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Key Store Financials & Market Metrics (Part 1)

These markers can signal a laundry’s health, potential for growth

CHICAGO — Writing for American Coin-Op several years ago, now-retired small-business columnist Howard Scott left little doubt about how important he thought knowing certain store financials and market metrics was for a self-service laundry owner: “Your Laundromat’s operating numbers should be as easy for you to recite as your Social Security number.”

Indeed, there are certain markers and measures that can signal a laundry’s health and potential for growth. Let’s take a look at some of them:

Demographics — These are, as defined by Merriam-Webster, “the statistical characteristics of human populations (such as age or income) used especially to identify markets.” They aren’t “operating numbers” as described by Scott but they are statistics that can influence those numbers a great deal.

While understanding the nature of an area’s customer base is important any time, it may be most vital when a first-time investor or an expanding store owner is deciding where to open up shop.

Store location can significantly impact an operation’s success or failure rate, so there are a few key demographics to identify when analyzing potential sites. First, the service area you’re considering needs to have a significant share of renters. A good starting point is 35%.

Household size and income level are also important when it comes to demand potential. It’s recommended that the average household size in a considered location be at least 2.3 people with a low to medium income level. Lower-income households—earning less than $35,000 per year—are less likely to pay extra for an in-unit washer and dryer, thus making the area Laundromat more attractive to them.

Neighborhoods that are heavy in multi-family housing and communal living—such as apartment complexes and trailer parks—offer great potential.

Demographics can also influence what machines, services and amenities to offer. If the nature of the local population shows it’s changing, that may also signal a need for the service or services you’re offering them to change, too.

Gross Income Minus Expenses Equals Profit (or Loss) — Once a store is in operation, its gross income is determined by adding the results of various revenue streams, including vended laundry, vending machines (candy, supplies, etc.), wash-dry-fold service, drop-off dry cleaning, etc.

The greater the income each month, the greater the profit potential. But where there is income, there are expenses.

Typical expenses for a Laundromat include, but aren’t necessarily limited to, utilities, rent/mortgage, employee wages, equipment payments, maintenance costs, supplies, insurance and property taxes.

Scott has favored keeping track of the percentage of utilities to revenue, because if that number is rising, it clearly shows that costs are increasing as a percentage, he says. Does this mean the laundry operator hasn’t raised vend prices enough to cover cost increases, or that a portion of the utilities cost could be in the form or leaks or inefficient usage?

Utilities as a percentage of gross averaged 20.4% in 2019, according to results of this year’s American Coin-Op’s “State of the Industry Survey” report, down slightly from 21.7% in 2018.

Customer Retention — Today’s advanced data collection and/or management tools make it easy to track customer usage. However you choose to follow it, if you notice that someone who typically visits your store every Monday to do their laundry hasn’t stopped by in a month, that signals a need to reach out to them and encourage them to return. But if you haven’t noted their absence, or if you haven’t collected their contact information in some way, then that’s an opportunity—and revenue—lost.

Check back Thursday for the conclusion.