Is It Time to Retool?

By Randy Radtke posted 11-30-2017 12:16

Upgrading Your Laundry Business Takes Planning and the Right Partnerships

[This is the second of a three-part series examining the key factors to consider when retooling a self-service laundry.]

Any great project starts with the right partner leading the way. That’s where store owners pondering a retool of their laundry should lean on their distributor.

“Laundry equipment distributors shouldn’t just sell equipment and walk away,” said Jim Rosenthal, North American sales manager for Speed Queen. “The good ones in this industry are true partners that help store owners maximize their business potential.”

Retooling a laundry is definitely a time when store owners need a strong distributor to walk through the potential return on investment and what the process looks like.

Upfront Thoughts

Craig Dakauskas, president of Commercial and Coin Laundry Equipment Co., a distributorship based in Gulf Breeze, Fla., said he wants his entire staff to be forward thinking and serve the best interests of customers.

“We empower our service technicians to not just go in and make repairs, but to help laundry owners make informed decisions when it comes to service,” Dakauskas explained. “We don’t want people making a bad decision on a 15-year-old machine,” he said, of introducing the benefits of upgrading the store versus performing expensive repairs on already outdated inefficient units.

Once that discussion begins, owners will need to decide the best way to handle retooling their laundries. Many opt for a slow approach to replacing equipment – a few tumblers here, a bank of washers there. However, invariably their customers will gravitate to the new machines, rightfully assuming a better wash or a faster dry. As discussed in the first part of this series, we all like the latest and greatest. That’s why a total retool of the laundry can have a far more dramatic positive impact on customers.

Dakauskas also recommends laundry owners review “the guts” of their store, such as breakers, utility connections and make-up air to determine if upgrading those areas at the same time makes sense.

“Why put a new machine on a 10-year-old plumbing connection,” he said.

Making Sense of Dollars and Cents

When owners ultimately make the decision to upgrade some of or their entire stores, it’s important to obtain the best loan conditions possible and not just focus on trying to get the lowest rate. Often, financing through an equipment manufacturer can not only provide terms that cater to the specific needs of owners, but these vended laundry professionals act as an additional set of eyes on projects.

“From the finance side, we are here to make sure it works,” said Jeff Harvey, financial services relationship manager for Speed Queen. “As a company, we really believe in the retool… and we do all that analysis,” he added, of reviewing demographics and store financials to ensure the additional investment will deliver a maximum level of return for owners.

Flexibility is key when putting together a replacement finance package. Harvey recommends owners look for terms that help them begin cash flowing early, such as 90 days with no payments, but don’t extend the payments out too far. For larger retools, seven to eight years appears to be the “sweet spot” for loans, Harvey said, adding, however, that loans in his portfolio are typically paid off in half the time.

He also recommends owners lay out all the numbers on a total store retool.

“People really underestimate the utility savings alone,” Harvey said. Between the utility savings and additional income from a vend increase, the cash-on-cash ROI on new equipment can sometimes weigh in at 20 percent to 35 percent or more.

“Don’t get sticker shock,” Harvey said of how owners sometimes react to the costs to retool their laundry with new washer-extractors and dryers, adding that reviewing all the numbers (profit potential, efficiency, cycle modifier earning potential) can help them see the additional money that goes into their pocket even after their loan payment. “Spend time to run some numbers. If you want to grow your business, at least take the time and effort to do it.”

Owners should also take into account the additional write-off that IRS Section 179 allows. For example, if an owner purchased $250,000 in equipment, they could deduct that full amount the year that machines were purchased and installed. That could potentially save them roughly $87,500 and lower the cost of equipment to $162,500 (note that, because every business is different, this tax example may not apply to every owner).

Bigger is Better

In this day and age, bigger capacity is dealing owners bigger returns. In fact, according to the Coin Laundry Association’s white paper “Deciding When to Replace Laundry Equipment,” 64 percent of customers are using 40-, 50- or 75-pound machines. So when laundry owners are pondering a retool of their stores, increasing the capacity of equipment has to be part of the discussion with their distributor.

“While not every store is going to be able to increase capacity substantially, most are in a position to at least replace a few topload washers with a couple larger capacity frontloads,” Rosenthal said. “Retooling is really about giving your laundromat the ability to maximize profit per square foot.”

And when it comes to maximizing profit per square foot, Bill Kelson, director of vended laundry sales at TLC Tri-State Laundry Companies, a Speed Queen distributorship, based in Atlanta, is a master at getting the most out of his customers’ retooling projects.

Kelson uses the example of an owner who has three topload washers vending at $1.75, with a minimum of three turns bringing in roughly $15.75 in revenue. In the same space, the owner could install two 40-pound washer-extractors with controls that offer additional income generating cycle modifiers. Between the higher vend base price and cycle modifiers, they can generate roughly $6 per cycle. That works out to $36 in factoring in the turns for the two units. This also doesn’t yet take into account the efficiency of today’s new frontload washers.

“You’re not in business to make $5.25; the goal is turns,” Kelson said, adding that upgrading capacity in a retool also helps laundromats appeal to homeowners seeking to wash bulky items.

While owners should look to increase capacity, they still need to match the equipment mix to the demographics. For instance, if the demographics lean toward more singles and college students, 40-pound washer-extractors would be the best fit. If it’s more families, owners should look more at 60- and 80-pound units.

Kelson also recommends installing at least two machines with the same capacity to ensure better odds that one will be available. Lack of availability can frustrate customers. And where possible, feature your big units up front to draw in customers – bigger means better and faster.

The same holds true on the drying side, where retooling single tumble dryers with stacks help increase overall capacity and appeal to all customers.

“I think [store owners] are a little surprised by the return on investment,” Dakauskas said of sharing the gas savings numbers. He added that once they see those savings, many jump in and upgrade washer-extractors with 60- and 80-pound units.

Eye on Design

Total store retools are the perfect opportunity to maximize the “wow factor” for customers by linking the new, modern equipment with a refresh of the store’s look and feel. This is another area where you can lean on your distributor partner for design direction or resources.

Sally Klingler, who has built an impressive interior design resume in projects, such as hospitals, banks and offices, recently applied her talents in the laundromat world when she and her husband, Doug, opened Your Laundry in Milwaukee in 2015. She recommends that owners start at the bottom and work their way up.

“The money is in the flooring. Pick the floor type to see your options,” she said, adding that they should always choose elements with the customer in mind. For instance, a tile floor will create a more noisy laundry and is hard on customers’ feet (remember, they will be standing for long periods of time loading, unloading and folding). Luxury vinyl plank (LVP) flooring, which is easier on feet, comes in a variety of colors and styles, is low maintenance and has a non-industrial appearance.

While flooring can change the look and feel of a space, wall colors have the power to truly transform an area. Paint is cheap and can go a long way, so take advantage of color combinations that can have a dramatic impact on first impressions of your store. Sally suggests using complementary colors such as the orange and blue that she used in Your Laundry. Complementary colors are on opposite sides of a color wheel. Where blues and grays create a soothing feeling, red can create an agitated and heated environment, if not done correctly. Bold colors are best used as accents around the store.

If owners are going to stumble in their retool design, Sally said it is going to come in selecting the wrong lighting.

“There’s nothing more important [in laundry design] than the lighting,” she said, adding that too many stores opt for long fluorescent bulb fixtures or ones that give off a yellow light around the machines. She used energy-saving LEDs positioned correctly to avoid shadows.

It’s important to have a true, white light around the machines so customers can see any stains before loading and give the whites a truly clean look when emerging from machines. It also highlights pigments and dyes in clothes, another plus for a laundromat. Owners also will want to employ this same lighting strategy in service and vending areas.

“When customers bring clothes out of the dryer, you want them to see white, not yellow.”

For Your Laundry, Sally used a mix of lighting types – recessed, pendant and track – and that’s a strategy she recommends other owners employ, if possible within their budgets. A mix of lighting and bulbs helps the laundromat transition away from the big box store look created by long fluorescent bulb fixtures. The pendant style also helps break up the normally abundant air space above the bulkheads.

“Pendants create interest and a much more homey feeling, because so many people have this style light hanging in their own homes or apartments.”

Obviously, safety is always a focus, and owners will want to make sure the back of the store is well lit. Warm-toned bulbs can be used, but reserved more as ambient light in sitting areas.

Speaking of sitting areas, Sally recommends owners, where possible, move away from rows of perimeter seats that create an “airport” feel where people just stare at each other. Remember, focus on your customer. Sitting areas with tables help create a more social atmosphere, which can help take the chore out of performing the laundry task.

Additional Thoughts on Design

Sally suggests that retooling a laundry is a wonderful time to take a look at the brand owners are trying to create. Do the colors in the laundry reflect the brand logo? If not, it’s an opportunity to use that strategy. She also cautions that once owners have invested their time and money to get the maximum impact of their store retool, don’t let signage cheapen the look and feel.

“You can ruin a space in a heartbeat with signage,” she said. Her advice is to match it to the environment (colors) and bring in the store’s logo and branding. There are a variety of options out there. At Your Laundry, they used dimensional individual letters in some areas to create a classy coffee shop look.

“You spent a lot of money retooling your facility, don’t mess it up by skimping on signage,” she said, adding that hanging scores of signs from a drop ceiling creates a “circus” look, in addition to being hard to keep clean.

Retooling your laundry with new equipment and employing these design ideas can help create a far better customer experience.

Now that the owner has a plan to put into motion, it’s time to look at the results. Can the investment in retooling and redecorating produce the results owners anticipate? And what happens next? We’ll address these topics in Part Three of this series.