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Economics of a Laundromat Retool (Conclusion)

There’s more than just equipment in play

OAKBROOK TERRACE, Ill. — Whether owning a store now or likely buying one in the future, retooling is something that you’ll consider someday. But in what ways can a project like that benefit you and your customers? What are the economics of such a project?

The Coin Laundry Association recently hosted a webinar about retooling and invited a trio of experienced operators to describe their latest retools and how they were able to get their project financials “to pencil out.”

Panelists included Jose Almonte, who recently spent $680,000 in retooling the 5,000-square-foot Lavanderia Express in New York City; Manny Zervos, who invested $600,000 in his 4,000-square-foot Good Neighbor Laundromat in Bronx, N.Y.; and Lou Sproviero, who spent roughly $450,000 in redoing his 3,600-square-foot Super Saver in Chicopee, Mass.

“It’s one of the biggest potential investments—or reinvestments—of your Laundromat career, when you consider doing a complete retool of your store,” says moderator Brian Wallace, CLA president and CEO. “We know that there are lots of considerations.”

SO WHY DO IT?

After the store owners recounted their projects (described in Part 1), Wallace gave his impressions: “What I’m hearing from that is that we’ve got old stores with old equipment, stores that were kind of scuffling and breaking even. We have cases where repair and maintenance were a consideration. But it all came down to reinvesting in the location and making it better.

“It’s not just the equipment side. It’s making the experience better. It’s the aesthetics, it’s the signage. That’s something that we heard from all three of you.”

“I wanted to make my customer happy,” Almonte says. “In the stores when I walk in, I hear the complaining. So I needed to change, I needed to do something. And also the utilities, water, in the first store I retooled, I was paying $15,000 a month. I cut that bill to $7,000 or $8,000.

“That really made it. That’s why I’m … buying stores that are old and retooling them.”

Utilities was also a big factor in Zervos’ decision to retool.

“I saved 35% on my water from that,” he says. “The other thing was, there were so many times on these older machines that these hoses in the back were snapping and my attendants wouldn’t even know for half a day. … Electric and gas, not that big of a savings, but water is a tremendous savings.”

Today’s advanced washers with high-speed extraction remove more water per load, saving the laundry in energy costs due to faster drying times.

While reducing utilities cost is attractive, Sproviero says enabling customers to do their laundry more quickly is a valuable retooling consideration.

“Certainly, there are different stores that benefited from utilities more or from the aesthetic more. I would say the most important aspect of it is … keeping the customer happy,” he says. “The speed of getting people in and out quicker, time is very valuable to people. We’re getting people in and out in less than an hour now, when it was typically an hour and a half. … If somebody can spend a half-hour less in the Laundromat, and they maybe do their laundry once a week or every two weeks, over the course of a year, that’s a lot of time they’re saving.”

CAN COMPETITION BE AN INFLUENCE?

Wallace asked the panel about competition’s influence. “I imagine part of your thought process is, ‘I need to stay ahead.’ How is that part of your thinking with your most recent retool?”

“We actually had three stores open up by me from the time I bought that store,” Zervos says. “So, of course, I had to keep up with my competitors. It is a competitive business and you see Laundromats all over the place now. The retool was definitely needed, with the machines breaking down. You’ve got to keep the customers happy.”

To Sproviero’s earlier point, Zervos says he added more large-capacity (60 and 80 pounds) washers and dryers to enable families to “bring all their laundry at once.”

REAL ESTATE CONSIDERATIONS

If you don’t own the property where your laundry is located, it’s important to have a lease that’s long enough so you can confidently make the retooling investment and have enough time to retire the debt service, Wallace says.

“I won’t recommend anybody retool a store without negotiating the lease for an extension,” says Almonte, who renegotiated the lease on his Lavaderia Express property to 20 years before retooling. “You’re getting yourself in trouble if you don’t do that.”

“We’ve found that leasing is more beneficial (than owning),” says Sproviero, who operates 22 laundries in total. “We can grow faster. Of course, if you come across a piece of property that warrants a Laundromat and you can get it at the right number, and the set-up isn’t outrageous to remodel it into a Laundromat, that’s probably the better way to go. You shouldn’t slow down your process of growing strictly because you want to own the real estate. There’s not a problem leasing, as long as you get a good long-term lease.”

VEND PRICING

Retooling not only improves customer experience, it increases the market value of a store, Wallace says. Completing such a project also provides an opportunity for the owner to raise vend prices.

“From a financial standpoint, we usually throw in a 5% bump in (vend) prices, and nobody flinches as long as you do it right at the time of the retool,” Sproviero says. “Everybody is so happy with the change in experience.”

Zervos didn’t raise vend prices until several months after retooling.

“I was surprised at how many thought we had reinvested in our community. I’d never thought about it that way, to be honest with you,” he says. “They said, ‘We know you did it for yourself but you’re not the one washing here, you’re not the one folding here.’ The whole ambience was accepted by everybody.”

Miss Part 1? You can read it HERE.