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Shaky Economy Has More Investors Looking at Laundries, Survey Says

Paul Partyka |

There are different ways to gauge what’s going on in an industry. In the coin laundry industry, taking the pulse of distributors is one way to see if a challenging economy is impacting business. The results of our annual distributor survey, which was sent to all of the distributors on American Coin-Op’s mailing list, are in, and the results are somewhat encouraging.First, a little background. One-half of the distributors had an increase in business (sales of newly constructed stores and replacement business) in 2007, while 19.4% saw business dip last year, according to the national survey. Business stayed the same for 30% of the distributors.These figures represent a slight decrease from last year’s survey, where nearly 58% of the distributors reported a bump in 2006 business and 15.4% saw business decline.What are the distributors forecasting for this year? Is there optimism? More than half of this year’s respondents believe their overall business will be better than last year.REASONS FOR EVERYTHINGThere are a variety of reasons why some distributors saw business increase in 2007. Strangely enough, the No. 1 reason for increased business had to do with one aspect of a struggling economy. The top five reasons, in order of response, for business improving in 2007 are:1) People were investing in coin laundries as an alternative to investing in a weak stock market.2) Customers were seeking energy-efficient equipment.3) Better marketing was provided.4) The investor pool grew.5) More older stores were upgrading.For those distributors experiencing a decrease in business last year, here are the five top reasons:1) The economy slowed down.2) There are too many laundries in the area.3) Financing was difficult.4) Stores are not making enough money and aren’t adding new equipment.5) The cost of utilities continues to be a concern.REPLACEMENT BUSINESSAre operators adding to their stores? Forty-nine percent of respondents saw replacement business rise in 2007, a slight drop from last year’s figure (54%). Twenty-three percent saw replacement sale business decrease in 2007, a slight increase from last year’s number (19%). Twenty-eight percent say replacement sales were the same in 2007 as in 2006.The figures in this category have fluctuated slightly during the last several surveys. Three years ago, for example, only 43% of respondents reported an increase in replacement sale business.READY FOR BUSINESSDistributors were asked how many new laundries they built and/or to whom they supplied equipment in 2007. Forty-five percent of respondents built or supplied equipment to three or fewer new laundries in 2007.How many new laundries are distributors dealing with? Here are the most popular answers, in descending order: two, zero, five, three and one. Other popular answers are four laundries, seven laundries and 10 laundries.Distributors were also asked if their 2007 new construction total was more, less or the same when compared to 2006. Thirty-nine percent say new construction was up in 2007, 33% say new construction was down, and 28% say it was the same as in 2007.FINDING THE RIGHT MIXWhat equipment mix do you favor? Are owners starting to shy away from top loaders, or are some of the newer top loaders gaining favor with operators? Those are just a couple of questions that can be asked when it comes to the equipment mix at newly constructed stores.Sixty-nine percent of the distributors put at least one top loader into their new stores. Last year the figure was 62%, and two years ago it was 73%. How many top loaders are going into new stores? Here are the most popular numbers of top loaders put into new stores in 2007:1) 02) 103) 124) 65) 5,8 (tie).Newly constructed laundries in 2007 have 6.7 top loaders. This figure factors in the stores with no top loaders. However, if you exclude new stores with no top loaders, the average is 9.8 top loaders.The most common numbers of front loaders installed in newly constructed laundries last year are, in descending order, 30, 20, 40, 50 and 12. Newly constructed laundries in 2007 have an average of 27.7 front loaders, almost identical to last year’s figure.The most popular numbers for dryer pockets in stores are 40, 20, 30, 60 and 50. The average newly constructed laundry in 2007 has 35.2 pockets. In last year’s survey, the average was 34 pockets.A SIZE FOR EVERYONEWhen you ask operators about the ideal size for a new laundry, you get a variety of answers. However, most of them agree about one thing: They don’t want a store that is too small. Here are the most popular store sizes, in square feet, for stores that opened in 2007:1) 3,0002) 2,0003) 3,5004) 4,0005) 2,500Twenty-nine percent of the new stores are 2,000 square feet or less. Forty-three percent of the new stores are more than 2,000 square feet, but not more than 3,000 square feet. Twenty-seven percent of the stores are more than 3,000 square feet.The largest laundry in this year’s survey is 7,500 square feet, and the smallest store is 1,000 square feet. The average newly constructed store in 2007 is 3,220 square feet. In 2006, it was 2,831.PUTTING IT ALL TOGETHERIf you built a new store last year, how does it match up to other new stores? Here’s a quick snapshot of newly constructed laundries in 2007: The new laundries average 6.7 top loaders, 27.7 front loaders and 35.2 dryer pockets. The stores are, on average, 3,220 square feet.There are a couple of things about these numbers that should be mentioned. First, while a slightly higher percentage of new stores included top loaders compared to last year (69% vs. 62%), the number of top loaders per store dropped a bit. Second, the average size of a new store grew a bit from last year (3,220 square feet vs. 2,831 square feet).To get a better perspective on this year’s profile, here are the 2006 and 2005 profiles:2006 — 9.5 top loaders, 28.2 front loaders, 34 dryer pockets, 2,831 square feet.2005 — 8.2 top loaders, 26.3 front loaders, 29.6 dryer pockets, 2,546 square feet.MAKING IT WORKThe distributors who had a good year in 2007 in terms of selling new stores listed a variety of reasons for their success. The most popular reason for distributors having success in 2007 is a larger, more educated group of investors. Other popular responses to this question include:• Financing was easier to obtain.• More energy-efficient equipment was needed.• The population grew in certain areas.The distributors who experienced problems with new store growth last year cited a variety of reasons for their struggles. The No. 1 reason is high construction costs. Other popular responses include:• High impact fees• A struggling economy• Difficulty finding good locationsThere was very little difference, in terms of the number of responses, between the four reasons listed above.DISTRIBUTOR ODDS AND ENDSTwenty-eight percent of respondents broker coin laundries. Nearly 35% of respondents operate some type of route laundry.Distributor open houses/equipment shows are a coin laundry tradition. Fifty-four percent of respondents plan to host some type of show in 2009. A good number of the shows will take place in the fall of 2009. However, some companies are planning spring events.THE BOTTOM LINELet’s be honest, when most people bring up the state of the economy right now, they don’t usually use glowing terms. The distributors seem somewhat optimistic about this year, although these surveys were filled out in July.Slightly more than half of the distributors believe 2008 overall sales will be better than 2007 sales. Thirty-one percent expect overall sales to be the same as last year, while only 18% of the respondents see lower sales this year. 

About the author

Paul Partyka

American Coin-Op

Paul Partyka was editor of American Coin-Op from 1997 through May 2011.

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