of the buildup and buzz from Clean 2017 spilled over into adoption this year,” said Dennis Diaz of Spynr Inc., headquartered in New York City. “It’s clear that the industry is evolving. It’s why we no longer refer to the ‘coin laundry industry’ anymore. I’ve met many owners who are curious about marketing their businesses online and learning how customers interact within their stores by using newer payment systems. Technology and data no doubt are increasingly impacting the way we do business.”

The last 12 months also has been a monumental year for the Coin Laundry Association and, more specifically, the LaundryCares Foundation.

“There were two highlights that stand out in 2018,” explained Brian Grell of Eastern Funding in New York City. “First was the enormously successful Excellence in Laundry Conference in Naples. The quality of the attendees exceeded expectations. Leading store owners from across the country came together to network and share ideas for best practices. If you’re in the business and want to grow, you simply need to be around the winners in this industry. I have been to all of the Excellence events, and each time I come away more inspired and motivated to share the ideas garnered from successful store owners.

“Second, and more importantly, was the meteoric growth of the LaundryCares Foundation. When looking back, 2018 will prove to be a breakout year for that organization.”

LaundryCares not only held several successful free laundry and literacy events this year, but in March, the foundation hosted the first-ever Literacy Summit in Chicago. The two-day event brought together 30 leaders in childhood literacy to develop ways in which vended laundries can be used to spur increased literacy and learning among young people. In fact, the summit inspired a study by renowned NYU professor Dr. Susan Neuman, who conducted her research at six laundromats in the New York City area.

“The phenomenal enthusiasm growing around the LaundryCares Foundation and its partnerships with Too Small to Fail and Libraries Without Borders is beyond inspirational,” said Ted Ristaino of Yankee Equipment in Barrington, N.H. “Well-run, well-attended events around the country supported by manufacturers, distributors and store owners have created a unified sense of mission in the industry – unparalleled in its history. When more than $100,000 was raised at Excellence in Laundry in less than 20 minutes from all constituents, it became clear that the industry was all in.”

“In-store literacy centers certainly found their place and established their value in 2018,” added Jim Whitmore of Sunshine Express Laundry Center in Gloucester, Mass.

Facing Challenges

It’s not the 2018 was necessarily all sunshine and rainbows for laundry owners.

“Obviously, we see the boat anchor of our industry being thrown out, with tariffs,” warned Karl Hinrichs of HK Laundry in Armonk, N.Y. “Regardless of your political views, tariffs are going to make steel more expensive. In the last year or so, U.S. steel has gone up by at least 30 percent, and imported steel from Canada and elsewhere is certainly that high. U.S. steel production isn’t capable of taking care of all our domestic demands. Regardless of whether you have an imported machine or a domestic machine, we’re already seeing price increases for next year, which are in the 5 percent to 7 percent range, and may climb higher. That will be a real drag on next year’s growth.”

“Permitting processes through local municipalities take too much time,” said Tod Sorensen, vice president of Continental Girbau West, pointing out a perennial issue for the laundry industry. “This has been a problem for years, and it delays store openings. The longer a business drags on without revenue, the more it costs the owner.”

Interest rates also have been a key obstacle and will continue to command our attention in 2019.

“One of the most important challenges of 2018 has been rising interest rates,” explained Kevin Hietpas, director of sales for Dexter Laundry. “Like other capital-intensive businesses, our industry has benefitted from the historically low financing rates of recent years. Low rates have made it less costly to make major long-term investments. That has allowed savvy laundry owners to make significant investments at favorable rates. Although the lowest rates may be behind us, the good news is that we still remain at a level that is quite low by historical standards.”

“Certainly, rising interest rates proved to be one of the larger concerns as the Federal Reserve has raised rates eight times since December 2015, with another increase expected this month,” Grell said. “As a result, some store owners may have hesitated in pursuing desperately needed retool and rehab projects. However, I see it as a sign of a better economy and an opportunity to expand or upgrade operations.”

Another significant issue has been the rise of minimum wages all across the country and its impact on profitability.

“With the economy at or near full employment, hiring and retaining good employees remained a challenge,” said Brian Brunckhorst of Advantage Laundry in Dublin, Calif. “Let’s face it, there are a lot more jobs out there than there are people willing to work them. This resulted in large increases to our payroll, as we needed to increase attendants’ pay to compete with other jobs available.”

“Again, I look at this situation as an opportunity for laundry owners to upgrade the quality of their attendants,” Grell countered. “Unfortunately in our industry, the tendency is to hire anybody with a pulse, often ignoring whether or not the candidate has any communication skills, personality or the right attitude. Remember, your attendant is the face of your retail business – apply the following in managing your business: slow to hire and quick to fire.”

“Aggressive and unhealthy price competition challenged the industry and does not serve anyone well,” added Hannes Saeubert, vice president of sales and marketing, North American Commercial for Alliance Laundry Systems. “We’ve also seen less new stores in densely populated metro areas due to high real estate and lease costs. Despite these barriers, Alliance has had a successful year in the laundromat segment.”

Of course, unusually strong storms in several parts of the country wreaked havoc in a number of laundromat markets in 2018. Namely, Hurricanes Florence and Michael – on the heels of the deadly Hurricane Harvey in 2017 – battered much of the eastern seaboard, as well as Florida’s panhandle region.

“The weather-related disasters that occurred this year were a surprise to me,” said Chris Moreno, vice president, partnerships for Drop Locker. “However, it was incredible to see the outpouring of support from laundry owners in those communities.”

For example, in the wake of Florence, an impromptu free laundry day was quickly organized by the Williford family – owners of multiple laundries in North Carolina – with help from the LaundryCares Foundation. In all, more than 15,000 pounds of laundry was washed for those displaced by that particular storm.

Another surprise this year has been “the amount of distributor consolidation that’s occurred,” said Steve Marcionetti of Card Concepts Inc. “It’s unclear to me how this trend will affect the industry, but we will be watching closely.”

Specifically, Miami-based EnviroStar has been particularly active – with the acquisitions of Worldwide Equipment, Skyline Equipment, Western State Design, Martin-Ray Laundry Systems, Tri-State Technical Services, Aadvantage Laundry Systems, Scott Equipment and Industrial Laundry Services.

Also, despite the strong economy, there was a slight but nonetheless surprising uptick in store closings and repossessions in some markets, according to Ristaino.

“Competition, lack of management and loss of a lease were some of the contributors to these events,” he explained. “With a vibrant economy and a number of investors and veteran owners seeking locations, it was surprising that a better outcome was not reached in some of these cases. Better planning and seeking mentoring could have prevented some of these situations.”

Now Trending…

A major, long-term industry trend that continued in 2018 was the emergence of the full-service laundry business.

“Most new vended laundries are developed with multi-level services,” Sorensen stated. “There aren’t as many ‘traditional’ self-service laundries. Rather, laundries are including wash-dry-fold, commercial laundry services and drop-off drycleaning to appeal to a broader demographic.”

Once again, technology continues to muscle its way to the forefront of the industry.

“The best part about the advancements in today’s technology is that it can help you manage your store, even when you’re not there,” Koukourakis said. “Machines with remote connectivity capabilities are now equipped to help you do things like adjust pricing, rates or cycle modifiers, and provide credits from a computer, tablet or smartphone. This technology can also deliver real-time data so that you’re always aware of how your machines are running. And, as the industry turns toward modern advancements, laundry owners are able to access the technology they need to help them run their businesses more efficiently and keep up with their customers’ needs.”

The industry also has experienced a significant increase in interest in alternative payment solutions.

“Not only are we seeing our customer base grow faster than ever, but the trend is confirmed with many new system providers entering our industry,” Marcionetti pointed out. “Even some of the equipment manufacturers are starting to offer alternative payment options built into their equipment. I believe this trend confirms the work we have been doing to raise awareness in this area over the last 18 years, and it legitimizes the need for store owners to consider payment alternatives.”

The pickup and delivery of wash-dry-fold laundry continues to gain strength as a trend as well

“Although a long time staple of the vended laundry business, sophisticated software for customer contact and satisfaction, marketing and vehicle routing have raised the volume of this segment by a significant amount,” Ristaino noted.

And 2018 also was a year where laundromat marketing went decidedly digital.

“The trend I saw take off was social media,” Brunckhorst noted. “It has become a major influence in the decision-making process for most of our customers. Who doesn’t look at reviews before going out for dinner or having their car serviced? Our customers are looking at our reviews and that is forcing us to stay on our game. Like it or not, almost everyone is connected to social media, and I don’t see that changing anytime soon.”

“From a marketer’s eye, the power of video online really held its place,” Diaz added. “Businesses that embraced it saw better engagement than their competitors who didn’t. I always fear that our industry is too slow to adapt.”

One trend that has seen widespread adoption across the U.S. has been the retooling and renovation of older facilities.

“In 2018, I continued my quest to not only eradicate ‘ZombieMats’ by retooling and upgrading them, but to also emphasize best practices in customer service,” Grell explained. “These are just two examples of the many tips in my presentation. It’s important to note that these tips are not mine, but rather come directly from conversations with successful store owners. What’s truly exciting is that owners are finally listening and embracing change, and the message is resonating among dissatisfied laundry owners.

“The number of success stories is mounting – just ask anyone who has taken steps to revive a ‘ZombieMat.’ The concept of wholesale improvement works!”

Looking Ahead to 2019

So, what can laundry owners expect in the coming year?

“I think we will continue to see more innovations that enhance conveniences to retail customers and store owners,” Marcionetti predicted. “The industry will continue to evolve, leveraging technology in a way that brings more value to all stakeholders. Laundromats will continue to grow into more mature retail businesses, providing better value through marketing programs via new technology. These innovations will also continue to attract a more technology savvy investor who inherently understands how to leverage the tools. This new generation of store owners will help shape the direction of our industry.”

Also, due to the industry’s aging install base – along with stronger technology, modernization and improved professionalism overall – Saeubert expects replacement opportunities to be numerous in the year ahead.

“Financing, leasing and renting will play increasing roles, due to capital constraints,” Saeubert said. “New owners and investors will gravitate toward value added services offered by manufacturers and distributors – going beyond just product – including pre- and post-sale services, often enabled by technology.”

“I think networking becomes more commonplace,” Hinrichs added. “We’re going to see a lot more adoption across all brands. We’re going to see it become more mainstream. The automated laundry is the direction operators want to go. The manufacturers realize this, and it’s just a question of getting the infrastructure in place to make it happen.

“In 2019, we’re going to see a drop in sales. I think we’re going to see a pause, more than anything else. I don’t think the steady, stellar growth can keep on going. It’s going to be a mild correction. Anyone who is going to retool has probably already done so by now, or they’re going to do it before the end of the year. So, next year may be a little softer.”

With that said, the future still remains quite bright for operators who are willing to embrace it, according to Hietpas.

“Time will always be people’s most valuable commodity, and great laundry facilities save customers a lot of time, while at the same time delivering a very important, and very basic personal need – clean clothes,” he summed up. “And with new avenues like social media to help reach more and more people, we have many more possibilities to reach out to more potential customers. The sky is the limit.”