OAKBROOK TERRACE, Ill. — Overhead costs are among the many aspects of running a business that many vended laundry owners and operators grapple with on a regular basis.
This challenge has become even more difficult to manage in recent times, as the cost of minimum wage and utilities, specifically water/sewer, has increased for many vended laundry operators.
To help tackle these obstacles, Brian Wallace, CEO and president of the Coin Laundry Association (CLA), facilitated a lunchtime roundtable discussion titled Managing Rising Water Cost & Wage Increase during the Illinois Coin Laundry Association’s (ILCLA) recent membership meeting here at The Remedy Pub.
Though the meeting focused on wage and water increases specific to operators in the Chicagoland area, Wallace and several members of the ILCLA discussed best practices that store owners across the nation can employ in their own businesses.
RISING WATER, SEWER RATES
Vended laundry operators are continually plagued with rising water and sewer costs.
For example, the City of Chicago raised rates in 2012 by 25% to $2.51 per 1,000 gallons, and by 15% each year after, to its current rate at $3.81 per 1,000 gallons.
Store owners are “better off planning for persistent increases” larger than expected, Wallace explains, particularly as sewer and freshwater infrastructure projects are continually explored by organizations like the Environmental Protection Agency and the American Water Works Association.
“Us retail commercial rate payers tend to pay the gist of it, so it becomes a simple, not-easy-to-execute, but simple formula of using the least amount of water you can and still deliver a quality wash, and making sure that you’ve got vend price strategy in place that can accommodate those increases over a period of time,” says Wallace.
OVERCOMING THE TIDE
So what can operators do to cope with these rising water and sewer costs? Wallace suggests operators look to technology.
“I happen to think that … alternative payment system options is one of the things you ought to consider in that calculus, of being able to move up on price on a more regular basis,” says Wallace.
“We’ve got to do better than raise our prices every four, six, eight, 10 years,” he adds. “[Alternative payment systems] have the potential to play a big role in your ability to execute on that strategy. You’re moving up [prices] as you need to move up, and not be, necessarily, tied in with the quarter increments.”
Wallace also advises operators to consider energy-efficient equipment, particularly for those looking to re-equip their stores.
“Most people who call me to talk about solar, recycling, geothermal, all kinds of alternative energy … almost always that’s an operator who simply needs new washers, new dryers and a new water heater,” he says. “They’re trying to find a shortcut, whereas the re-equipping of that store is going to give the 30-40% gain in efficiency.”
“What some folks are understanding is that, if they don’t think they’re in it for the long haul, they don’t think they’re going to be able to swing the inevitable capital investment of that store,” adds Wallace.
“[Bring] that question [of re-equipping] to a head sooner than later … be deliberate, and [making] that decision one way or the other is going to be the best thing for your financial future.”
CONSIDER COMPETITION
One other factor to consider, as it relates to rising utilities cost, is what competition is charging, particularly for store owners who operate near multi-housing units that provide washers and dryers for its residents, according to Wally Makowsky, industry veteran and ILCLA member.
“I think the [operators] that have to worry about raising prices are the ones that are around apartment buildings that have route operators,” he says.
Wallace added to the topic, saying, “I think the biggest issue there [is it] gets back to differentiation and the fact that the route operators each have different pricing strategies.”
He also alerts operators to be mindful of the “widespread remodeling and upgrading” of apartment laundry rooms with larger equipment.
“What it’s doing is giving that renter less reason to leave and go use your retail facility. I think that’s the part to be concerned about,” says Wallace.
“Increasingly, our most significant competitor is getting better,” he adds. “Your retail competitors are generally getting better, but more importantly, your route operator competitor is getting much more sophisticated.”
‘CORE BUSINESS’
Despite the hurdles operators face in running their business, Wallace advises them to sell the service that’s at the heart of a coin laundry business.
“We’re in an industry that doesn’t do a lot of marketing and advertising, anyway, but we’re certainly the only industry that, in the course of the marketing, doesn’t promote our core service,” he says. “We never talk about cleaner clothes, and getting people’s clothes clean, and I think that’s a real miss.”
“That’s what we should be good at, that’s what we should be promoting to the customer,” he adds.
“We almost never talk about it. We talk about price, we talk about capacity, time savings and convenience, but we should also be talking about clean clothes.”
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