Friday, February 23, 2007

Coin Versus Swipe Card Technology for your Laundromat - The Great Debate

You will inevitably come to the Great Debate in the laundromat business. Do I go with Coin slots for my machines or do I go with swipe cards? A lot of this decision will have to do with how comfortable you are with technology and what your goals are as far as running the business.

Do you know why most entrepreneurs get into business for themselves? Money isn't the number 1 reason. If you ask most, 'freedom' is the biggest driving factor. The laundry business takes the 'freedom' factor to the next level. No inventory and relatively simplistic operations with the right revenue streams, makes for a great business.

So in the spirit of freedom, automation and efficiency for yourself and your customers - my personal vote goes to swipe card technology. That's my personal preference but that's not to say coins are bad or not right for you. Most of the Mats out there today are coin stores and do quite nicely for their owners and customers.

With coin slot machines you should expect to spend at least half a day a week or maybe a full day's work dealing with coins. This will include collection, slot maintenance, emptying change machines or switching coins for bills, and bank time. In most coin stores, after the coins are collected they're dumped into the bill changer machine and the owner removes the bills for deposit. If you have a hopping store though there will be overage and you'll have to handle additional coins for counting etc. Don't bite your fingernails afterwards - you'll catch a disease. You will most likely buy a change counter to help unless your prefer the old manual barbaric way of rolling quarters.

Many of the veterans who have been in the industry for a while have coin stores for obvious reasons. First of all the swipe card technology has just come out in recent years. Also a lot of the veterans like keeping their stores all cash. In many cases they see keeping their stores 'coin' a way to avoid possible computer glitches, upgrade possibilities that might bring problems, employee and customer training, and training for themselves which takes some time up front.

I will tell you one thing - if you plan on having a small "unattended" store, where it's just the wash machines, the tumbleweed and the customer - You Have to go Coin. There's really no two ways about it. If you have no one there to show the customers how it works, the card store isn't for you. The system is easy to learn once you get the hang of it from the customer's perspective but if no one is there to ease them into the new technology they'll leave - especially if they've never been in a card store before. If you're totally petrified of anything technology or computer related (which I find hard to believe since you're reading a blog!) than go coin.

Most of the new stores today are going in the swipe card direction. Technology is the future and it's just where the industry is heading. I've given some of the reasons why people have coin stores but I haven't declared any great positives to actually going in that direction. That's because I honestly do not see any. If you talk to veteran coin store owners many of the reasons I have given above is why they're in coin stores. They also add the excuse - 'the customers wouldn't like it'. BS - I have a card store and the customers absolutely love it. There are many other reasons why I prefer swipe cards also.

Customers enjoy having a nice store debit card in their wallet versus 20 pound bags of coins. This is a fact. Now when we first opened, we had the occasional old timer that will just stare at the machine and run out screaming, "I'm old fashioned - I like my coins". We had like maybe 3 total people in the beginning that said this and have had none since. Bottom line is: any one "boomer" age or less, which will be 95% of your customers, gets right on board and is off and running. Even elderly customers we've had picked it up quickly.

From the customer view, with a magnetic swipe card system (we use ESD), it's pretty simple. They press the screen monitor for a card to be dispensed (you can charge them for the card if you want). Once the card is dispensed to them - they swipe it in the card slot at the bottom of the monitor. The monitor reads the card acknowledging what card it is and then the customer can enter whatever amount in bills they want (most systems allow up to $20s only for security). The dollar amount is loaded to the card and they're off to wash away. Once the customer gets to the machine they want and the clothes are loaded, they simply swipe the card in the slot on the wash machine (the card balance appears first, than the wash price is minused giving them a new balance on the reader). They press their wash setting and then hit 'start'. Magic - the machine is washing.

The customer has the ability to register their name to the card also - using a register button on the transfer monitor. You can also reward them for this and give them $1 for submitting their information. For you it's great because you're retaining customer data and for them it is good because if "Joe Smith" loses his card and it had $14 on it, you can retrieve his data from your back office PC and issue him a new card with the same balance.

The customer interaction in the store, with regards to using their swipe card is minimal. They basically once again will either be swiping the monitor at the front of the store to add more cash to their card and your FAT coffers, or they will be swiping the machines they want to use in the store - it's as simple as that.

A great plus to the card system, in regards to customers, is that their are so many bonus features that coin systems just can not do. For example we have a "Free Wash" system set up so that after a certain amount of bonus points are gained on particular machines, the customer gets a FREE Wash (it says this on the swipe reader when they swipe it also). You can set a certain amount of points per machine (larger points for larger machines etc.) and then have a value system set up so that let's say 80 points gained will give you a FREE Wash on an 80 lb. machine. There are also other options like lotteries you can run. This would allow random free washes to go out per every 100 or 1000 washes (wouldn't recommend this option because they could miss the fact they got a free wash even though it says it on the screen - with bonus points at least they can anticipate the free wash). There are other settings that allow for price discounts to run at certain days of the week (or even hours) if you want to have a "Super Tuesdays" for example at 20% off.

From a customer stand point the card system is a great positive. They learn the system within the first day of usage and are happy about the bonus points and fact that they can register. Most of all they enjoy not having bad backs from lugging sacks of quarters around anymore.

From your management stand point the system is obviously a little more involved since you'll be in command of the back office data. The thing that took us a while to get used to, in the beginning, were all the cards needed for setup. There are a lot setup cards that are used to swipe wash machines and dryers when they're originally being setup and connected to your office software. You will get the hang of those cards after about a week. Your card company will set up all the computers and software for you so in some cases you will never be using these cards again. They will also set you up with a PC where the software will be reporting all the daily MAT data. The holy grail - the MAT Data... oooo.

The management software for the swipe card system is really where you're getting most of your ROI. The reporting features allow you to see your store's financial picture at the click of a mouse (or you can collect quarters with an old casino cup) hmmm... let me think. Did I mention I prefer swipe cards? There are too many reports to mention them all here. These reports give you more detailed information about how your business is tracking (or you can fumble through your records and look at your deposit statement from the bank). SWIPES Rule.

Some of the most impactful reports are the daily revenue reports - show me the money!$ You can run the report for up the minute data on how much money your store has brought in today, for the last 7 days, from January 1st - whatever. This is good because at the click of a mouse you get your data and can see if you're making progress month to month or Sunday to Sunday.

Another great report is one that displays all the machine data. It shows how many spins each machine has done, how much revenue it's eaten from cards and what hours of the day they were most active. This data is great for trending. Based on your machine data of spins for example you could pretty much pin point how much money you would make the following month if you raised the price 2 cents.

This is where the advantage over coin laundries goes to a higher level. With coin systems you need to adjust your machines with new slots to account for another coin increment. That's another huge disadvantage for coins - you can only raise the price in coin increments. In a coin store you really have no way of knowing the total spins for individual machines (unless you're keeping tabs in a notebook - add another couple of days of labor time! yikes). With the card system, by just clicking the old mouse, you can raise the price 7 cents or 40 cents. It is such an advantage to know that your dryers are doing 15,000 spins a month and by raising the dryer price 4 cents, you will add another $600 revenue a month from that click.

As far as pricing, here's something to consider. Imagine being a customer in a coin store and you're about to use a big wash machine - the price $7.25. Okay now reach into your pants for all those quarters (hopefully you have a belt on or they're around your ankles). Think about that for a moment though. You need to insert 29 quarters into that big jalopy. 29! Does anyone even want to count to 29? Nope. Some old coin store owners are now dealing with the new dollar coin that has come out and adjusting their slots for these now also. It's still coins and still laborious. Did I mention I prefer Swipes?

Monday, February 19, 2007

The Right Machinery Mix for Your Laundromat

So you think you have a location for your laundromat. You've done plenty of research and homework yourself and your consultants with their demographic reports have given the thumbs up - now what?

Whether you're dealing with a lease or buying the location - all you need are the measurements of the store space to have your consultants run a detailed design plan for the store. This will be done professionally inhouse by them and should only take a few days to get back to you. This is a free service based on the ridiculous amount you'll be paying for the machinery. Even if you're in the first steps of checking out a location - get the floor space layout dimensions - send them to your consultant and have them run a machine-design layout for the store.

This layout will be a bird's eye view of the store and a map of where everthing will be, most importanly the machines. You should get your contractor involved with this process to get his input. He will know where the bathroom needs to be, where the front desk and office will be situated etc. He can make edits after the plans have been drawn and they can be redone.

In this plan your consultants will have the exact size machines they recommend to have within your mix - large, medium and small. If at all possible you want the largest machines you have in the front of the store. The larger machines make the most money. 60 Pounders for example are priced at about $7 a wash in most stores. 80 Pounders can be around $9 a wash. When the families come in on the weekends, one family can fill a couple of these big boys up at once - if not all of them! Having the bigger machines in the front of the store make it easier for your customers to just start stuffing their clothes in as soon as they enter. If you make them walk through your store to find the right machine, they might settle on a smaller machine. Your layout mix, if possible should have the larger machines in front and then in descending order. For example a nice design would be if you walked into the store and passed by 60 Pounders, than 40 Pounders than 30 Pounders and so on. This is an efficient layout for your largest self wash customers to quickly drop their clothes in the wash and move on while not creating roadblocks in your store. It's also the most efficient way to position your biggest money makers up front. If you come to an awkard spot in the store where you have a decision to make as far as machinery size - go bigger.

When you get your design plan you will notice that you will have measurably more dryers than washers. For example if you have 50 total machines - the equation should be around 30 dryers to 20 washers. Most mats do not provide enough dryers for their customers causing bottlenecks, especially on the weekends for your customers. The dryers get used so often that although the pricing ranges are about 39 cents per 10 minutes or 25 cents for 5 - you will be making probably one third or more of your total machine revenue on dryers alone. Whenever possible you should go with double-stack dryers (one on top of the other) for obvious reasons - you can double your dryer numbers within the same space. You should provide at least one large dryer also within your mix - for comforters and blankets.

The next major question is: do I go with coin slot machines or swipe card technology for my store? If you've read past blogs - you know I'm all about efficiency so you know where I lean on this, but I'll handle this debate in the next blog.

Wednesday, February 14, 2007

Finding the Right Location for Your Laundromat

Finding the right location for your laundromat is the most important 1st step in this business. You can't make chicken soup out of chicken shit, as the saying goes. You're not going to turn a laundromat in a bad location into a winner so you need to do your homework.

Demographic research is an imperative first step - this means running numbers. You can do an impressionistic scan of the city and general location drive through which you should do; but the numbers don't lie and eventually you will need to run them. Some sites give great demographic research like epodunk.com. For example here is a demographic snapshot of Brooklyn:

http://epodunk.com/cgi-bin/popInfo.php?locIndex=286

Your vending company (or the company you decide to buy the machinery from) will have demo software also to get in depth read outs of these stats. The population, income, and housing information is huge for your analysis. There are some MATS that make good money in medium sized towns because they might be one of the only games in town. But you should probably be shooting for at least a 50k population and a high rental rate of at least 60% if you're looking to make serious revenue. Epodunk.com also allows you to link off to city hall websites also which sometimes have more in depth, current information about the populations and recent growth trends. You want areas that are in growth mode as far as population and even construction (strip malls etc.). You don't want a city/town that has been trending downward in population. If you're at that 60%+ Rental rate you will be in the sweet spot of the lower to middle income population you're trying to turn into customers. You need a high density population surrounding your store. Most customers will be within a 2 mile radius - you will not have many customers beyond that limit in an urban area - this is a mature business so there's a lot of choices and a lot of competition.

General Traffic is something to gauge -you'll want right around 20k cars a day passing your store location. If you're moving into a strip mall or location you'll be renting, the landlord should have this data. Make sure there is a healthy flow of traffic surrounding your store (not highway traffic) but you get the point. If you have surrounding stores that attract more people that's also a huge plus.

Parking is a crucial factor for your location also. Many rookies think 4-5 spots might be enough because they fall in love with a location they've found. If you're going whale hunting bring the tartar sauce, and if you're trying to launch a booming store - HAVE PLENTY OF PARKING. You want as much as possible. If you've found a great location I don't think you should go with less than a dozen open spots. You need to seriously study this subject and think about it from a customer stand point. Is the lot an awkward one where bottlenecks occur and traffic doesn't easily flow in and out? Are you in a building that's in the middle of the town with 2 street spots in front and some parking in the back? Are you in a mini-strip mall with only 2 other stores that occasionally fill up the lot with their customers? If it's a nuisance to customers to get in and out that's a huge problem. Consider Parking a serious subject to study with regards to your location. We had scouted a location that was kitty cornered on two major roads -great traffic - great demographics but next to zero parking and very awkward spots - EL PASO.

Visibility is big. It goes hand in hand with traffic and being seen in a good location that is surrounded by destinations like shopping, banking etc. and not down the bowels of some alley. Visibility has to do with your own outer appearance as well as accessibility. I think many people in the business, even veterans, don't take this seriously enough. The outside of your store should be stunningly neat (from the roof, to the outer walls and windows, to the walk ways). Location and convenience is A # 1 to customers, but having a neat clean appearance is an innovation in this industry believe it or not and will gain you many customers. Also if you're standing in front of your store what can be seen through the windows? If it's piles and piles of clothes - that's pretty sloppy and unappealing. Room might be limited but you have to find a storage place for Wash Dry Fold that appears neat to the customers. You might think the customers don't care but they do. If you go out of your way to have a bright, clean and neat store the people will talk and invite everyone they know to come and try your store out - trust me I've seen it. I will get into the atmosphere and look within your store in later blogs. While we're still on the subject of outer appearance consider attractive signage for your store - being in a strip mall take advantage of lit signage. If you have a lot of frontage in a deep mall make sure you're getting a large enough sign to be seen from a distance.

Competition is something you should be checking out. If you're looking on A Street and B Street has 2 Laundromats all ready ... you get the point. You want to keep some distance especially if you're near a Monster Store. But many of the small, dumpy Mats you see today were started 20 years ago and if you come in with a new - stunningly clean store that isn't crumbling all around your customers - you will win. This is a mature business so purchasing a store might be the route you're going. If the location is excellent this might be the right move. Just make sure you're willing to update the store also to take it to the next level.

I also believe you do not necessarily need to be in the heart of the city to be successful. If your location is a neighborhood or two down the road with a lot of the qualities above; and has a safer feel to it, you will get a lot of those people.

Your Commute is another important factor. Your first MAT needs to be accessible to you. It's a hands off business more in the latter stages and once the business starts humming. You will be spending plenty of time there in the beginning stages while growing the business and dealing with start-up mode glitches that will inevitably come up. Most experts and consultants in this field say you shouldn't be involved with a store that is more than 30 minutes away from you.

How Much Capital Will I Need to Start a Laundromat?

The most asked question from beginners...

Before you have mentally made the plunge to go forward with any business - you need to run some numbers. My calculations will be for a medium/large store with about 75 total machines (Washers and Dryers) and about 2700 - 3000 sq. feet of store space.

In the laundry business you will have two major upfront costs. If you're launching a brand new location (or refurbishing an existing one for that matter) you will have Construction Costs. The Construction costs for a store this size will probably be around 100k - 200k. Our last venture was in a strip mall and was on the higher end of this range. The major pieces of these costs will include, electrical updates, plumbing and general carpentry. You should get a few contractors (to shop prices) and expect no matter what quote you get to end up about 20k higher based on unexpected code/inspector requirements. You should try to add limits to your contractors contract so they don't go overboard.

Another major cost will obviously be the machinery. You need to talk to many vendors and make sure your Representative is knowledgeable and very responsive. We fired a few companies before deciding on our company. The selection was largely due to the diligence of our Representative. An experienced and knowledgeable Rep can act as more a consultant working on your behalf rather than just as a salesman. Research the maintenance capabilities of your vendor as well as the Financing plans (interest rates etc.) they offer also. A brand new machine mix for the 75 machine range will be 200k - 250k. If you have good enough credit and financing the whole note of the machinery can be financed.

There are other start up fees also such as: incorporation, lawyer, lease negotiations and legal review, Security deposit for landlord etc. These are smaller fees compared to the bigger chunks detailed above, but you need capital for these also.

If you're buying your location for your laundromat (which is a whole other topic of discussion on the pluses and minuses) you will obviously have another large note to contend with. Having to not deal with a landlord is a great plus but we'll get into that later.

These are broad brush strokes and ballparks of start up costs for the size store illustrated above. I welcome feedback and more in depth discussion on any of the subjects above.

Entry to Laundromat World!

The purpose of this blog is to act as an informational forum for entrepreneurs that are currently in the Laundromat Business or thinking about it. I've always been a big fan of "passive income streams" and businesses that allow you to actually live your life while making income.

A business partner and I were thinking of "hands off" businesses we could get involved in while slowly stepping out of the corporate muck. We started thinking about car washes and the big revenue they would generate. My Biz partner had added Laundromats to the conversational mix as well. Being a big thinker, I wondered how much money can you actually make in that business? Frankly knowing nothing about the business, my first thoughts were - chump change.

After researching big city Laundromats, we found that the revenue and income generated in many cases matched that of car washes. I say big city because it's all about location in this business (which I'll get to in future blogs). As with any business you need to be careful and do the research - along with winning locations there are dogs.

In any event, some years back my business partner and I launched our business and entered Laundromat World! We run and are involved with many different businesses, so we are by no means experts on the laundry business. I hope to publish some of our trials, tribulations, as well as some successes; not only on running the business but the setup and labor involved with it. Hopefully this blog can be interactive and ideas can be shared so that Laundry Pros can share their knowledge and we can all run our businesses as efficiently and profitably as possible!

Let's have some fun doing it also - jokes, anecdotes and lighter stories about the Laundromat Business are welcomed along with the hard cold data of running the business.



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