CHICAGO — For today’s self-service laundry investors, one of the first — and most critical — decisions is whether to build a store from the ground up or purchase and renovate an existing operation.
Each path comes with its own mix of costs, timelines, risks and rewards. Market conditions, customer perceptions, financing options and operational goals all play a role in determining the right fit.
To examine the factors that can tip the balance and to offer insights to help operators make a confident, informed choice, American Coin-Op sought the input of several distributors and an industry-specific financing company; their responses have been edited for magazine style and length.
Q: How do equipment planning and layout strategy differ between a ground-up build and a retrofit?
Dan Schulte, sales manager for Laundry Solutions Co.: Building from the ground up is the most advantageous if you have the wherewithal to do it, because you can build that laundry to be the most efficient and not have the headaches you might have as far as a retool. You may have to squeeze and try to fit your machine mix into a retool unless you just totally gut the place and start over. If it’s the right location, that might be the way to do it. But by building a laundry, you don’t have to worry about plumbing above ground. You can have your needed makeup air there. Everything you can do to make that laundry efficient and the best way to go.
Andy Wray, sales manager at ACE Commercial Laundry Equipment: I would say night and day, but given the low-voltage washers and dryers (less taxing on the utilities), it has become a lot better. Everyone would love a blank canvas to draw a laundromat into. For many of the existing retools, we have taken designs from the ’80s or ’90s and tweaked them with larger equipment (think big washers on endcaps) or more stack dryers. They show well and bring a store into a modern look and feel.
Brandon Hoffman, salesman for Gold Coin Laundry Equipment: When planning a new store, you are dealing with a blank slate. Layout is always going to be better as you can try to dictate how customers will move around within the space. In new construction, you decide where everything can be placed to maximize the entire customer experience. With a retool, you’re working around other people’s choices and decisions made back when the store was built.
Markets change and what customers expect to see is different, but as long as the location was built within the last 20 years, you can work with what’s there to fit as best as possible. A retool should be quick and effective, and you should always try to plan it out so you can remain open the entire time.
Tommy Murati, director of marketing for Laundrylux Distribution: With a new store, there’s total flexibility. You can design everything around today’s trends, like larger-capacity washers, optimized customer flow and efficient utility placement.
Retools are more limiting. You’re working around existing walls, plumbing and electrical, so adding, say, more 80-pound washers might not be feasible without expensive upgrades.
One way to work around those limitations is by using soft-mount washers. They’re easier to install and don’t require the same structural reinforcement, making them a smart option for any project type.
Tony Regan, vice president of sales and marketing for Eastern Funding: A retool might mean some reorganizing and remodeling. It’s not always easy to make dramatic changes, but it’s not impossible. A new build, depending on what, if anything, is in the space you’re building out, is a blank canvas and provides more flexibility.
Q: How do zoning and permitting challenges compare between new construction and renovations?
Wray: It’s much more difficult and costly in our (California) market to construct new laundromats. Permits cost more and take more time (to obtain). Counties vary in the way they compute certain impact fees. In our market, we’re competing with housing starts for contractors. That’s one of the reasons existing laundromats (with infrastructure) in certain areas have an intrinsic value to them. Just like an old car that goes through an auction perfectly restored, your neighbor thinks his is worth the same.
Hoffman: Zoning and permitting can be a long, drawn-out process for a new location. Most times, even if you get a rent abatement, you could go through your free-rent period just in paperwork stages. I suggest, for any new build-out, you negotiate the potential rent abatement to start when your plans are approved by the building department, not when you submit and sign the lease.
A retool is usually a much more streamlined process and sometimes will not even require permits, as it’s “existing” and you’re just changing the machines. The biggest thing when considering a retool is the existing utilities that are in place. If they can accommodate the higher demand, in some cases the process can go quickly, even if permits are required.
New construction almost always demands new, larger services including gas and water, which usually are underground and require involving the utility companies, adding a lot of time and cost of material.
Murati: New construction usually comes with more complex zoning and permitting requirements. Since you’re starting from the ground up, you’ll need approvals for things like land use, parking, signage, fire, utility connections and more. Depending on the city, this process can take several months and often involves multiple layers of review.
One cost that often catches investors off guard is the water impact fee. Cities charge this based on projected water usage, and for laundromats, it can be substantial. It’s something we flag early when evaluating a new build.
With retools, especially if the space was already a laundromat, the process tends to be quicker. You’ll still need permits for equipment, plumbing, or electrical upgrades, but you’re generally not facing those same infrastructure-related fees.
Regan: Areas may be stricter when it comes to a new build. Existing laundromats going through a retool usually need to present the plan but unless there is a dramatic change, new equipment is an upgrade and the remodeling is typically met with little to no resistance.
Schulte: With new construction, you really have to dot your I’s and cross your T’s with your contractor. He’s got to be able to pull permits. If you don’t find that right contractor, it’s a headache. On retools, sometimes you can get away with no permitting, you’re just replacing appliances. But saying that, you’ve alerted [the authorities] that you’re doing that, so you should still dot your I’s and cross your T’s. You need to ask yourself if you need permits and if you do, then you have to get a contractor to pull them.
Q: Do customers perceive or respond to the two types of stores differently? If so, how?
Hoffman: New stores are a clean slate for you and the customer base. New stores are not dealing with a poorly mismanaged, already unhappy customer base, so it’s a lot of marketing and getting the word out to try your store. A retool can be a longer process depending on how long the customer base and store have been neglected and what you corrected that they expect to see. Word of mouth and (customer) reviews become a big part of a retool’s success and how long it takes.
Murati: Yes, they do, especially when it comes to appearance and equipment. A brand-new store has that immediate “wow” factor. It feels modern, clean, and shows that the owner is serious about providing a great experience. New equipment, especially soft-mount washers, also means faster laundry times, which customers notice and appreciate.
That said, retools can actually deliver an even bigger “wow” for existing customers. If they’ve been using the same dated store for years, walking into a completely upgraded space with new machines and a refreshed layout can be a dramatic and positive surprise.
In both cases, what matters most is a clean, well-lit environment, reliable equipment, and amenities that make the experience easy and pleasant.
Regan: Customers want a clean, safe environment where all of the machines are working and they can get in and out quickly. If both (types) provide that, it will come down to how the business is run and promoted to the community it serves.
Schulte: A lot of customers have a preconceived notion [about] the one that’s being retooled. If you get a location that doesn’t have a very good reputation, that’s not going to help you out long-term. I have seen new builds really get the community excited that this new location’s coming in with state-of-the-art, you know, all the bells and whistles — safe, well-lit, and all the brand-new equipment. They time their grand opening where it becomes an event for the community. I’d say you get more excitement for a new build than you would a retool.
There have been successful retools. We’ve had so much success on building new stores. Retools today, if you do it right, you’re still going to have an equipment investment on a medium-sized store of $500,000-550,000.
Wray: If you have the same footprint, we can make an existing store run toe-to-toe, cranking out a high-quality retool with updated layout, machine sizing and services. Prospective investors love the idea of new construction until they see the price tag.
Coming in Tuesday’s conclusion: The biggest upsides for each path, and some valuable advice for first-timers
Miss earlier parts? Part 1 - Part 2
Contributors to this article:
Schulte
Wray
Hoffman
Murati
Regan
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].
