Is It Time to Retool?

By Randy Radtke posted 01-03-2018 10:39

  
Ensuring You Reap the Rewards of Your Laundry’s Recent Refresh

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

All of the homework is done. You have selected the best distributor partner and equipment brand, which you hope will deliver the most profitable results. The equipment order and financing are in place. All that’s left is to complete the store updates, get that equipment installed and start tallying the turns.

Often, retool work is completed in the summer months, since this is typically a slower time for vended laundries. Many owners also will choose to complete much of the design and décor work themselves to stay on budget.

“Most of the owners we work with on retools act as their own general contractor in taking care of the store improvements,” said Craig Dakauskas, president of Commercial and Coin Laundry Equipment Co., headquartered in Gulf Breeze, Fla. That work also is normally done before the new equipment is installed.

As with anything related to a store retool, install time is a reflection of the quality of the distribution partner you have selected. Most installs can be completed in a few days, while a one-man-type distributor may take significantly longer.

“Obviously, once the decision is made to upgrade a store, the goal is to get new equipment online as quickly as possible,” said Jim Rosenthal, North American sales manager for Speed Queen. “This is another consideration owners should have in selecting a distributor partner for a project. Long lead times on equipment or long install periods might be indicators you’ve selected the wrong partner.”

Thoughts on Pricing and Payment

With all of the changes owners may make when retooling their laundries, they need to consider one more thing before turning on the “Open” sign. They must have a plan for pricing. The laundry industry has gone from matching competitor pricing down the street to recognizing that not all stores provide the same service.

Roy Narvaez is one of those owners who knows that his laundry retools have given customers more than just high quality commercial washers and dryers. He bought his first store in Huntington Park, Calif., in 2011 and slowly started replacing the dated equipment, setting the stage for the same approach at his second store in Downey, Calif.

“Why should I be the same price as the cheap store [in my market]?” Narvaez said, adding that he is generally a quarter more than competitors. “I always want to be ahead of the game.”

As owners embrace a higher price point for the higher level of service they provide, there’s also data to show that consumers are willing to pay a little more for a better overall laundry experience.

According to a Coin Laundry Association white paper – entitled “Deciding When to Replace Laundry Equipment” – customers will pay 10 percent to 20 percent more for updated equipment.

However, Brad Steinberg, co-president of PWS, one of the largest Speed Queen equipment distributors in the U.S. and active in store retool projects, cautions owners. Replacing a bank of washers or a few machines doesn’t automatically justify an increase in vend price.

“It has to be the whole experience,” Steinberg explained. “When you show that you are investing in the store, you can get a premium from customers.”

Certainly, the CLA data backs up that customer acceptance. But, again, it comes down to owners showing customers their commitment – whether it’s through décor, flooring, paint, lighting or all of the elements discussed in the previous two parts of this series.

How Much?

Narvaez generally raised his vend prices by a quarter and heard no complaints. In fact, his recently retooled store has taken off, with his customer base expanding. Going beyond the overall look, feel and amenity updates, he also believes the flexibility and options offered through the machines’ control features have helped further sell the price increase.

Flexibility allows him to charge more for warm and hot water washes. However, Narvaez has adopted a middle-of-the road approach to his default.

“I default washers to medium, which gives the customer options to go either up or down in price for their cycles,” he said, adding that he has seen customers making use of the pre-wash for an extra 25 cents. Cycle modifiers like that not only give customers greater control, but Narvaez likes the fact that following the retool with new equipment, he is offering customers something his competition cannot.

“Compared to other stores in the area, nobody else has that,” he said.

Steinberg said going up by 25 cents on topload washers through 40-pound washer-extractors – as well as boosting prices by 50 cents on 60-, 80- and 100-pound washers – is a good starting point for pricing increases following a complete store retool. Where to place the default on multi-level vend is up to owners.

Spreading the Word

Following a project of this size, it’s important to get the word out, bring customers back in and, most importantly, get those machines turning. Steinberg suggests a “soft” reopening, where owners and staff can work out any bugs. From there, promotion through Facebook, mailers or whatever works in your market can spur activity.

While special promotion pricing can help generate traffic, Steinberg cautions owners not to go too deep in discounting their offerings. Operators should recognize the value their stores contribute, versus others in their markets. Don’t be quick to drop prices; it’s a common tactic for other laundromat owners who haven’t re-invested in their businesses.

“When you have a great business, pricing is not the main factor,” Steinberg noted, adding that one promotion he has seen be quite successful has been adding value to a loyalty card. For instance, put $20 on your card and get a $2 bonus value added, or put $40 on and get $4 added value.

“We have seen that provide a really nice bump,” Steinberg said.

The Results

Rarely will a store owner, who commits to a total retool of the business, not benefit from the investment. A major component to that is the overall improvement in efficiency and correlating reduction in operating costs.

Steinberg explained that it’s not unusual for the savings recognized from lower utility costs, as well as reduced parts and service costs, to more than make up for the debt service of the new equipment.

Dakauskas echoed Steinberg in saying, “I think people are surprised when they see the savings returns on their investment.”

In fact, one recent CLEC retool generated substantial savings moving from topload washers to new stainless steel frontloaders. From the high-efficiency machines, combined with the 50-cent increase in vend prices due to the premium look and feel of the store, revenue has increased dramatically.

For Nabor Hernandez – who recently retooled his Fort Stockton, Texas, store – his returns tell a similar story. Utility costs decreased dramatically, business went up, and he has settled into a standard flow: Week One makes his retool payment; Week Two pays utilities, etc.; with Weeks Three and Four going straight to the bottom line.

“It’s been one of the best decisions I have made, Hernandez said of his store retool, which included replacing topload washers with frontloaders, and single-pocket dryers with 30- and 45-pound stack units.

Final Thoughts

Laundromat retools are one of the best ways to breathe new life into tired old stores. New equipment delivers the features that customers love, while the advanced technology brings increased efficiency and improved information on store operations.

When that’s combined with upgraded interior elements – flooring, lighting, seating, paint – and new exterior signage to let the world know of the refreshed business, it has a positive impact on the bottom line.

And the quickest way to lose the impact? Not staying on top of that new business.

“Good owners are always doing something to improve the business,” Steinberg said, adding that customers today are looking for (and willing to pay extra for) an experience that is a cut above.

Owners need to continue to look for ways to improve their stores and ensure that they stay looking nice. Part of that effort includes utilizing store data to drive marketing activities. Knowing how customers use the laundry, what machines they gravitate to and other operations data helps owners better market to individuals and improve profitability.

Steinberg suggests digging into data and using features such as time-of-day and day-of-week pricing to pull customers toward slower periods and even out of busier times. But, again, he cautions against across-the-board discounting that devalues what your store brings to the market.

Owners who have invested in retooling and continue to invest in their business should always reap the rewards.

“It’s not even a premium… it’s a fair amount [they are charging],” Steinberg said.

He added that laundries focused on providing exceptional service and an improved customer experience are helping transform the public’s view of our industry – and that’s a retool that pays dividends for the industry as a whole.
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