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FALL RIVER, Mass. — American Dryer Corp. (ADC), which has manufactured products for commercial coin-operated, on-premise and industrial laundry markets for more than 50 years, is undergoing a complete remodel of its marketing campaigns, the company reports.

The blueprints for the new marketing plan focus heavily on digital platforms, social media channels, and advanced SEO (search engine optimization) tactics.

“We want customers to easily connect with ADC by giving the brand a definite voice,” says CEO Joe Bazzinotti. “Maximizing the value of ADC is priority. We want our marketing to be just as advanced and well-engineered as the products we continue to provide for more than half a century.”

The new face of ADC will include a total revival of all messages via sales and marketing collateral, distributor portfolios, newsletters, blogs, and web and print advertisements.

Not only is ADC launching a new message and new perspective, the company reports it is yielding excellent product discovery and development. EcoWash washer-extractors entered the market in 2012 as ADC’s newest addition and first line of commercial washers.

ADC has been working on a long-term strategy to separate the sales and marketing divisions. With this shift, Stacey Hodges, vice president of employee and customer relations, has assumed responsibility for the marketing division while continuing in her other roles. Senior Vice President of Global Sales Tony Regan continues to oversee the ADC sales team.

To further strengthen its marketing efforts, ADC recently named Andrea Ferreira marketing director. Also, a graphic designer has been added to optimize product marketing.

“Bringing in new talent will help form new perspective and creative ideas to move ADC to the next level” says Bazzinotti. “In the coming months, consumers will notice a total redesign of ADC’s website, including content, layout, streamlined navigation and functionality.”

ARDMORE, Pa. — The so-called “fiscal cliff” tax package recently signed into law renewed more than 50 temporary tax breaks through 2013, saving individuals and businesses an estimated $76 billion. For the owners and operators of small- and medium-sized laundry businesses, there is good news and bad news contained in the fiscal cliff tax laws.

First, the good news: greater certainty in taxes. The owners and operators of laundry businesses have grown used to many longstanding tax breaks but they also have had to get used to the uncertainty of whether they will be renewed each year.

On the downside, in addition to a 3.8% Net Investment Income (NII) tax and a 0.9% Additional Medicare tax that, thanks to the Health Care and Education Reconciliation Act of 2010, began in 2013, many laundry owners discovered they are subject to new taxes. Single individuals with incomes above the $400,000 level and married couples with income higher than $450,000 will pay more in taxes in 2013.

EQUIPMENT WRITE-OFFS FOR PROFITABLE OPERATIONS

The American Taxpayer Relief Act extended through 2013 the Tax Code’s Section 179 first-year expensing write-off for equipment and business property purchases. Now, the higher expensing limits in effect in 2011 have been reinstated for 2012 and extended for expenditures made before Dec. 31, 2013. Thus, a laundry business can expense or immediately deduct up to $500,000 of expenditures in 2012 and 2013, subject to a phase-out if total capital expenditures exceed $2 million.

The tax break that allows profitable laundry businesses to write off large capital expenditures immediately—rather than over time—has long been used as an economic stimulus by our lawmakers. While 100% “bonus” depreciation expired at the end of 2011, today the new law allows 50% bonus depreciation for property placed in service through 2013.

Some transportation and longer-lived property are even eligible for bonus depreciation through 2014. If bonus depreciation had not been extended, the 2012 tax year would have been the final year in which substantial first-year write-offs for buyers of business automobiles and light trucks were available.

To be eligible for bonus depreciation, property must be depreciable under the standard MACRS (Modified Accelerated Cost Recovery System) and have a recovery period of less than 20 years. Section 179 first-year expensing remains a viable alternative, especially for small businesses. Property qualifying for the Section 179 write-off may be either used or new, in contrast to the bonus depreciation requirement that the taxpayer be the “first to use.”

Leasehold improvements and building improvements generally must be depreciated over 39 years. The tax law provides a special 15-year, straight-line depreciation break for qualified leasehold improvements, restaurant property, and retail improvements. Naturally, there are quite a few restrictions, such as the lease must between unrelated parties.

Qualified leasehold improvements also qualify for the 50% bonus depreciation. In fact, qualified leasehold improvements, restaurant property, and retail improvements up to $250,000 may qualify for Section 179 expensing. And, best of all, these provisions have been extended for property placed in service before Jan. 1, 2014.

MORE, MORE AND MORE

The Work Opportunity Tax Credit (WOTC), which rewards employers that hire individuals from certain target groups, has extended to Dec. 31, 2013, and applies to individuals who begin work for the employer after Dec. 31, 2011. Under the revised WOTC, laundry businesses hiring an individual from within a target group are eligible for a credit generally equal to 40% of first-year wages up to $6,000.

An S corporation is a pass-through entity and not usually subject to income taxes. It is, however, liable for the tax imposed on built-in gains or capital gains. The tax on built-in gains is a corporate-level tax on S corporations that dispose of assets that appreciated in value during the years when the operation was a regular C corporation.

The new law extends a relaxed version of the provision limiting the “recognition period” to five years, but only for “built-in gains” recognized in 2012 and 2013. Thus, if a laundry business elected S corporation status beginning Jan. 1, 2007, it will be able to sell appreciated assets it held on that date without begin subject to a hefty tax bill.

Check back Thursday for the conclusion!

Information in this article is provided for educational and reference purposes only. It is not intended to provide specific advice or individual recommendations. Consult a financial adviser for advice regarding your particular situation.

CHICAGO — Ralph Wagner, who owns Wash ’n Dry Laundry Services in Morris, Ill., has been working in the coin laundry business for 14 years. His store an hour southwest of Chicago occupies 2,000 square feet and features Maytag equipment totaling 33 washers and 26 dryers.

Up until last June, his business was strictly a self-service laundry. But since then, his sales have risen 25%. Why? Wagner attributes it to an extra service he started last summer, one that many laundries may already offer: wash/dry/fold.

Getting into wash/dry/fold was something he and his wife had always wanted to try. Wash ’n Dry competes with a couple other Laundromats in the market of about 25,000 residents, but the economy and the lack of actual wash/dry/fold service in the vicinity pushed Wagner to pursue it.

“We feel right now, with the economy coming back, that [it was] a good time to start it,” he says. “In our area, we only had one other Laundromat that offered the service.”

Wagner reached out to Kevin Meyer, president of distributor Dolphin Laundry Service, Bensenville, Ill., to help him get started. “It’s a tough thing to get going, but it’s gone pretty well,” Wagner says. “A 25% increase in our revenue is pretty good.”

Chris Brick, regional sales manager for equipment manufacturer American Dryer Corp., explains that up to 80% of attended coin laundries in the United States offer some form of wash/dry/fold service. “Wash/dry/fold brings a different customer base to a lot of laundries.”

“Household washers [or] small equipment within apartment buildings can have trouble handling comforters,” says Meyer, “so it solves a need for prospective customers.”

Considering the convenience such an added service offers to customers, it’s no wonder that many coin laundries have decided to cash in.

Dick Ruel, national sales manager at equipment manufacturer Maytag Commercial Laundry, attests to the profit potential. “If it were not for wash/dry/fold services, some laundries would not turn a profit.”

How much does such a service contribute to a store’s total gross revenue? Gary Gauthier, national sales manager for equipment manufacturer Milnor Laundry Systems, says it varies from store to store, while Meyer cites a range of less than 5% to up to 30%.

Considering how many laundries offer this service, what considerations must one take to truly profit from wash/dry/fold? Brick says the key to mastering the service starts with organization.

HIRING AND INSURANCE

With policies in place and any equipment issues resolved, the next consideration is employing an attendant.

Hiring an attendant should ultimately pay for itself, according to Brick.

“To me, the better way to look at it is you would want a minimum of 50% of whatever their labor cost is to attend [their] laundry, they should try to generate in wash/dry/fold,” he says. “If you look at a guy that’s spending $60,000 a year in labor, to me he needs to generate at least 50% in wash/dry/fold revenue [or] $30,000.”

To keep labor costs down, Wagner, his wife, and, on occasions, his son and daughter pitch in to process the store’s wash/dry/fold service. While his store only has one part-time employee that helps with the service, he plans on hiring a full-time attendant.

“We’d like to have one full-time employee hired by the end of the year,” he says. “Hopefully we have enough accounts established [so] that we can maintain [it] and make it profitable.”

What qualities should a store owner look for in a candidate? Brick suggests seeking the right combination of experience and personality. Look for a person who has “a good personality, and someone that is going to communicate positively with your customer base [and] make them feel welcome [but] doesn’t mind washing, drying and folding clothes.”

Protecting your business against damage claims is another important issue to address, and that’s where insurance coverage comes into play. “With residential laundry, the standard insurance policy should suffice,” Meyer explains. But if a store wants to get into commercial accounts, “Owners should consult their broker to ensure the proper amount of liability insurance is in place.”

Besides the possibility of lost or damaged garments, there is another potential liability: “left items,” or items that customers forget they had brought in for laundering. Preventing these occurrences all goes back to an owner’s policies and procedures, and establishing a reliable tagging system, Brick says.

“When [a] customer comes in and they sign that ticket, some [stores] will take that ticket with a magnet and when that load goes into the wash, that magnet is stuck with that ticket on the wash,” Brick says. “When the load moves to the dry … the ticket never leaves the load.”

PRICING AND TURNAROUND

Charging by the pound is “the way to go now,” says Brick.

In his experience, Ruel has seen pricing range between 65 cents to $1.50 per pound. Brick says that some stores have a $5-10 minimum.

Meyer and Gauthier agree on the per-pound trend, but add that some laundries charge separately for bulky items such as comforters.

“Our recommendation is always determine your costs to process, and what the desired profit and price [is] accordingly,” says Meyer.

For Gauthier, transparency is key when it comes to pricing. “It’s important to make sure that a store’s rates and policies are clearly published and easy to understand.”

As for turnaround time, Brick explains that most fully attended laundries offer same-day service for garments brought in before noon. If a load is received later than that, many stores will have it done the next day.

But as with any business, rewarding loyalty is a top priority. If a regular customer brings something in and requests same-day service, “absolutely you provide that service for the regular customer,” he says.

“You try to go above and beyond to keep that business.”

Check back Wednesday for Part 3!

CHICAGO — American Coin-Op covered a variety of topics this year. If you happened to miss a story along the way, then you might appreciate a brief recap. Here’s a quick look at some of the more informative articles presented this year.

BUILD NEW OR REHAB?

When considering opening a new coin laundry, do you build from the ground up or look at rehabilitating an existing store? Setting your laundry apart from the competition has to be at the heart of the decision-making process, says Scott Equipment’s Carl Graham.

When building new, you can start from the ground up to create a clean, modern infrastructure so it can handle the laundry equipment you plan to install, says National Laundry Equipment’s J.D. Dixon. And you can eliminate any concerns about infrastructure issues with new construction. Choosing to rehab a store means you're locked into that location, while building new gives the prospective owner the flexibility to select the best site for his/her business needs.

New construction provides the opportunity to design a store that is highly efficient and thus equipped to get customers in and out in the shortest time possible. But what works in one store may not work in another. For example, you might choose a color scheme for a Miami store that you wouldn't for a store in Lexington, Ky.

Building new also means a much more extensive project than a rehab, taking on greater financial risk, plus it's generally more expensive.

When choosing to rehab, consultant Robert Renteria favors repairing any machines that still have useful life, then looking to buy rebuilt or refurbished machines.

Buying and rehabbing an existing laundry can save the new owner some expenses, and may allow them to avoid bureaucracy such as impact fees and code restrictions. Another benefit for choosing to rehab an existing laundry is that it already has a customer base. With a new store, you must build that customer base from zero.

LAUNDRY FURNISHING OPTIONS EXPAND

The general structure of chairs and tables typically found in coin laundries today really hasn’t changed much in recent years, but the palette of colors and textures that are available has become quite expansive, according to some manufacturers of such furnishings.

CACO Mfg. has been making Sol-O-Matic© fiberglass seating and folding tables for coin laundries since 1960. CEO Randall Chaffee says his company can now create granite-type finishes commonly seen on countertops.

High Mark Mfg.’s high-pressure laminate furniture is available in more than 500 different colors, says President Peter Valconesi, whose company produces fiberglass and laminate furniture, both standard and custom in design.

RJ Papalini is celebrating its 50th year of manufacturing furniture for the industry. The customer is accustomed to seeing coin-ops utilize bright color schemes to attract customers, but President/CEO Richard Pennington says he’s seen that trend change in places “that are not quite as economically challenged.” Operators there are looking for softer colors, browns and earth tones.

Any time spent discussing coin laundry décor will be wasted if the furniture selected doesn’t stand up to the rigors of laundry life. Resist the temptation to purchase residential-grade chairs or tables from a retailer or home improvement store, because that’s just a short-term solution. “We see it all the time, but two or three years later, they come back to us because that stuff just doesn’t hold up,” Chaffee says.

CRITERIA FOR SETTING PRICE

Upon what criteria should a laundry owner base his or her wash and dry vend prices?

“It really comes down to two issues,” says Kevin Hietpas, vice president of sales and marketing for Dexter. “No. 1 is what’s happening to his costs. How have costs impacted the viability and profitability of his business? Owners should have a good sense of where their business is tracking from a performance standpoint. No. 2 is where is he competitively.”

A store owner needs to be aware of and factor in the competition’s prices when determining his or her own pricing, says Kent Walters, national sales manager for Maytag/Whirlpool Commercial Laundry. “The owner’s goal should be to produce the best experience for the customers, from ambiance to equipment to services—and the costs associated with washing and drying play a large part in this equation,” he says.

While customers may not react warmly to a price change, they will understand if you explain the reason behind the change, such as higher utility rates. Hietpas believes that customers are more sensitive to how long it takes and how much it costs to dry than to small changes in wash prices.

Vending technology has enabled owners to change prices on equipment easily—during slow hours or days, for example—but avoid changing prices too often, as the practice can turn off customers.

BECOMING A MULTI-STORE OWNER

When you’re thinking about opening a second store, it’s important to go back to the basics and look at everything from location to equipment and store naming, advises Pittsburgh Laundry Systems’ Sonny Rogalla.

Carve out an area of no more than an eight-mile radius from your original store and use that as your market. Having your stores in close proximity—no more than 45 minutes from each other—allows you to easily more between stores.

Make sure to continue cultivating your relationship with the distributor that assisted you in building your original store. Distributors typically have information on existing Laundromats coming up for sale and will approach you to judge your interest. And the distributor can easily identify whether a laundry is a potential good investment.

Whether rehabbing a store or building one from the ground up, rely on what you’ve learned from your first store. You already know what works—now it’s time to make it even better. Look at the machines your distributor offers; there are probably new advances since you last purchased equipment. It may also be time to look at investing in advanced controls if your previous store doesn’t have them; these controls can be a great resource for multi-store owners.

Financing through a laundry manufacturer is better than using a bank, Rogalla believes, because manufacturers understand the industry better and can tailor a financial solution to meet an owner’s needs.

ONE LITTLE IDEA AT A TIME

Little changes over time can make a difference for your business, advises columnist Howard Scott. Here are a number of little ideas he’s seen in different Laundromats, or been told about, or that just popped into his head:

• Hang a purple neon sign in your window
• Put a sandwich board sign on your front sidewalk
• Announce that you offer high-quality equipment
• Place a wooden bench out front
• Sell three sizes of laundry bags
• Offer a deal for wash-dry-fold service
• Hang a large clock in your store
• Give machines names, not numbers
• Sell a value card
• Paint a mural on your exterior side wall
• Set up a glass display of your merchandise for sale

TRACKING ENERGY EFFICIENCY

The specter of ever-rising utility costs should be enough to spur the average laundry owner to track this expense and explore ways to minimize it. Owners looking to determine their store’s level of energy efficiency need to compare the cost of utilities vs. revenue, says Maytag’s Walters.

If the store’s utilities cost is above the industry average of 20-25% of total revenue, the owner should look for ways to decrease this cost, starting with equipment. Look in the washer-extractor control software, Huebsch’s Gary Dixon advises. Are the water levels set where you wanted them? Is the water temperature different than where it was? Is the software notifying you of potential leaks?

Walters says the first place a store owner should investigate is the dryers. “Specifically, an owner needs to ensure all ventilation is free of lint, which can cut down on the amount of air getting to the dryer, as well as make-up air.”

Store owners who want to maximize equipment performance must regularly perform proactive and preventive maintenance tasks. “By following a recommended maintenance schedule, the laundry owner is ensuring that their equipment is operating at optimum efficiency,” Dixon says. “This translates to lower utility costs and keeps downtime to a minimum. The result is happier customers and more profit.”

EXTRA CREATIVITY, EXTRA PROFIT

Extra profit centers provide a variety of additional revenue opportunities, and some require little extra work from you and your employees, says Todd Santoro of Clean Wash Laundry Systems. Try partnering with a local dry cleaner. Establish a program where customers can drop off at your location for both services; work with the cleaner to determine the timeline and revenue split.

Pick-up service is another way to adapt wash-dry-fold to suit your business. Set a delivery radius around your store, up to 20 miles, and charge per pound to accommodate the increased costs. Pick-up is particularly important for growing your commercial laundry revenue to include clients such as spas, catering companies and salons.

Ancillary profit centers allow Laundromat owners to be creative with their offerings. An example is offering U-Haul trucks for rent. Store owners receive commission from the rentals, and attendants also set up reservations for other locations, which also nets owners a percentage of the rental.

There are many other services that a laundry can offer, but remember, consider your target demographic. Services that are quick and helpful will best serve them and you.

To read the original stories in their entirety, click the following:

Store Creation: Build New or Rehab? (Part 1)

Store Creation: Build New or Rehab? (Part 2)

Trends in Laundry Furnishings

Coin Laundry Pricing Strategies (Part 1)

Coin Laundry Pricing Strategies (Part 2)

Coin Laundry Pricing Strategies (Part 3)

Expanding Your Business: How to Become a Multi-Store Owner

Grow Your Laundry One Little Idea at a Time

Energy Efficiency: Battle Against Rising Costs Often Starts with Equipment (Part 1)

Energy Efficiency: Battle Against Rising Costs Often Starts with Equipment (Part 2)

Extra Creativity Can Lead to Extra Profit (Part 1)

Extra Creativity Can Lead to Extra Profit (Part 2)

CHICAGO — Personal safety is one of the primary reasons that the average customer chooses a Laundromat. “Safety and security are paramount,” says Karl Hinrichs, HK Laundry Equipment, in his YouTube video titled Characteristics of Successful Laundromats. “If people don’t feel really comfortable coming to a Laundromat, they’re going to go elsewhere.”

In April, American Coin-Op surveyed its audience about the safety of their store’s neighborhood and if they think their customers or employees feel safe in their store while doing laundry or working there.

Nearly three-quarters of respondents to the unscientific survey described their neighborhood as “somewhat safe.” Roughly 19% said their neighborhood is “neither safe nor unsafe,” and the remaining 7.4% described theirs as “extremely safe.” No one who took the survey described their neighborhood as “somewhat unsafe” or “not safe at all.”

Yet, more than 40% of operators said they, an employee or a customer have been a victim of crime at their laundry. Most of these incidents involved burglaries or robberies. An employee was threatened with a knife in one case, while an attendant was pushed to the ground in another.

SAFETY BY DESIGN

Coin laundry safety starts with store design. One can deter criminals by keeping the business well-lit at all times.

If cost is a concern, look for opportunities to upgrade lighting that may be tied to energy-saving incentives. For example, Colonial Laundromats, a chain of laundries in Central New York, enlisted SmartWatt Energy to upgrade its indoor fluorescent lighting at 23 of its facilities and outdoor LED pole lighting at 17 facilities. Colonial is looking at an average payback of 22 months after receiving a rebate totaling more than $104,000 and interest-free financing for two years.

Large windows will make it easy for customers—or the police—to see inside; take care not to block the view when posting signs. Equipment and furnishings should be positioned so there are clear sight lines from the front of the store to the back, and so that they do not create “hiding places.” Equip exterior doors with buzzers to signal when someone has entered the laundry.

Having an attended store can also be a deterrent to criminal activity. “Security is a concern for all stores,” says J.D. Johnson, president of equipment distributor LaundryRx. “Of course, it’s more of a concern for the unattended owner.”

And the owner/operator must not forget about their own safety, particularly when handling money. If a laundry has an office space, don’t allow customers inside, and keep it locked while away. Be aware of the surroundings when making collections and when transporting money to/from vehicles. Vary collection times so the average observer can’t anticipate when this activity will occur.

Never share information about store security, the amount of money a store makes, who has keys, who is responsible for opening or closing the store, etc., with anyone.

SECURITY MEASURES

Consider physical equipment (especially for an older, unattended store) such as high-security locks, bars, solid steel doors, and anti-stringing validators for the changers. Check out the latest burglar alarms and surveillance cameras.

Before installing security equipment, don’t forget about signage. Make it clear to anyone who enters the laundry that it is protected by electronic security. It’s a warning to thieves, and it provides a comfort level for customers.

Also from the survey earlier this year, a surveillance system is the most popular safety-related feature or practice utilized by respondents (77.8%). Other popular choices are employees/owner watch store (48.1%), alarm system (44.4%), signage (33.3%) and some type of weapon (29.6%).

Thirty-seven percent of operators who responded to the survey have brought a firearm to their laundry. Among those who haven’t, 35.3% said they would consider carrying a firearm while there.

Keep in mind that it’s possible to tamper with or destroy security cameras or devices. It’s common for burglar alarms to be tied to a central station by telephone lines, but a burglar may cut the line. It’s good to have a backup method.

The same concerns can be true of cameras. Burglars may sneak underneath the camera and point it at another part of the store. But with updated technology, a camera can “memorize” a store scene, such as a changer, and if that scene is changed because a burglar moves a camera or covers it, the owner is signaled that there is a problem. Check with security companies for the latest technological updates.

Alarm systems have the capabilities of detecting unauthorized opening of doors, the breaking of windows, and movement through interior areas when the business is closed.

INSURANCE BENEFIT

Not only is increased security a plus in attracting and retaining customers, it can also improve a store’s bottom line by lowering insurance costs a bit.

“(Having a) surveillance/security system would lower the costs of most property coverage as this is a definite deterrent to theft, vandalism and similar situations causing a claim,” says Adam Weber, president of Irving Weber Associates. “Surveillance systems can also assist in determining if there was an actual fault on the business owner’s part in a liability claim, such as to whether a water spill caused a slip-and-fall.”

Be certain that the security system is in good working order at all times. “Security systems are great, but in many cases someone forgets to turn them on, they aren’t working for some reason, or they are working but the burglar is able to get in and out before the police arrive,” says Anne Hawkins, senior underwriter for NIE.

Customers rely on the owner of a self-service laundry to provide them with a safe environment to clean their clothes, so make it a priority each and every day.

NEW YORK — Most family business owners expect their thriving enterprises to transfer to the younger generation with minimal fuss and bother. Reality, though, can be far different. Absent a carefully designed plan, misunderstandings and disputes can turn any business transition—including ownership of coin laundry stores—into a costly train wreck.

Parents must analyze the skills and proclivities of their children before assigning future management roles. While such assessments can help smooth the transition, even the best of such plans needs the support of legal documents that ensure power flows to the right people and sufficient cash is available to make everything happen on cue.

SETTING TERMS

Often the most important transition document is the so-called “buy-sell agreement,” which specifies how ownership will be allocated and how the sale of shares will be funded. “A buy-sell agreement is crucial to a smooth ownership transition for a family business,” says Gregory Herman-Giddens, a board certified specialist in estate planning at the law firm of TrustCounsel, Chapel Hill, N.C. “It allows for one or more of the children who are active in the business to buy out a parent who retires or dies.”

Buy-sell agreements typically cover an array of issues that go beyond the basic transfer of ownership upon the death or retirement of the original owners. They also typically cover how ownership will transfer when one of the children exits the business, either through death, disability or even a decision to go into another line of work. Will the business itself, as an independent entity, buy up the shares of the departing individual? Or will the remaining siblings as individuals have the right to buy up the shares?

Here are some other issues that buy-sell agreements often cover:

• What if one of the siblings desires to sell shares to an outside third party?
• Must the siblings be offered the shares first?
• How much time do they have to reach a decision?
• And what if a child wishes to withdraw capital from the business? How much money can an individual owner take out, over what period of time, and how much prior notice must be given to the other owners?

These agreements also often specify the methods by which internal disputes are resolved. Some issues will lend themselves to arbitration or third-party mediation. For those which can be resolved by voting, the agreement will specify who has the power to vote and whether a simple majority or super majority is called for.

Buy-sell agreements can be real lifesavers in sticky situations. For example, they can avert unexpected shifts in power to unqualified individuals. “Often one member of the second generation receives share of ownership, then gets divorced,” notes John J. Scroggin, a partner at the estate planning law firm of Scroggin & Company, Roswell, Ga. “That individual’s former spouse now owns the equity. Unreasonable demands can follow, and that can be a thorn in the side of the family.”

The solution, says Scroggin, is to draw up clauses in buy-sell agreements that anticipate common and costly events such as divorce or unexpected death. To do this, the document should mandate a “call right” on shares that are gifted to children. The “call right” is a provision that empowers remaining family members to buy out the shares of a non-family spouse who may survive the divorce or death of a family member who was in an ownership position.

PRICING THE BUSINESS

The buy-sell agreement will usually specify the method for determining the business’ value upon the death or departure of an owner. “Commonly, the plan may call for a valuation to be done by a business valuation expert or CPA,” says Herman-Giddens. “There may also be a tie-breaker provision: Survivors who disagree over the business’ value might be able to choose their own expert, and then either those two experts agree on a third expert or the two values are averaged.”

An alternative valuation system specifies a formula to be used, such as a multiple of earnings. This can be problematic, though, since economic conditions at the time of a partner’s retirement or death may differ substantially from those at the time the plan is put together, making a pre-set formula inappropriate.

Information in this article is provided for educational and reference purposes only. It is not intended to provide specific advice or individual recommendations. Consult an attorney or financial adviser for advice regarding your particular situation.

Tomorrow: Tips for avoiding the hidden pitfalls of family business transitions

ARDMORE, Pa. — Things go a lot easier when potential lenders, suppliers and partners can decide to take a risk based on a laundry business’ credit history and capability of repaying obligations. With strong business credit, a business can borrow at a lower cost, with more favorable terms. In fact, many small businesses with good business credit have discovered it is possible to get loans without an onerous and often embarassing personal guarantee.

Obviously, business credit is quite difficult to get. For any small-business owner, navigating the credit and lending world can feel like a vicious Catch-22. Most commercial banks and traditional lenders are reluctant to loosen their purse strings until would-be borrowers have proven themselves with a strong credit history. But it’s difficult to develop that good record when no one will lend in the first place.

IN THE BEGINNING

When a business issues or extends credit to another business, it’s referred to as “trade” credit. Trade, or business, credit is the single largest source of lending in the world.

Information about trade credit transactions is gathered by the credit bureaus to create a business credit report using the business name, address and federal tax identification number (FIN), also known as an employer identification number (EIN). The business credit bureaus use this compiled data to generate a report about a company’s business credit transactions. In many cases, those extending credit will rely on that business credit report to determine if they want to extend credit—and how much credit they’ll give.

The major business credit bureaus that compile and provide copies of the reports are:

• Dun & Bradstreet (dnb.com)
• Experian Business (experian.com)
• Equifax Business (equifax.com)

Unfortunately, because information provided to the business credit bureaus is submitted voluntarily—no business is required to send it in—the credit bureaus may never receive much, or even any, information about a coin laundry business’ credit transactions. In fact, many businesses go for years racking up business credit without any of it being reported to the credit bureaus.

ESTABLISHING BUSINESS CREDIT BASICS

Fortunately, there are a number of proven strategies that can help establish the credit worthiness of any laundry business and gain recognition from the credit reporting agencies:

1. If not already incorporated, forming a corporation or LLC (Limited Liability Company) to operate the laundry business, and obtaining an FIN or EIN from the IRS should be considered. Corporations and LLCs afford business owners liability protection, and a business credit profile can be created that is separate from the owner’s personal debts. 

2. Every laundry business should be registered with some, if not all, of the business credit bureaus. Dun & Bradstreet (D&B), for example, is one of the main business credit bureaus and maintains its own business credit score. An established business with an EIN can begin the process by applying for a free DUNS number. The number is how lenders will determine the operation’s creditworthiness (most business credit card and lending companies will ask for a D&B number during the application process).

3. Apply for a business credit card. Although most major credit card companies require that cardholders be in business for at least two years before they will extend credit, there are many small, local banks that are more accommodating to small businesses. They may be even more accommodating if an owner or manager is savvy enough to set up a business bank account with them!

Even though the laundry business may not require more credit cards to finance its operations, it should still apply for more business credit cards. In business, the 5-3-2 rule is key—a business’ credit record is not considered established and solid until it has at least five trade accounts, at least three credit cards, and at least two small loans fully paid off.

4. Comply with all business requirements. Not being in compliance with local, state and federal rules, ordinances, regulations and laws can raise red flags with both credit bureaus and those who grant credit. Potential red flags include such things as a lack of a business license or a phone line. Many suppliers will not grant credit to another business that hasn’t taken the steps to set the operation up with the proper licenses or meet local, state and federal requirements.

5. Financial statements and a professional business plan are a necessity, particularly in today’s economy. These documents are also required by many credit grantors.

6. Finding companies willing to grant credit to the laundry business without a personal credit check or guarantee is also a good strategy. When a supplier grants a business credit, it is important to ensure they report the payment experiences to a credit bureau. This step can help build a business credit report as well as provide a financial foundation for the operation.

7. Manage debt so the laundry business, large or small, won’t experience trouble making payments, which will negatively affect its credit score.

8. Monthly payments to credit grantors will keep a business credit profile active.

9. Get a website. It may not seem like a must in building or maintaining business credit, but D&B now shows and lists websites on credit files. Many banks also use the fact the operation has a website as a positive factor in determining the creditworthiness of a borrower.

Information in this article is provided for educational and reference purposes only. It is not intended to provide specific advice or individual recommendations. Consult a financial adviser for advice regarding your particular situation.

Check back Thursday for Part 2!

CHICAGO — Fire, liability or a worker injury is a risk that a coin laundry faces every day. If the business doesn’t have the proper insurance protection in place, an incident could be difficult to recover from. In a worst-case scenario, it could even put it out of business.

American Coin-Op invited representatives from the industry’s major insurance providers to answer some questions that the average self-service laundry owner might have about protecting their business investment.

ACO: What specific coverages do you believe are absolute requirements for any coin laundry, and why?

Adam Weber, president, Irving Weber Associates: There are many coverages that are industry-specific, such as bailee coverage for operations that offer attendant service (as well as those that don’t) such as wash and fold, but may experience an equipment malfunction that damages a customer’s clothing while being processed.

Other important coverages are water damage caused by sewer system backups, signs, general liability, parking lots, and equipment breakdown (including equipment and/or boilers and machinery if present). Also, business property coverage should be considered not just for machinery but also folding tables, TVs, chairs, vending machines, computer systems, card readers, etc.

Anne Hawkins, senior underwriter, NIE: At a minimum, every coin Laundromat should carry these coverages: 

• Building (when owned by the business owner) — If it’s an older building and you wouldn’t rebuild, insure for actual cash value. If you would rebuild, insure for replacement cost.
• Improvements and Betterments (when the business owner is a tenant) — You will need to replace the building owner’s property that is part of the building if you have a loss due to your negligence. This would include flooring, lighting, paint, wallpaper, etc.
• Business Personal Property (at replacement cost) — When you determine the replacement cost, be sure to include delivery, installation and taxes because these are included in the loss amount.
• Loss of Income (for minimum of three days) — This pays your profit and continuing expenses while you are out of business due to a covered cause of loss that occurs at your location.
• Utility Services-Time Element — This pays your profit and continuing expenses while you are out of business due to a covered cause of loss that occurs away from your premises, i.e. downed power lines due to windstorm.
• Utility Services-Direct Damage — This pays for damage done to your equipment due to a covered cause of loss that occurs away from your premises, i.e. when the power comes back on, some or all of your equipment is not working.
• Equipment Breakdown — Even if you do not have a boiler at your location, there are many other pieces of equipment that can fail due to an accident such as a power surge that is not caused by a covered cause of loss, i.e. power company equipment failure.
• Bailee — If you are doing drop-off dry cleaning and/or wash/dry/fold, you need to have coverage for your customers’ items that may be in your store overnight or for any length of time.
• Liability — Coin laundries have high liability exposure due to the volume of customers who enter their store and stay on the premises while doing laundry.

Larry Trapani, president, Brooks Waterburn Corp.: While a Laundromat owner needs many types of coverage, here are what I feel are the most important:

• Business Personal Property (AKA Contents) — This coverage protects your washers/dryers, vending machines, coin changers, basically all your stuff inside the building. Make sure the coverage is valued at “Replacement Cost” rather than “Actual Cash Value,” because if there is a claim, you want what it cost to get new machines, not the value of a 10- or 15-year-old machine. When you buy this coverage, think of how much it would cost you to replace all of your equipment if you had to buy it today.
• Tenant Improvements (AKA Build-out) — This is the cost that you put into the space you are renting. It includes electrical, plumbing, lighting, flooring, etc. Sometimes, these values can be $75,000 to $100,000. It is by far the most overlooked coverage when I review competitors’ policies.
• Liability — This covers slip-and-falls, children running into tables, or any other type of incident that might get you sued. Standard coverage is $1 million but some landlords require $2 million or more.
• Workers’ Compensation — The truth is, the Laundromat industry is a cash business. Many store owners pay workers “off the books.” The IRS is cracking down on small business. In most states, employers are required by law to carry workers’ comp insurance. And classifying employees as “independent contractors” will not fly. More than one of my customers has been caught doing that and paid significant fines. 

Steve Brodie, senior vice president, Wells Fargo Insurance Services USA: Key insurance issues are property coverage and adequate liability protection. Within these two broad segments, you want to make certain on the property side that you have full replacement cost for both equipment and tenants improvements, along with business income protection. Get your distributor involved by asking, “What would it cost to rebuild my store today?” Once you have that answer, discuss it with your insurance broker. Many times, fees (sewer hookups are a good example) do not have to be paid again.

On the liability side, review your lease as a minimum requirement, then discuss your own personal net worth, or that of the LLC, corporation or partnership that owns the store.

Last item of importance, but by no means should it be forgotten, is workers’ compensation. Laws differ in each state based on labor codes. Do not have a person in the store, even if advised by your CPA, that you call an “independent contractor” who is not covered by workers’ comp. If you have that exposure, take out a minimum premium compensation policy, evenif your CPA gives them a (Form) 1099 and classes them as independent. The only time this is questionable is if you hire another company (janitorial, for example). Make sure they supply proof of insurance and a “waiver of subrogation” from their workers’ comp carrier.

ACO: What are the biggest insurance risks in a coin laundry setting, and why?

Hawkins: The biggest risk is the liability exposure due to wet floors and/or damaged floor tiles from water leakage, plastic furniture that can collapse, lack of supervision of children, stools used to reach equipment controls, and improper maintenance of equipment. 

Burglary is another big risk. When someone burglarizes a coin laundry, they usually destroy the coin boxes on each machine and vandalize coin changers. This gets expensive and happens frequently.

Trapani: The biggest risks in a coin laundry setting can be broken down into two areas:

• Property Losses — The largest and most frequent claims are dryer fires. It usually has to do with not cleaning lint traps or ducts. As you can imagine, most fires cause significant damage because the dryers and washers are closely grouped together and the fire easily spreads. A good housekeeping procedure can help reduce these types of claims.
• Liability Losses — While trips and falls are common, lately, I see more children getting hurt in stores. Parents don’t always pay close attention to their kids, who run into things, pull down tables on top of themselves or fall from carts. I always suggest that a store owner bolt down tables to minimize some of the risk.

Brodie: Fire and liability claims are your biggest exposures to loss and cost the most when they happen.

Weber: Fire is probably the most common and easiest to avoid. Fires can easily begin in these businesses due to buildup of lint in dryers/exhaust vents, poor maintenance of heat-limiting safety devices (switches on dryers), combustible material stored near dryers or water heaters, washing materials soaked in flammable liquids such as gasoline, and buildup of oxygen agents (bleach, for example) through overuse.

Additionally, liability claims for alleged slip-and-falls are prevalent with this industry group.

ACO: How does the status of a store—unattended or attended—affect its insurability?

Trapani: The status of a store has a significant impact on insurance premiums. Unattended stores obviously are not as closely watched as attended stores. If something goes wrong, nobody is there to minimize the damage. Insurance companies know this as well and charge accordingly. The premium can be up to 40% more for an unattended store.

A note of caution here: If your store is unattended, make sure your insurance company knows it. If there is a loss, you may have trouble collecting because the insurance company can state that if it had known the store was unattended in the first place, it would not have written the account and thus deny the claim.

Brodie: They are both insurable; the attended store might get a little bit less premium based on someone attending the store during operational hours. Around-the-clock operations, as sometimes can be found in cities like New York and Las Vegas, pose different risks and must be 100% attended, usually with two people on duty at a time.

Weber: Unattended stores are at a higher risk of theft, vandalism and claims in general. Any time a business is left unattended, it is at a much greater risk of incidences that would require the use of your business insurance policy and generally are not as desirable to insurers.

Hawkins: It may depend on the individual insurance carrier. It’s been my experience that the unattended Laundromat pays more premium than the attended Laundromat due to the vandalism issue and the lack of a witness when someone reports an injury.

Check back tomorrow for Part 2!

MOUNT VERNON, N.Y. — Equipment distributor Todd Santoro recently shared some thoughts about providing extra services for your laundry customers and how certain additional revenue streams require little extra work to put into place (Coin-Op 101:Extra Creativity Can Lead to Extra Profit).

Today and tomorrow, American Coin-Optakes a look at two laundries that couldn’t be more different as far as geography and demographics are concerned, and how their owners approach the offering and management of extra profit centers.

MEGAMAT SUPER LAUNDROMAT, MOUNT VERNON, N.Y.

When Conrad Cutler responded to American Coin-Op’srecent poll about extra profit centers, his list for the Megamat Super Laundromat in Mount Vernon was a lengthy one: vending machines, laundry bags, wash-dry-fold services, drop-off/commercial accounts, video games/pinball machines, moving truck rental, rug cleaner rental, ATM, and car care equipment (vacuum, air machine, and fragrance machine).

The 5,000-square-foot store located in a low-income, predominantly African-American neighborhood just north of New York City is open 24 hours, seven days a week, and is advertised as the “home of America’s largest washing machines.” (For the record, the largest machine there holds 125 pounds.)

Cutler, 22, only recently graduated from Syracuse University with a degree in supply chain management and entrepreneurship and emerging enterprises, but he’s been running Megamat since August 2009.

His family owned the property, a former warehouse, and had leased it to a tenant who installed the mega-laundry. When the tenant went bankrupt after five years, the young Cutler was called on to take over the operation so the family could avoid the accrual of real estate tax on a vacant property.

Cutler successfully renegotiated the tenant’s sizable outstanding note with the finance company and instituted a renovation plan that would take four months to complete and cost $30,000.

Expanding the breadth of services offered by the laundry was always part of his business plan.

“We took the store over in a bad situation, so we needed to do whatever we could, not only to bring up the revenue but also to increase the foot traffic in there,” Cutler says. “Diversifying the services that we offered to the community was the way in which we developed a large customer base.

“My objective in having so many different auxiliary revenue streams was not only to generate money but also to bring people into the Laundromat who might not come in there regularly otherwise.”

And that’s mighty important when you consider there are 46 coin laundries within four square miles serving 65,000 people. That’s a lot of competition, so it pays to offer services that set you apart from the rest.

All of the non-laundry equipment is serviced by outside contractors (eight, by Cutler’s count) that pay Megamat a portion of the revenue.

“The most important thing to me is that we have 100% uptime on all of our equipment,” he says. “One of the most detrimental things you can do in the laundry industry is to have equipment that’s out of service. Not only do you not make money off of it, it also makes the store look bad.”

Cutler depends heavily on a staff of six attendants to manage the around-the-clock operation when he’s not there. All are trained extensively in customer relations, equipment troubleshooting and store management, he says. The store wouldn’t be able to offer the number of added services that it does without them.

“One way that we’re able to compete so well … is because of the staff that we have,” he says. “They’ve all been in the laundry industry for a long time, way longer than I’ve been here. They know how important customer service is, not only to me but to the customers as well.”

Among the Laundromat’s most popular auxiliary services are U-Haul truck rental (it’s one of the few Northeast businesses to offer it around the clock, according to Cutler) and pay-as-you-go Internet service (at the rate of $1 per 10 minutes; most people living in and around the neighborhood don’t own a computer or have Internet access, he adds).

“I would say that the ATM, the vending machines and the (video) games are kind of just an extra. They don’t really bring in that much money.”

Megamat’s newest extra profit center is carpet cleaner rental. In the first 30 days of offering the service ($27 to rent the machine for 24 hours), just one person rented a machine. But it was a person who’d never visited the store before.

“After three months, I think you’ll be able to tell if the real estate that it’s taking up in your store, and the liability of operating it, is worth your time or not,” Cutler says. “If you see an upward trend where it’s at least doubling every month for three months, it’s worth keeping.”

Extra profit centers are a “dual-edged sword” that can just as easily hurt the operation if they’re not treated with the same level of care and concern as the laundry, Cutler says.

“You really have to make sure that you’re giving excellent customer service in all aspects to whoever walks in the door, regardless of whether they’re washing clothes or just putting 25 cents in a gumball machine,” he says. “That’s really what’s going to keep the business going is maintaining the same level of customer service for every customer.”

Tomorrow: We visit The Service Station in rural Thompsonville, Ill., where owner Nova Randolph’s business offers laundry, tanning, Internet and copy/fax services for her hometown.

CHICAGO — Uncle Sam, in the form of our tax laws, wants to reward every laundry business that improves the energy efficiency of the building housing its business or plant. In fact, all so-called “commercial buildings” may qualify for this unique tax deduction. Even those that only partially improve energy efficiency may qualify, albeit with a smaller deduction.

While there is some question whether tenants can claim this credit, new guidelines from the Internal Revenue Service make it easier than ever to claim even the partial deduction.

ENERGY-EFFICIENT COMMERCIAL BUILDING DEDUCTIONS

Our tax rules allow a deduction for a portion of the costs of installing energy-efficient systems in a commercial building. The maximum deduction is generally $1.80 per square foot, less the total amount of any deductions claimed in earlier years. Qualified systems include interior lighting, heating, cooling, ventilation, hot water systems, and the building’s envelope. Best of all, the deductions don’t expire until Dec. 31, 2013.

The deduction of up to $1.80 per square foot is available to owners or tenants of new or existing commercial buildings that are constructed or reconstructed to save at least 50% of the heating, cooling, ventilation, water heating, and interior lighting energy costs.

Partial deductions of 60 cents per square foot are also available for improvements to any building system that reduces total heating, cooling, ventilation, water heating and interior lighting energy use by a specified—and recently changed—percentage.

COMMERCIAL BUILDING DISCRIMINATION

It is no secret that our tax rules have long treated commercial property less favorably than residential property. Today, however, tax breaks are available that create significant incentives for making “commercial” buildings more energy-efficient.

The incentive comes in the form of a tax deduction. The unique Energy Efficient Commercial Building Deduction (EECBD) is already rewarding many commercial building owners—and tenants.

Under EECBD, a laundry or dry cleaning business can claim tax deductions for new or renovated buildings that save 50% or more of projected annual energy costs for heating, cooling and lighting compared to model national standards. Partial deductions are available for efficiency improvements to individual lighting, HVAC and water heating, or envelope systems.

Commercial property is generally defined as property intended for use by retail, wholesale, office, hotel or service users or for manufacturing or other industrial purposes. Examples include shopping centers, office buildings, hotels and motels, resorts or restaurants, and, of course, laundry and dry cleaning buildings and plants.

THE REFERENCE BUILDING

Before any laundry owner can claim the EECBD deduction for energy-efficient systems installed in a commercial building, they must obtain certification. Although guidance issued by IRS explains how to calculate a building’s square footage, when a building is considered placed in service, and more, a licensed contractor or engineer must verify the building or portion of the building being submitted is better than the American Society of Heating, Refrigeration and Air Conditioning Engineers’ (ASHRAE) Standard 90-1-2001.

For purposes of the EECBD, the “Reference Building” is a building that is located in the same climate zone as the laundry or dry cleaning plant building and is otherwise comparable to it except that its interior lighting systems, heating, cooling, ventilation, and hot water systems, and building envelope meet the minimum requirements of the ASHRAE 90.1-2001 standards.

WRITE-OFF COMPLEXITIES

Rather than a deduction for the actual cost of the systems or equipment purchased to make a commercial building at least 50% more energy efficient, a flat tax deduction of up to $1.80 per square foot is available. Remember, however, the improvement must save at least 50% of the heating, cooling, ventilation, water heating and interior lighting energy cost. A partial deduction of 60 cents per square foot can be taken for improvements made to one of three building systems—the building envelope, lighting or heating, and cooling system.

The deduction applies to “energy-efficient commercial building property,” defined as depreciable property installed as part of a building’s (1) interior lighting systems, (2) heating, cooling, ventilation and hot water systems, or (3) the building’s envelope as part of a certified plan to reduce the total annual energy and power costs to a reference building that meets specified minimum standards.

The Department of Energy maintains a list of the software that must be used to calculate power consumption and energy costs for purposes of certifying the required energy savings necessary to claim the deduction. With only buildings covered by the scope of the ASHRAE Standard 90-1-2001 eligible, seeking professional assistance is almost mandatory.

The person or organization that makes the expenditure for construction is generally the recipient of the allowed tax deductions. This is usually the building’s owner, but for some HVAC or lighting efficiency projects, it could be the tenant.

Thursday in Part 2: Write-off complexities, partial deduction basics, and who gets the credit?

Information in this article is provided for educational and reference purposes only. It is not intended to provide specific advice or individual recommendations. Consult a tax adviser for advice regarding your particular situation.

ARDMORE, Pa. — In an effort to resolve the controversy over whether certain expenditures made by a laundry business are currently deductible as repair expenses, or whether they must be capitalized and deducted over the life of the underlying business asset, the Internal Revenue Service has finally released new regulations.

The IRS’s long-awaited expanded regulations for determining whether an expense must be capitalized because it betters or improves tangible business property or equipment, restores it, or adapts it to a new and different use, will have a significant impact on every laundry business that acquires, produces, or improves its tangible property. 

In addition to clarifying and expanding the current rules, the new regulations create “bright-line” tests for applying the repair-or-capitalize standards, provides guidance for accounting for—and disposing of—repaired property, as well as clarifying other aspects of the repair/capitalize dilemma.

The new regulations specify how repairs made simultaneously with improvements are to be treated, and provide a “safe harbor” for routine maintenance expenses such as materials and supplies. The new rules are also must reading for landlords and tenants that must capitalize expenses related to leased buildings. And, because the new rules were issued in “temporary” form, every plant owner and operator will feel the impact immediately.

CAPITALIZE-OR-REPAIR EXPENSE

Since the Reconstruction Era Income Tax Act of 1870, taxpayers have been prohibited from deducting amounts paid for new buildings, permanent improvements, or betterments made to increase the value of property. While this concept has been recognized as part of tax law almost from its inception, exactly what must be capitalized and what may be currently deducted as an expense has been at issue ever since.

According to the IRS, expenditures are currently deductible as a repair expense if they are incidental in nature and neither materially add to the value of the property nor appreciably prolong its useful life. Expenditures are also currently deductible if they are for materials and supplies consumed during the year.

On the other hand, expenses must be capitalized and written off over a number of years if they are for permanent improvements or betterments that increase the value of the property, restore its value or use, substantially prolong its useful life, or adapt it to a new or different use.

Unfortunately, the current rules don’t clearly address even the core issue of whether expenditures should be deducted currently (e.g., as repairs or as materials and supplies) or capitalized by the plant owner or operator.

REPAIR/REPLACE BASICS

Under the rules, the cost of work performed to return property to a former condition without extending its useful life is currently deductible as a repair expense, unlike capital improvements that extend its life or increase its usefulness or productivity and which must be depreciated.

Similarly, the cost of incidental repairs is typically deductible. The regulations state that the cost of incidental repairs that neither materially add to the value of the property nor appreciably prolong its life, but keep it in an ordinarily efficient condition, may be deducted as an expense.

Quite frequently, new additions are made to existing property. These additions are not replacement components nor are they repairs to property, but are instead newly installed components. These additions are required to be capitalized.

At other times, replacement parts or components are added. For example, a car’s engine is worn out and replaced. This replacement returns the car to its condition prior to the deterioration of the part. It would be logical to consider this replacement as an increase in the car’s value requiring capitalization. Conversely, it would also make sense to say that by returning the car to its prior condition, it had been repaired. Under this theory, all repairs would be deductible, no matter how substantial they might be.

The above interpretation renders meaningless any distinction between a deductible business expense and a capital expenditure. Thus, it is oftentimes insufficient to merely look at increased value as the determining factor for characterizing the replacement of a part or component. An increase in value is only one of many factors that must be considered to determine deductibility or capitalization.

Check back Wednesday for Part 2: Changes, We Have Changes

Information in this article is provided for educational and reference purposes only. It is not intended to provide specific advice or individual recommendations. Consult a tax adviser for advice regarding your particular situation.

CHICAGO — Even if you’re not a literary scholar, most of you are probably familiar with William Shakespeare’s famous phrase: “To be or not to be.” For self-service laundry owners, “To be or not to be” may come to mind when deciding whether to open an attended or unattended store.

While industry representatives have long claimed that there is no “magic” formula when it comes to the attended/unattended decision, most agree that there are basic factors that affect one’s call. For example, if you have a large store (more than 2,000 square feet) and want to offer extra services, the attended route is the way to go. The larger stores require more cleaning and have more equipment that needs to be cared for. The extra equipment also generates extra revenue, which helps pays for the attendant.

If you have a small store or two (1,500 square feet or so) and don’t want to spend time at the store(s), being unattended is an option. If you don’t have extra services or enough work for an attendant, why do you want the hassle of dealing with employees? With fewer machines there is also less revenue. Do you really want to cut into your profits by paying an attendant?

Are you thinking about opening a new store and wondering if you need attendants? Now is a great time to take another look at this age-old industry debate.

American Coin-Op recently spoke with industry representatives about the attended vs. unattended issue. The self-service laundry industry continues to evolve, and some of the following opinions may cause you to look at this question in a different light.

THE RIGHT QUESTIONS

When assisting a prospective store owner, it’s all about asking the right questions, says J.D. Johnson, president, LaundryRx, Birmingham, Ala. The company does business in Alabama, Louisiana, Georgia, Tennessee and Florida.

Besides being a distributor, Johnson has also operated an unattended laundry.

When the attended-unattended question pops up, Johnson inquires about what the new owner expects from the business (profitability) and how much time he/she wants to spend at the store. “When I know this, I get a better feel for what the owner really wants,” Johnson says.

Johnson estimates that 80% of the stores he sees are attended, but knows there is still a place for unattended stores. “First, you can’t do a 3,000-square-foot unattended store because of the work it needs. It would be ideal to have a 1,500-square-foot unattended store.”

He believes the main reason owners want attendants is to handle extra services. The importance of attendants has increased recently because owners have expanded their drop-off services and are even offering commercial work, he adds.

Johnson enjoyed his experience as an unattended store owner and believes these stores can work in most locations, but the ideal situation is opening an unattended store (as large as 1,800 square feet) in a small, rural town.

Technology had made security concerns somewhat more bearable. “Security is a concern for all stores. Of course, it’s more of a concern for the unattended owner. Remote security is the No. 1 thing to ease headaches. I feel better if I can monitor my store from my phone. It’s also great to be able to wake up at 2 a.m. and see what’s going on in my store!”

Whatever type of security you use, it’s also important to have the proper signage letting customers know that a system is in place, he adds.

Will customers boycott unattended stores? “It’s rare that customers bypass a store because it’s unattended. Actually, it can be just the opposite. Some customers don’t like attendants looking over their shoulder.”

If you are concerned about introducing new technology without having an attendant present, don’t be, Johnson opines. “First, if you have a small store, you can’t afford a card system. You just don’t have enough machines to justify the investment. So not having attendants doesn’t really hurt in this case.

“Plus, keep in mind that people are much smarter today in terms of dealing with new technology. In the past, some operators may have stayed away from high-tech equipment in an unattended store. But people today use smart phones.”

When it comes to selecting new washers and dryers for an unattended store, search for the most user-friendly equipment, he suggests.

“My No. 1 worry about an unattended store is someone tearing it up. Study the crime rate in your area to determine if it’s suitable for this type of store.”

Some of the age-old concerns can be dealt with in advance by proper planning, he explains. “Put up a store with good lighting and visibility, have a good layout and establish a relationship with the police.”

Operators must not forget that even unattended stores needs attention. “I like unattended stores, but you still need someone to open and close and clean. If you need some help, but don’t want an attendant, trying getting one of your customers to do the job.”

In the future, he believes unattended stores will stay around. If anything, with new corporate investors not wanting to deal with employees, future trends point to slightly more unattended stores, he predicts.

KEEP IT SIMPLE

Roger Idler, a 29-year industry veteran, is in a unique position to discuss the attended vs. unattended issue. Idler has five stores in the Denver area. Three stores are fully attended, one is unattended, and one is partially attended. His largest store is 4,500 square feet and the smallest store is 2,200 square feet.

Idler values attendants because they constantly monitor a store. On a scale of 1-10, he rates the value of attendants as a 7.

“Attendants can also handle your drop-off laundry and dry cleaning to pay for themselves. It’s also nice to have that certain comfort level you get by having someone in the store.”

Idler has some simple guidelines when it comes to deciding if an attendant is warranted.  If your store is 2,500 square feet or larger, you need an attendant, he advises. The size of the store is key because extra services alone may not pay for attendants. “Larger stores generate more revenue because they have more machines. This is what also pays for the attendants.”

Do a little research on the area and see if customer demographics lend themselves to supporting extra services, he adds. (Lower-income customers may not use extra services.)

Idler admits that it can be difficult to find people who want to work and can be trusted. However, the tight job market has made it easier to find employees, he says. Idler has some veteran attendants. One of his keys to success is that his entry-level wage is more than minimum wage. “I even trust [the attendants] to watch the store if I ever take a vacation,” he jokes.

If you’re considering the unattended route, remember that you still need someone to clean up and that some insurance companies won’t deal with unattended stores, he says.

Should an owner promote the fact that his store is attended? “Promoting having attendants isn’t necessary, but remember that some promotions need attendants, such as offering wash-card promotions.”

Idler says digital security is a great thing for all owners, especially unattended owners. “When I first started, I used VHS tapes with the security equipment.”

Customers also play a role in your decision. “Some customers want unattended stores. I get the impression that some customers don’t want attendants because they don’t want people looking over their shoulder. Some also may stay away from unattended stores, but that’s not my experience.”

Idler isn’t worried about having attendants introduce new technology, such as cashless equipment, because he doesn’t plan on installing it. He believes his customer base can’t handle too much technology. “Some of my equipment has text messaging, but it’s never used. Know your customers.”

His best bit of advice is to keep things simple and care for your store, regardless of whether it is attended or unattended. The little things, like handling refunds, matter.

“I even like handling refunds. You can do this at the unattended store with the proper signage. People are surprised and appreciate getting a refund in the mail.”

Idler says his situation proves that unattended stores work outside of rural areas. Unattended stores also are here to stay, he adds. “People want to invest in something, and the unattended store can work for them.”

Check back Wednesday for Part 2: Fewer unattended stores on the horizon, but you still need help