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Industry Outlook: Hold On to Optimism but Run a Tight Ship (Part 1 of 2)

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industry outlook
Photo: ©iStockphoto/Kadir Barcin

Bruce Beggs |

CHICAGO — Simply put, an outlook is an expectation for the future. But no one has the ability to see the future, so the best you can hope to do is to gather as much pertinent information as possible, prepare yourself for what you think will come, then have the flexibility to adapt your business to what actually comes your way.

As the ocean waves wash away the remnants of 2011, there are reasons to be optimistic that the self-service laundry industry will continue to bounce back in 2012. But that optimism will be tempered by a lagging economy and ever-present high unemployment rates.

In speaking with experts around the industry, it’s clear that an operator’s best course of action in 2012 will be a continued emphasis on running an efficient operation and taking whatever opportunities are available to promote their business.

PAST PERFORMANCE AND FUTURE RESULTS

While past performance is no guarantee of future results, it’s certainly a good indicator. From an operator’s perspective, business in 2010 was better than it was in 2009, according to our 2011 State of the Industry Survey.

Forty-two percent of operators reported an increase in gross dollar volume in 2010 compared to 2009. That was up nearly two percentage points from the previous year. The average 2010 business increase was 10.8%, up from 7.9% in 2009.

But 58% of respondents to our unscientific survey saw their laundry business decrease in 2010. That was two percentage points less than 2009, but a significant portion overall nonetheless. It’s apparent the recession that economic experts say officially ended in summer 2009 was still being felt last year.

There were also reasons for optimism on the supply side. Nearly half of respondents to our 2011 Distributor Survey said their business was better in 2010 than it was in 2009. Better yet, nearly two-thirds predicted in July that 2011 business would be better than 2010. Those whose distributorships thrived saw investors who were inspired by upticks in the economy, or who chose to look into the coin laundry business after losing their jobs.

Distributors whose business suffered in 2010 lamented over changing demographics, tight lending/lack of financing, and potential investors unwilling to spend.

IMPACTS OF 2011

Dick Ruel, national sales manager for Whirlpool and Maytag Commercial Laundry, says the continued sluggish economy and the “exodus of 1 million Hispanics” since the recession began have had the biggest impact on our industry.

People are doing laundry every other week now instead of every week, he adds.

The rising cost of utilities is having a major impact as well, says Setomatic Systems’ Jeff North, who owns the Newport (N.H.) Car Wash and Laundromat.

“While energy-efficient machines and hot water heaters are almost a necessity now, they simply can’t make up for the enormous increases in costs,” he says. “Water and sewage has gotten to the point in many municipalities that it has passed electricity and fossil fuels as the most expensive utility cost.”

His municipality is at approximately $15 per 1,000 gallons and is slated for two more 10% hikes in the next two years, North says.

In the South, where Raymond McMurry owns Pat’s Washtub in Lawton, Okla., the biggest impact on his business came from the weather.

“In 2010, we had bad ice storms and power outages, (and) therefore great sales because we had power. Hard to beat in the first half of 2011 with good weather.”

Second was the shaky economy. “We have seen a major dip in full service (wash/dry/fold, comforters, pressing), and self-service is on the increase. Commercial accounts are increasing somewhat due to outsourcing to cut expenses.”

Larry Larsen has more than 30 years of experience in the ownership, management and construction of Laundromats. “The continued severe recession with high employment and a loss of home-construction jobs has had the biggest impact in Southern California. Our unemployment rate hovers around 14%. If you’re not working, you’re not getting your clothes dirty.”

Another Californian, Andy Wray of ACE Commercial Laundry Equipment, says there are fewer laundry customers to be had because many people have migrated elsewhere to find work and a lower cost of living. And laundry owners there are fearful of losing even more customers by increasing their prices.

“Prices on utilities in the Laundromat have gone up at an alarming rate, and it has come to the point where owners just simply can’t afford to absorb the increases any longer. Capacity and volume have now officially made way for pricing and margins.”

Tomorrow: Attracting business in 2012…

About the author

Bruce Beggs

American Trade Magazines LLC

Editorial Director, American Trade Magazines LLC

Bruce Beggs is editorial director of American Trade Magazines LLC, including American Coin-Op, American Drycleaner and American Laundry News. He was the editor of American Laundry News from November 1999 to May 2011. Beggs has worked as a newspaper reporter/editor and magazine editor since graduating from Kansas State University in 1986 with a bachelor’s degree in journalism and mass communications. He and his wife, Sandy, have two children.

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