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Is it Time to Raise Prices?

Craig Dakauskas |

GULF BREEZE, Fla. —Ah, it’s time to address the age-old question that has plagued our industry since the first coins were dropped into a box — when is it time for a price hike?The query is usually followed by questions such as: How do I break the news to my customers? Won’t the customers be upset? How much should I raise the prices by?I’m going to take this column in a bit of a different direction. I’m banking that not all newcomers to the laundry business built brand-new stores with the latest cutting-edge washers and dryers. I’m sure many of you bought existing stores. This column is geared toward this group of new owners.INVESTIGATION TECHNIQUESApproaching this question, there’s a tendency to head out and see what the competition is doing. Certainly, it’s never a bad idea to conduct some market research. But I’m going to advise you to do some investigation even closer to home — like in your own laundry.Think about your laundry situation. Why isn’t your business as profitable as you’d like it to be? Are you getting the turns that you projected? If not, maybe you need to plug resources into marketing activities in order to grow your customer base (click here to read Jim Kell’s June column for some great thoughts on marketing).If things appear to be turning nicely, then it’s time to analyze your current equipment mix. Is a vend price increase a Band-Aid approach covering a much larger problem in the form of inefficient equipment? Is the extra quarter your customers drop into a tumbler they already feel takes too long to dry going to increase loyalty? Take a long look at your store, because jumping into the vend-price-increase pool can have an unintended ripple effect of losing precious customers.THE FIRST STOPThe No. 1 place to look for inefficiency is your tumblers. It’s also the area you cannot afford to have issues. If your tumblers are drying too slowly, chances are customers are waiting around for pockets.Let’s face it, your laundry has one mission: Get the customers in and out as quickly as possible. When clients spend more time waiting, there’s a greater chance they’ll go elsewhere next time.Does your store have a large number of top loaders? This is another area that requires investigation. Some stores still do a brisk business with their top loaders, while many new stores being built aren’t offering any top loaders. If the usage is high, there may be a benefit to simply upgrading to new units with better efficiency. However, if the top loaders are not seeing decent turns, perhaps you are best served by upgrading to entry-level front loaders or filling the bulkhead with more of your most popular washer-extractor models. Again, the efficiency will be improved, which certainly betters your bottom line. There are advantages to thinking “green.”With many manufacturers offering new controls that allow time-of-day pricing and programmable water levels, owners may benefit by trimming expenses and maybe eliminating the need to raise vend prices (or perhaps just by a lower increment). In addition, I highly recommend investigating card payment options, which bring the ability to adjust vend rates by smaller increments. Tankless water-heating systems that trim expenses further are another investment that can pay quick dividends in utility savings.These are all moves that can help your store become more efficient. But upgrading equipment has a second benefit to your customers — value. Customers who feel valued come back. Owners need to grasp the concept that perception is reality. Rarely will customers view a price increase as the owner’s way of dealing with rising expenses. Rather, they’ll see it as a means for the owner to make more money.By contrast, if you are adding new machines that are washing and drying faster with more options and better quality, the store has given customers value. The perception is that the owner is improving his store and the customer is getting better service as a result. Now that price increase may be easier to accept.Smart operators understand that an extra quarter really impacts people. But if your customers feel you are investing in the store and offering equipment that delivers benefit and value to them, they are going to take the news better.CATCHING A BREAK?For storeowners pondering equipment replacement, there’s better news. The Economic Stimulus Act of 2008 allows owners who purchase and place equipment into service this year to apply a 50-percent bonus depreciation. This is in addition to the standard depreciation of 20 percent. Even if you are hoping to gain an extra year or two out of those old top loaders and inefficient tumblers, the reality is that there may never be a better time to upgrade.Now I know as a new owner, the last thing you want to do is shell out more money on new equipment, but in this case the federal government has extended a prime opportunity to upgrade your laundry operation.I would advise that before you commit to hiking up the vend prices, you analyze your store and how it’s operating. Meet with your accountant as well and determine if it makes sense to take advantage of the Economic Stimulus Act of 2008 to upgrade even a portion of your laundry’s equipment.Whatever you do, don’t make the mistake of moving too quickly to a vend price increase to pull margins back in line. You may find it has the opposite effect. Challenge yourself as the owner and ask “What am I doing to take my store to the next level?” of experience in the industry. 

About the author

Craig Dakauskas

Commercial & Coin Laundry Equipment Co.

Vice president

Craig Dakauskas is vice president of Commercial & Coin Laundry Equipment Co. in Gulf Breeze, Fla. He has 12 years of experience in the industry.

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