Coin Laundries - Road to Financial Independence: A Complete Guide to Starting and Operating Profitable Self-Service Laundries [Revised] 096231739X, 9780962317392

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KIRSTEIN BUSINESS

BRANCH

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Coin Laundries

Road

to Financial

Independence

RECEIVED

Klfstein Business

Branch

Coin Laundries

Road

to Financial

Independence A Complete Guide to and Operating

Starting

Profitable

Self-Service Laundries

(Revised Edition) Emerson G. Higdon

Mountain Publishing Hillsboro,

Oregon

Published by Mountain Publishing Post Office Hillsboro,

©

Box 1747

Oregon 97123-1747 U.S.A.

1989, 2001 by

Emerson G. Higdon. All

reproduced or transmitted

in

rights reserved.

No part of this book may be

any form or by any means, electronic or mechanical,

including photocopying, recording, or by any information storage and retrieval system,

without permission from the author, except for brief quotations in a review.

Published 1989

Revised Edition 2001 Printed in the United States of America

Library of Congress Cataloging-in-Publication Data

Higdon, Emerson G., 1933-

Coin laundries— road

to financial

independence

operating profitable self-service laundries

a complete guide to starting and

Emerson G. Higdon.— Rev.

ed.

cm.

p.

ISBN 0-9623173-9-X 1.

/

:

(he.

:

alk.

paper)

Self-service laundries-Management. 2.

Title -

HD9999.L382 H54 2001

business enterprises-Management.

I.

00

\y \

New

\

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30 Q 2001031492

7oo[

!

ABOUT THE AUTHOR EMERSON

G. "SKIP"

HIGDON was a Branch Manager for an inter-

national appliance manufacturer before resigning to

preneur. After leaving corporate

life,

become an

entre-

he started and operated several

successful small businesses.

One of

was a modern self-service laundry near Portland, Oregon. Nine months after its grand opening, Higdon's laundry was the highest volume coin laundry in the state Higdon has also designed laundries, sold laundry equipment, and these businesses

acted as a consultant to other industry entrepreneurs. Presently semiretired,

Higdon devotes

and adventuring with

his time to writing, consulting, volunteering,

this

wife Joan of forty-five years.

v

NOTICE THIS made skill,

BOOK is not a "get rich quick" scheme. Although money can be in the self-service laundry business,

it

requires a combination of

adequate financing, and years of hard work. Even then there

be unforeseen circumstances that can cause a business to

may

fail.

This book does not guaranteed success. There are great financial risks in starting or

money

buying a business. Anyone

in a business

must do so

who

and

invests time

realizing that they risk losing their

investment.

This book does not cover every situation that the reader counter

when

starting,

inform and entertain

buying, or running a business.

—not

Its

may

purpose

money

is

to

to give professional advice. Contact an at-

torney, an accountant, or other professional help before investing

time or

en-

any

in a business venture.

Neither the author nor the publisher guarantee the accuracy of the information contained in this book. Although every effort was

maintain a high standard of accuracy

may be

errors.

Some

at the

of the information

vi

made

to

time of publication, there

may now

be outdated.

CONTENTS About

the

Author

V

Notice

vi

Illustrations

ix

Introduction

xiii

1

How Much Money Can I Make?

2

Is the

3

The Modern Self-Service Laundry

13

4

Selecting Your Location

17

5

Buying versus Building

41

6

Evaluating an Existing Coin Laundry

45

7

Surveying the Market

73

8

Planning the Size of Your Store

85

9

Utility

Coin-Operated Laundry Business for

1

Me?

Hookups and Charges

7

105

10

Selecting Your Equipment

129

11

Planning Your Layout

159

12

Negotiating the Best Lease Possible

183

13

Estimating Equipment Costs

217

14

Estimating Construction or Remodeling Costs

227

15

Developing

An

Operating Plan Forecast

and Cash Flow Projection

vii

265

91

Contents

16

Attended versus Unattended Laundries

307

17

Getting Financed

3

18

Security

333

19

Advertising and Promotion

347

20

Maintaining and Repairing Your Equipment

361

21

Accounting

371

22

Utility

23

Managing Your Laundry

407

24

Hiring Professional Assistance

425

25

Getting Started

429

Appendix

43

Associations and Publications

437

Index

441

1

391

Conservation

viii

11

ILLUSTRATIONS

1-1

Census Bureau-Select Personal Services

2

1- 2

Census Bureau-Estimated Receipts for Firms

3

2- 1

Monthly Cash Flow Statement

9

2-2

Monthly

4- 1

James Crossing Demographics

22

4-2

James Crossing Market Pricing Analysis

25

4-3

James Crossing Market Revenue Forecast

27

4-4

Oak Ridge Demographics

28

4-5

Oak Ridge Market Revenue

4-6

Coin Laundry Location Analysis Survey

40

6-1

Depreciation Schedule-Straight Line

48

6-2

Depreciation Schedule-Sum-of-Digits

49

6-3

John Doe Laundry-Profit Statement

50

6-4

Sale of Equipment

5

6-5

Investment

Summary

52

6-6

Annual Washer Revenue Formula

54

6-7

Water Usage per Cycle

55

6-8

Annual Washer Revenue Calculation

56

6-9

Laundry Revenue-Quick Estimate

57

Water Wastage Chart

59

6- 1 0

Profit Statement

ix

1

Forecast

29

0

1

Illustrations

6-11

Washer Revenue-Detailed Estimate

60

6-12

Total Revenue-Detailed Estimate

62

6-13

Washer Vend Price Calculations

64

6- 1 4

Estimated Profit Worksheet

69

7- 1

Prospective Customer Data Sheet

75

7-2

Estimated Revenue from Data Sheets

8

7- 3

Estimated Revenue from Survey of Competition

82

8- 1

Financial Penalty from Oversizing a Laundry

86

8-2

Washer Capacity and Revenue Return Comparison

91

8-3

Optimum Dryer Load

92

8-4

Washers-Revenue per Cycle

93

8-5

Load-Spread Calculaton

96

8-6

Analysis of Prospective Customer Data Sheets

99

8- 7

Machinery Mix Calculations

101

9- 1

Water Demand Specifications

108

9-2

Maximum Water Demand Adjustment Table

109

9-3

Maximum Flow (GPM)

1 1

9-4

Water Flow and Pressure Loss for Meters

111

9-5

Water Supply Pipe Selection Chart

112

9-6

Water Service Estimate

114

9-7

Standpipe Drain System

115

9-8

Floor Sink Drain System

1

9-9

Direct Connect Drain System

118

Sanitary Drain Pipe Sizing Chart

1

9-10

Sizes

x

16

19

Illustrations

Flow Capacity

120

Effect of G-Force

on Water Retention

134

Maximum Cycles

at

9- 11

Sanitary Drain Pipe

10- 1

10-2

Maximum Hot Water Use

150

Maximum Hot Water Use per Hour

151

10-4

Maximum Hot Water Use

153

10- 5

Average Hot Water Use per Hour

154

11- 1

Wheelchair Clearances

166

11-2

Illuminance Values

168

11-3

Laundry Layout Efficiency Comparison

175

15-1

Utility

15-2

Cycle Description Chart

273

15-3

Washer Operating Costs-Sewer and Water

274

15-4

Washer Operating Costs-Hot Water

275

15-5

Washer Operating Costs-Electricity

277

15-6

Dryer Operating Costs-Natural Gas

278

15-7

Dryer Operating Costs-Electricity

279

15-8

Utilities- Variable

15-9

Electrical-Fixed Expense Calculation

1

0-3

at

Peak Demand

Usage Chart

268

280

Expense

Summary

15-10

Utilities-Monthly Fixed Expense

15-11

Estimated Heating and Cooling Costs

15-12

Price and

15- 13

Projected Revenue

Revenue Analysis Chart

Growth

16- 1

Independent Contractor

17- 1

Summary

vs.

283

284 286 289

Employee

of Business Legal Structures

xi

282

315 321

1

Illustrations

21-1

Cash Tally Sheet

375

21-2

Balance Sheet-James Crossing Laundry

388

Financial Data Operating Plan Forecast

296-297

Cash Flow Projection

300-301

Profit

Analysis-James Crossing Laundry

378-379

Drawings Hyland Laundry Layout

1

78- 1 79

James Crossing Laundry Layout

1

80- 1 8

Floor Plan and Equipment Layout

244-245

Washer Pad and Floor Sink Layout

246-247

Wall Layout

248-249

North Wall Elevation

250-25

Lounge Wall Elevation

252-253

West Wall Elevation

254-255

East Wall Elevation

256-257

Water Heater Details

258-259

Dryer

260-261

Installation Details

262-263

Washer Pad Details

Miscellaneous Outline of a Laundry Business Plan

News

330-33

355

Release

xii

INTRODUCTION THE SELF-SERVICE LAUNDRY changes since 1989 when Coin Laundries

was

first

industry has undergone vast

—Road

to Financial Independence

published. In this revised edition, the author discusses these

changes and provides solutions

to

problems he has encountered as a

self-service laundry consultant during the last 12 years.

book may seem somewhat technical, the author has made every effort to explain each section in detail. To exclude information simply because of its technical nature would be a disservice to the laundry industry. It is, after all, a reference book for laundry owners and those who want to become successful laundry owners. The chapters in this book have been divided into the logical stages of laundry planning, construction and management. You are encouraged to read the entire book for an overall view, then review, in detail, While

parts of this

the chapter that pertains to each stage of your laundry's development.

That way you won't be overwhelmed by too

much

detail.

As this book was being revised, there was (and continues to be) a movement on the federal level and in some states to mandate efficiency standards for clothes washers.

New

and

reduce the impact on our environment.

electrical

consumption

Nothing has been

to

standards would target both water

finalized, as of this writing, so these standards are

not mentioned in the book.

There

is little

need for government mandated efficiency standards

for the self-service laundry industry. Manufacturers of commercial laun-

dry equipment have long recognized that the cost of

each year, and as a

result, they

duce equipment that train better than

is

increases

have had an ongoing program to pro-

more energy

government

utilities

efficient.

Competition runs

—no manufacturer can

this

afford to be left at

the station.

Since

utility costs are

ciency standards,

if

a major expense, government mandated

we must have

effi-

them, could only have a positive

impact on the operating costs of a self-service laundry.

xiii

Introduction

There

is

a considerable

edition of Coin Laundries

amount of new information

in this revised

—Road to Financial Independence, and the

author makes every attempt to explain methodology as each ject

is

discussed.

xiv

new

sub-

1

HOW MUCH MONEY CAN MAKE? I

OU CAN BECOME

A

a millionaire!

Many owners and

of self-service coin laundries have done

come

multi-millionaires.

Some have

it.

A

operators

few have even be-

achieved wealth with one giant

store in an outstanding location. Others

have made

their fortunes with

several smaller operations.

One example Eden try,

Prairie,

is

SpinCycle, a privately held corporation based in

Minnesota.

It

owns hundreds of

Or take Smiley 's Denver, Colorado, recently featured on the Dave

and management says they are just getting

Laundromat

stores across the coun-

in

Letterman show.

It

started.

started as a 16- washer, 8-dryer "hole-in-the-wall"

and has grown into a giant laundry covering an entire

city block.

With

over 400 washers and dryers and several other smaller businesses within the laundry itself, total annual receipts are

measured

in millions of dol-

lars.

How many

self-service laundries are there in the United States?

That's difficult to say because

ees or telephone

many

small laundries with no employ-

number don't appear on many of

1

the standard busi-

Coin Laundries

ness

lists.

— Road to Financial Independence

Estimates, though, run as high as 50,000 stores with total

annual revenue of over $4.6 billion.

The American Business Disc has 14,664

"Laundries-Self Service" (SIC code 7215-01). (According

sification

2000

to the

locations under the clas-

U. S.

West Yellow Pages, there are

dries in California alone.) In the article,

"A

1

,448 self-service laun-

Kind of Money

Different

Laundry" (Forbes, March 24, 1997), approximately 30,000 laundries United States collectively generate more than $3 billion in an-

in the

nual revenue. Figures 1-1 and 1-2 provide the latest revenue informa-

from the U.S. Census Bureau

tion available

probably as accurate as

Table [Dollar firms.

3.1.

In millions of dollars.

and are

gets:

Selected Personal Services (SIC

volume estimates are

See

it

as of this writing

Data

72)— Estimated Receipts

for

1996 have been revised

for

Taxable Firms: 1988 Through 1997

to reflect the

use

of

1996 administrative receipts

for

nonemployer

the introduction for a description of the revision process)

1987 SIC code 72

1997

1996

1995

1994

1993

76,938 22,855

73,905 21,533

70,607

66,105

20,709

19,741

62,597 10.075

817

875

932

906

913

761

605

585

(NA)

(NA)

2,815

Kind of business

Personal services Laundry, cleaning, and garment services

721

Power laundries, family and commercial .... Garment pressing and agents for laundries and drycleaners

7211

7212

7213 7215 7216 7217 7218

Linen supply

2,601

2,576

2,573

2,570

3,671

3,468

3,352

3,074

2,949

5,646

5,477

5,493

5,432

Carpet and upholstery cleaning

2,771

2,544

2,353

2,292

2,200

launderers

5,217

4,977

4,492

4,110

5,946

5,814

5,692

5,093

3,780 4,734

15,152

Coin-operated laundries and dry cleaning

Dry cleaning plants, except rug cleaning Industrial

..

...

5,354

7221

Photographic studios,

7231

Beauty shops Barber shops

18,321

16,986

16,382

7241

1,814

1,639

1,609

1,558

14.608 1,514

7261

Funeral service and crematories

10.634

10,034

9,437

8.571

8,193

7291

Tax

3,181

2,947

2,608

2,732

2,239

return preparation services

1987 SIC code 72

portrait

1992

1991

1990

1989

1988

59.597

54,620 17,579 830

54,736

51,832 16.616 824

48,329 15,700

Kind of business

Personal services Laundry, cleaning, and garment services

721

18.805

Power laundries, family and commercial .... Garment pressing and agents for laundries and drycleaners

7211

7212 7213 7215 7216 7217 7218

898

Linen supply

Coin-operated laundries and dry cleaning

Dry cleaning plants, except rug cleaning

..

17,347

818

875

(NA)

(NA)

(NA)

(NA)

(NA)

2.672

2,496

2,387

2,283

2,277

2,931

3,072

3,214

2,927

2,506

5,467

4,758

4.656

1,946

4.538 1.764

4,412

Carpet and upholstery cleaning

1,692

1,410

1,326

Industrial launderers

3,656

3,487

3,311

3,237

3,084

4,280

3,922

3,749

3,412

3,261

14,436

13,138

12,841

12,527

11,521

....

7221

Photographic studios,

7231 7241

Beauty shops Barber shops

1,515

1,466

1,439

1,390

1,434

7261

Funeral service and crematories

7,588

7,119

6,825

6,396

6.198

7291

Tax

1,838

1,643

1,455

(NA)

(NA)

NA

portrait

return preparation services

Not available.

Note: Estimates are for employer and nonemployer firms. Estimates are not adjusted for price changes. not

shown

separately.

See appendix

A, table A-3.1 for estimated

measures

of

sampling

COIN-OPERATED LAUNDRIES AND DRYCLEANING Establishments primarily engaged

known as laundromats,

in

Group

totals

may

include kinds of business

variability (coefficients of variation).

(SIC 7215)

the operation of coin- operated or similar self-service laundry and/or drycleaning equipment. Included are establishments

launderettes, self-service drycleaners. etc. Establishments which operate such machinery

similar locations are included. Establishments

which rent such machinery

(e.g., to

apartment houses) are classified

Figure 1-1

2

in in

apartment houses, dormitories, and Industry 7359.

How Much Money Can Make? I

5

-

1986

'87

'88

'89

'90

'92

'91

'94

'93

'95

'96

'97

Year Estimated Receipts

for

Taxable Firms: 1986 Through 1997

Establishments primarily engaged in the operation of coin-operated or similar self-service laundry and/or dry cleaning equipment. Included are establishments known as laundromats, launderettes, self-service dry cleaners, etc. Establishments which operate such machinery apartment houses, dormitories, and similar locations are included.

Source: U.S. Census Bureau

in

— Coin-Operated Laundries and Dry Cleaning (SIC 7215) Figure 1-2

Since every state requires the registration of an assumed business

name, you can find out the state

by checking with the

tions. Call

your bank, a

tion or the Service

total

state

self-service laundries in a

agency responsible for these

library, the

U.

S.

registra-

Small Business Administra-

Corps of Retired Executives for the name, address

and telephone number of the

More

number of

opportunities to

state agency.

make

big

money with

self-service laundries

exist today than ever before. Self-service laundries

have undergone

when laundry The industry is now a

considerable change since their beginnings in the 1930's

owners used wringer washers with coin

slides.

$3.7 billion dollar a year "high-tech" business employing both cur-

rency and electronic debit cards

new

—and

growing. Hundreds of

laundries are being built each year, and other smart investors are

buying up older, rundown laundries ing

it's still

them

into

all

over the country and convert-

modern, highly-profitable businesses.

3

Coin Laundries

From the late

— Road to Financial Independence

1950's until the mid-1970's, the construction of self-

Many

owner neglect and became rundown, dirty, and undesirable places to wash clothes. As a result, self-service laundries developed a bad image. While many remained profitable, the glamour was gone and investment dollars went service laundries declined.

existing ones suffered

elsewhere.

few years the picture has changed, and investment dollars are pouring back into the industry more than ever before. A new breed of dynamic businessperson is opening, managing, and profiting In the past

from coin laundries. Equipment manufacturers race equipment

"state-of-the-art" dries.

Owners of shopping

erators,

to

to

develop new

meet the needs of modern coin laun-

centers are courting potential laundry op-

and equipment distributors are

in

high gear to serve

this

grow-

ing industry.

What alone, and

has changed? Increasing numbers of single people living

more

single-parent families

who

can't afford the big cash

outlay for a laundry pair and the accompanying high cost of repair.

Then

there's the increase in highly

mobile apartment dwellers

the laundry facilities to be inadequate

show

that the

—or

numbers of working mothers

that find

non-existent. Surveys also is

increasing dramatically,

and many would rather reduce laundry time by using a coin laundry

where several machines are available ties

at

once. Finally, financial priori-

have shifted for many. Forget the necessities, they want personal

gratification

now\ In a choice between a boat and a laundry

pair, the

boat often wins. All of these factors contribute to a changing and growing market for the coin laundry industry.

What of the future? Are there long-term opportunities to make money? Yes! According to economists and sociologists, these trends will continue

and the need for self-service laundries should continue,

too.

As in all businesses, success takes work. Most owners who

self-service laundry

do so through trial and error, sometimes called "the school of hard knocks." Those who survive their mistakes often go on to achieve great financial security, independence, and recognistrike

it

rich

tion as outstanding business people.

4

How Much Money Can Make? I

Why do some get rich while others miss the boat? It all boils down to

one thing

—

a lack of knowledge. But where can you turn for knowl-

edge? Manufacturers? They must

sell their

business. Distributors? They, too,

must

or they

fail.

You might talk to

products or they are out of

sell their

products and services

other laundry owners

—your

future

com-

would they really help you? What about an attorney or accountant? While attorneys understand the law and accountants can interpret figures, this does not necessarily make them good business

petitors, but

consultants

if

they are unfamiliar with this industry.

Until now, good, unbiased information didn't exist. This led to the failure of countless self-service laundries that operated at a loss or pro-

duced minimal

profit as a result of

bad advice.

now have an objective and complete source of valuable information on how If

you plan

to succeed.

to

purchase or build a self-service laundry, you

The book you're holding covers

dry business from profits. It will

A

to Z, filling the

the self-service coin laun-

gap between you and potential

guide you every step of the way.

You

will learn

how

to:

•

Evaluate the potential of a location

•

Decide whether

•

Assess an existing business

•

Avoid costly

•

Negotiate a purchase from a position of power

•

Verify the profit of an existing business without relying on the

to

buy or

pitfalls

start a

new one

of starting or buying a business

owner's books

new

•

Estimate the profits of a

•

Conduct a market survey and use the information

•

Plan and build a modern, highly-profitable coin-operated laun-

business effectively

dry •

Evaluate, select, and save

money on

the purchase of coin-oper-

ated laundry equipment •

Negotiate a lease to your advantage and prevent future prob-

lems with the landlord •

Estimate equipment, construction, and operating costs

5

Coin Laundries

— Road to Financial Independence

•

Save tens of thousands of dollars on costs

•

Find and work with qualified contractors and subcontractors

•

Develop an operating plan

•

Create and assess your financial statements for greater profit

•

Obtain affordable financing to meet your needs

•

Save thousands of dollars

in advertising while substantially in-

creasing volume

you will encounter valuable information on security, maintenance and repair, accounting procedures, energy conservation and laundry management, as well as tips on how and when to seek In addition,

professional assistance. If

much

you as

buy or build, you can save as more) by applying the information

are looking for a business to

$30,000

to

$50,000 (or

contained in this book! If you are already a success in the self-service laundry business, this book will show you

how

to increase that suc-

While there are no guarantees, everything you need to know and a detailed, step-by-step plan to help you implement it is before you. Read the entire book before starting your project. It is divided into many "bite-sized" pieces, with areas of overlap. The book is purposecess.

fully constructed to

show you how

to eliminate costly mistakes that

mean the difference between success and know can (and most likely will) hurt you. will

6

failure.

What you

don't

2 THE COIN-OPERATED LAUNDRY BUSINESS FOR ME?

IS

LET'S LOOK AT the advantages of owning and operating a selfservice laundry:

•

Good market

•

Limited competition

•

Good

•

Unlimited opportunity

•

Good

•

Simplicity

stability

cash flow

pre-tax net profit

GOOD MARKET STABILITY Like housing and food, everyone needs clean clothes. The demand for clean clothes

is

strong whether the

poor economy, people

may

economy

forego an automobile,

or leisure items, but they will not

wear

7

is

bad or good. In a

new

dirty clothes.

clothes, luxury

!

Coin Laundries

— Road to Financial Independence

LIMITED COMPETITION The big driven

can

many

sell

makes

shift

toward mass merchandising

in the past

20 years has

small retailers out of business. Big chains have clout and

products at prices lower than independent merchants can. This it

independent entrepreneurs to succeed,

difficult for small,

whether selling hardware, drugs, appliances, clothing or groceries. But this is not the case

industry can

make

with the self-service coin laundries. a better deal than

you can when

it

No

comes

ery, natural gas, electricity, water, rent, construction, or

one to

in the

machin-

employees.

GOOD CASH FLOW Money inventory.

not tied up in inventory because

is

It's

plague of the

it

requires

little (if

any)

no bad checks, often the also no accounts receivable, so

a cash business, so there are

There are

retail industry.

no uncollectible accounts or late payment problems. You will never have to repossess a load of washed clothes. If cash runs short, wait several hours and then

open the coin boxes. Quarters accumulate

like

snowflakes on cold concrete

To illustrate, Figure

2- 1

shows a monthly cash flow statement

for a

self-service laundry with the following equipment:

Ouantitv

8-Pound-Capacity

Front-Load Washers

10

35-Pound-Capacity

Front-Load Washers

10

50-Pound-Capacity

Front-Load Washers

2

80-Pound-Capacity

Front-Load Washers

14

30-Pound-Capacity

Double-Chamber Dryers

24

50-Pound-Capacity

Single-Chamber Dryers

8

1

The cash flow margin get

Description

Size

month of September was 31.4%. (You percentage cash flow margin when you divide net cash by total

revenue.)

When

for the

the 7-year loans for equipment and construction are

8

Is

the Coin-Operated Laundry Business for

Me?

SELF-SERVICE LAUNDRY

MONTHLY CASH FLOW STATEMENT September 1997

Laundry Revenue Washers $2,124 5,445

18's 35's OU o 80's Tntal

1,551 \J>

1

D,Uc/0

Dryers

Double 30's Single 50's Total

$2,698 3,963 6,661

Revenue-Washers & Dryers

$22,756

Vending Revenue Total

1,593

Revenue

$24,349

Variable Costs

$4,323

Utilities

924

Vending Total Variable Costs

Gross

5,247

$19,102

Profit

Monthly Payouts Lease Payment Equipment Loan Payment Construction Loan Payment Systems Development Charges

$3,625 4,150 1,328

214 347 463 500 225 86 63 55 318 82

Insurance Advertising ~ Janitorial

Security

Maintenance Operating Supplies Accounting & Legal Property Tax Escrow Miscellaneous Total Payouts

11,456

Net Cash

$7,646

Figure 2-1

owner will no longer have a monthly principal and interest payment of $5,478. Net cash would then jump from $7,646 to a whoppaid

off, the

ping $13,124

—

a cash flow margin of 53.9%.

9

Coin Laundries

— Road to Financial Independence

UNLIMITED OPPORTUNITY Anyone

—from college student

to retiree,

a highly successful

owner and operator of a

You can devote

your time or just part of

all

and even

YOU —can be

self-service coin laundry. it

to

your business. With

amount of freedom to pursue other interests. You can stay small but profitable, or you can build a multi-store, multi-million dollar corporation. No matter which you choose, your opportunities are unlimited. proper management, you can

still

have a

fair

GOOD PRE-TAX NET PROFIT Net

profit for a well-run coin laundry

can range from 25 to 35

Some have exceeded 40 percent. Compare this to other

percent pre-tax.

service or retail businesses!

Take a look

at the

monthly

profit statement

on the following page

same coin laundry: The profit margin for the month of September was 35.5% pre-tax. (You get percentage profit margin when you divide net profit before taxes by total revenue.) Assuming a fairly steady sales volume, the net profit of $8,659 for September would project out to over $103,000 for (Figure 2-2) for the

a 12-month period. If

purchasing this coin laundry took $120,000 in cash for a

down

payment and start-up costs, the owner would be realizing a return of 85.8% of his original cash investment during this 12-month period. Compare this to the earnings for $120,000 at present bank interest rates, or investment in the stock market or real estate investment trusts. It

should be noted that while

this

laundry has only 30 washers, the

wash capacity

for all of these washers for a single cycle totals 1,154

pounds. This

equivalent to a laundry with over 100 top loading wash-

ers.

is

Other than the amount of space occupied,

this is

not a small laun-

dry.

SIMPLICITY Because there dries don't

is

very

little (if

any) inventory, self-service laun-

have to deal with inventory taxes, inventory

10

theft,

obsolete

Is

the Coin-Operated Laundry Business for

Me?

SELF-SERVICE LAUNDRY

MONTHLY CASH FLOW STATEMENT September 1997

Laundry Revenue Washers $2,124 5,445 6,975

18's 35's 50's 80's Total

1,551

$16,095

Dryers

Double 30's Single 50's Total

$2,698 3,963 6,661

Revenue-Washers & Dryers

$22,756

Vending Revenue Total

1,593

Revenue

$24,349

Variable Costs

$4,323

Utilities

924

Vending Total Variable Costs

Gross

5,247

$19,102

Profit

Monthly Payouts Lease Payment Equipment Loan Payment Construction Loan Payment Systems Development Charges Insurance Advertising ~ Janitorial

Security

Maintenance Operating Supplies Accounting & Legal Property Tax Escrow Miscellaneous Total Payouts

$3,625 4,150 1,328

214 347 463 500 225 86 63 55 318 82 11,456

Net Cash

$7,646

Figure 2-2

inventory, inventory close-outs, inventory handling and storage costs,

damaged inventory

write-offs, inventory insurance, or complicated in-

ventory accounting procedures.

11

Coin Laundries

— Road to Financial Independence

Since there are no accounts receivable, there are no collection prob-

The few accounts payable require a minimum of records and attention. You can therefore devote your time to matters lems or records that increase

to keep.

your net

profit.

Self-service laundries can be run without employees. This

no

payroll, payroll taxes, payroll accounting, or

employee

theft.

means

When

properly managed, unattended self-service laundries are simple, highly profitable businesses.

Is this

business for you?

Read

on.

12

3 THE MODERN SELF-SERVICE

LAUNDRY

COIN LAUNDRIES HAVE changed considerably over the years. The

many

some of them puts the decoration of shame. Matching woodwork, wallpaper, lush

quality of the interiors in

luxury

homes

to

carpet, decorator ceilings,

and fine furniture can be found in many laun-

Some stores even boast decorator lighting, hanging plants, and framed pictures. Ample background lighting makes these coin laun-

dry

facilities.

dries visible

Some

and

attractive to people as far

away

as the street.

laundries provide a comfortable lounge area for customers

while others dispense popcorn, soft drinks, coffee, candy-bars, sandwiches and other snack foods from convenient vending machines.

VCR's and large laundries.

and toys

to

screen television sets can be seen at other self-service

Many even

feature an enclosed area with juvenile furniture

keep children amused and prevent their annoying customers.

LARGER LAUNDRIES In the past, the average self-service laundry occupied between

and 1,500 square

feet.

Today,

it's

common

13

1

,000

to find self-service laun-

Coin Laundries

dries

— Road to Financial Independence

occupying from 2,500 to 3,500 square

dries are over 5,000 square feet in size,

8,000 square

feet of space.

Many

laun-

and some occupy more than

feet.

LARGER EQUIPMENT The

typical self-service laundry of years past contained several

rows of coin-operated, top-load washers with a 10capacity seen in the typical to

home

to

12-pound wash

washer, and perhaps one or two 30-

35-pound capacity "rug washers". Today's

self-service laundries

monly host rows of 18-pound, 35-pound and 50-pound washers as two to four giant 75- to 80-pound capacity washers.

com-

as well

Dryers are changing too. They're bigger (up to 80 pounds), they dry

faster,

and there are a lot more of them. Today's dryers

will

keep up

with the washers, and some will even dry clothes faster than they can

be washed. The national trend

more

space.

is

towards larger washers and dryers in

Laundry customers are demanding

this,

and successful

laundry owners are meeting their needs.

HIGH-TECH LAUNDRIES—A TECHY' S HEAVEN Modern technology

is

changing the self-service laundry industry.

Computerized washers and dryers can now be equipped to accept smart cards or debit cards. These cards increase security by concentrating

of the

money

countability.

in

all

one or two locations and by providing internal ac-

They

also allow for incremental pricing, such as increases

or reductions of 50, along with the ability to change prices in minutes instead of hours. Washers

now have multi-level pricing capability,

with

pricing based on cycle selection.

New technology is even allowing laundry owners to manage many self-service laundry functions

dem, including changing

from home using a computer and mo-

prices,

doing up-to-the-minute accounting,

performing security checks, analyzing machine problems, and doing

complex analysis based on figures

that

change by the minute. This

al-

lows effective management of a large chain of self-service laundries with a

minimum

of personnel. (More about this in Chapter 10.)

14

The Modern Self-Service Laundry

you want

If

dry, a it

to sit in

your

home

office

and

still

monitor your laun-

system of cameras, monitors, a computer and a

Not only can you observe what

possible.

but you can even talk with customers and

is

modem can make

happening

in the laundry,

make promotional announce-

ments.

THEY'RE NOT JUST LAUNDRIES ANYMORE Many

laundry owners have successfully combined their laundries

with other businesses, such as convenience stores, taverns, or fast food restaurants.

One

The

result is increased

notable example

is

Wire

customer

traffic for both.

& Wash in Charleston,

South Caro-

lina

which combines a

Bar

& Deli in nearly 5,000 square feet of space. The restaurant serves

breakfast, lunch

by the

self-service laundry with Canterbury's Espresso

and dinner, with 80 percent of its customers generated

self-service laundry.

Also featured are two larger screen

sions, a 50" giant-screen television, a

televi-

lounge area with three leather

couches, and a closed-off children's play area.

Another

is

the professionally-designed

Harvey Washbangers

in

Nashville, Tennessee, which possesses a 40-foot lighted geometric tower

topped with a corrugated aluminum pyramid, and a fully landscaped patio with accent lighting.

flooring and light

The

interior features light gray

ceramic

tile

brown brick walls accented with corrugated alumi-

num. Adjoining the laundry separated by glass block.

is

a full-service, upscale bar and restaurant

An addition to seven television sets, dart games

and video games are provided for the customers. Computers are

avail-

able for public Internet access and e-mail. Indicator lights on an electronic board in the bar provides patrons with up-to-the-minute infor-

mation on the status of their laundry. Self-service laundries offer

and

interior design,

many

opportunities for creative layout

and manufacturers and distributors of coin laundry

equipment can provide pictures and drawings of various arrangements.

The next time you pass an look.

old,

rundown laundry, stop and take another

A little mental creativity applied to the interior layout and decor

could set up a potential gold mine!

15

— Coin Laundries

Attendants

at

— Road to Financial Independence

some coin

laundries will wash, dry, fold, and pack-

age a customer's laundry for a small

fee.

Many

facilities offer a

economy bulk dry-cleaning

stop clothes care service with

sional dry-cleaning in addition to the self-service laundry.

volume

window

stores even offer a drive-up

and pick up

their clothes without

one-

or profes-

Some higher-

so customers can deliver

having to park. This

is

especially

convenient in areas subject to bad weather.

Today's modern coin laundry generates mountains of quarters for the owner. Late

parking

lot,

one night, a police officer patrolling a shopping center

trunk of a big Buick.

from the ground trunk,

man trying to load a large canvas bag into the He pulled and tugged at the bag, trying to get it

observed a

to the

bumper.

It

finally rolled over the lip

and into the

and the rear of the Buick dropped seven inches.

The

officer

approached the

man behaving

suspiciously and found

bag contained about 20,000 quarters. The "suspect," owner of the laundry in the shopping center, had just finished emptying his mathat the

chines and was taking his haul

suggested that the

man

if

this

home

was dangerous,

to count. Stunned, the officer

particularly at night,

he wasn't concerned about someone running off with his

money. "Officer, anyone strong enough have

and he asked

to run off with this

bag can

it!"

Successful businesses don't occur by accident. They take careful

planning and hard work. For the beginning entrepreneur, starting a business

is

a bit like trying to negotiate a minefield without a

one wrong move can fully.

They provide

spell disaster.

the

map

Read

16

map

the following chapters care-

that will take

minefield to success!

new

you safely through

the

4 SELECTING YOUR LOCATION

LOCATION IS ABSOLUTELY critical to the success or failure of any

retail business,

what might happen illustrated in

if

Chapter

but particularly to a coin laundry. Consider

you selected a poor 2, let's

location.

Using the laundry

imagine that you sign a lease for a ten-

year commitment of over a half million dollars with a monthly pay-

ment of $3,625. You then prepare the space

for the

equipment

at a cost

of $100,000, including plumbing, electrical, sheet metal, and carpentry.

Next, you purchase equipment and install

You open After that

the laundry, and it

levels off,

it

it

at a cost

grows rapidly for the

of $312,448.

first six

months.

and no amount of advertising increases the rev-

enue. Your monthly gross revenue falls $1,000 short of paying the lease

and

utility

If

expenses.

you close your business, you must

to the landlord.

You could run savings, and

You might sublease

still

pay $3,625 each month

the space or declare bankruptcy.

the business at a loss, put $1,000 a

hope

for a miracle.

Even

if

the space

month

is sublet,

into

it

from

you cannot

recover the $100,000 in materials and labor for the plumbing, electrical, sheet metal,

and carpentry work or for the monthly systems devel-

17

Coin Laundries

— Road to Financial Independence

opment charges. And what about your equipment? You could use another (better) location or perhaps

sell

it

at a fraction

it

at

of the original

cost in order to pay off your equipment loan. If this scares ter.

A

you,

it

should. Selecting a bad location can be a disas-

manufacturer, a distributor, a consultant, a leasing agent, or the

owner of a shopping center may lead you to believe that a particular location is good; but if it's not, you and you alone will pay the price. In this chapter you will learn how to pick a location that will ensure your success.

THE GENERAL LOCATION Successful laundries can be found in urban, suburban or rural eas.

ar-

Before compiling demographic information, you must determine

how

far

people will travel to use your laundry. This

laundry's draw."

Use

the following rule-of-thumb

is

when

known

as "the

estimating the

draw:

Urban Suburban Rural

-

1/2 mile (+)

up

to 3 miles

up

to 10 miles (+)

All things being equal people tend to use the laundry nearest to

them, so most of the customers will live within a couple of blocks. The greater the distance customers are

from the laundry, the thinner

customer base. However, a good, well-run laundry with

tomer amenities can draw for many miles, even

When you

in

lots

of cus-

an urban market.

look for a business location, you must consider the

lowing questions:

•

Who

•

What

are their needs?

•

When

will they

•

Where

•

Why

are your prospective customers?

be in need of your product or service?

are they presently getting the product or service?

should they buy from you?

18

the

fol-

Selecting Your Location

If

you plan

to build or

purchase a self-service laundry in a metro-

politan area, consider the following

•

Demographics

•

Competition

•

Market Trends

Demographics As you compare

locations:

potential markets, look for:

•

Large families

•

Lots of renters

•

Low income

The

when comparing

ideal location for a high- volume self-service laundry

is

a very

densely populated area consisting of working people whose earnings are classified as

medium-

to

low-income. There should be a high per-

centage of both single-family and multiple-family rental dwellings.

Make

sure the area has a heavy concentration of younger people in

their childbearing years.

An older population of predominantly retired

people creates very

business for a self-service laundry.

little

Look also for a heavy concentration of families as opposed to people.

A

significant portion of the population

single

must be children, and

the projected birth rate should be higher than average. In this business dirt is

your

ally,

and children create "mountains" of dirty clothes.

A

high birth rate guarantees future business by providing a continuous supply of dirt-attracting children.

Neighborhoods attract a highly

their

own

filled

with apartments and rental houses usually

mobile group of people

laundry appliances.

service laundry. This

is

Many

who

often cannot afford to buy

on

friends, parents, or a self-

rely

particularly true for single-family dwellers

central laundry facilities of an apartment

A

word of

caution:

are not available.

Apartment houses don't automatically mean

self-service laundry customers. In ers build

complex

where

more apartments than

many

areas of the country, develop-

the market will bear. This leads to re-

19

— Coin Laundries

— Road to Financial Independence

ductions in rent or other promotional services being offered to renters.

Some apartments contain washers and dryers or washer and dryer hookups. Renters who have their own washers and dryers only use a laundry to wash blankets, bedspreads, rugs or an occasional sleeping bag or

when

their

own

laundry equipment

is

broken.

Not all laundry business comes from low-income households. Most households, regardless of income, use laundries for large items such as

and sleeping bags. Higher income households

rugs, blankets, quilts

and young professional couples are also good prospects for drop-off laundry services.

Be

sure to verify your observations with solid demographic data.

United States law requires a census every 10 years, with the information

made

public. Since all

latest census,

you need

demographic information comes from the

to allow for possible

your target market since the

demographic changes

in

last count.

How To Get Demographic Reports Commercial

real estate agents

can provide you with demographic

information in specific areas, or you can obtain the figures directly

from the U. S. Census Bureau by computer. To do this, first go to the library and write down the census tract numbers from a map of census tracts in

your area of

interest.

Next, log on to the Census Bureau's

home page

at:

http://

www.census.gov. Click on "Access Tools" and then click on "Census

Lookup." Finally, click on "STF 3A." Follow out the interactive pro-

gram of clicking on your preferred geography or data items and clicking on "Submit" when you are through with each selection. (Census tract level data is found under circle item, "Go To Level State County") There are nearly 300 tables of census data available puter.

You don't need

to

download everything, but

it's

you by coma good idea to

to

download the master list of tables then study their descriptions to determine which tables you wish to retrieve, and record their numbers before proceeding further.

you don't want to compile demographic information yourself, you can pay a demographics company to do it for you. One of the If

20

Selecting Your Location

largest

demographics companies

Claritas, Inc.

is

For areas east of the

Mississippi River except Wisconsin and Illinois call 1-800-876-6732. All other states and outside the

US

1-800-234-5973. Their

call

web

sites are

www.claritas.com and www.claritasexpress.com. You can email

them

[email protected].

at

Figure 4- 1 on the following page shows the demographic information for a metropolitan

market

we

will call

"James Crossing." Notice

By Race" and "Households By Race." Legally, only the government can ask questions involving race. So why include the categories "Persons

these categories in a demographics report?

You and I may not this

like

it

but poor race relations

condition exists in and around your location,

it

is

a fact of

life. If

can substantially

number of potential customers for your laundry. With this in mind, you would be well advised to do a thorough investigation of affect the

your target market.

How To Use Demographic Information Various formulas circulating in the coin laundry industry are designed to convert demographic information into potential laundry revenue, based on an average amount of

average laundry user.

How

are desperately in

problems are inherent

in

week by the $5.00 per week and

spent per

Some estimates are as low

others as high as $10.00 per week.

100% when you

money

as

do you deal with a spread of

need of accuracy? Several other

formulas using an average weekly dollar

amount:

1

.

What

is

an "average" laundry user?

alone, or

is it

Is

it

a single person living

wash how can you

a person using a self-service laundry to

number of other people? If the develop an average when you don't know clothes for a

latter,

exactly

how many

other people are involved? 2.

What about

inflation? In

some

areas, laundries are rapidly in-

creasing their vend prices to compensate for large increases in utility costs. 3.

What

of competitive situations? Apartment house dwellers are

likely to

spend more money drying their clothes in an apart-

21

Coin Laundries

— Road to Financial Independence

JAMES CROSSING DEMOGRAPHICS Rentals - Breakdown By Rent

Persons By Race White

13,495

93%

229 348 367

2% 2% 3%

Black Asian Other Total Persons

14,439

1

Less Than $300 $300 - $349 $350 - $399 $400 - $449 $450 - $499 $500 - $549 $550 Or More Total Renter Occupied Units

00%

3%

395

Persons Of Hispanic Origin

No Cash Rent

Persons By Age Pre-School 5 -1

Years Years Years 30 44 Years 45 - 64 Years Over 65 Total Persons 1

10%

3,017 3,589 2,766

Rooms Room Rooms Rooms Rooms Rooms Rooms Rooms Rooms Rooms Or More

2

1

3

19%

4

8%

14,439

100%

5 6

7 Per Capita Income - 1989

$13,120

Black

5,370

93%

95

2% 1% 3% 1%

Indian

71

Asian

158

Other

61

Total Households

5,755

1

Persons In Household 1 Person 2 Persons 3 Persons 4 Persons 5 Persons 6 Persons

1,977 1,090 811

Total Households

Household Income - 1989 Less Than $5,000 $5,000 - $14,999

1

20% 00%

4%

1,236 1,160 1,018

17% 21% 20% 18%

530 515 93

9% 9% 2%

5,755

100%

1

,602

1

,257

Home

Other Total Housing Units

Year Housing Units Built 1980 After 1960- 1980 1940- 1960 1 939 & Earlier Total Housing Units

4% 10% 26% 21% 14% 11%

857 682 383 403 6,047

6% 7% 1

2,319 2,093

9% 4%

558 227

214 431

531

566 710 306 172 17 6,047

1,345 3,516 1,068 118 6,047

00% 1% 13% 38% 35%

62 788

2,947 153

20 - 49 50 Or More

1%

14

Housing Units In Structure 1 Detached 1 Attached 2

10 - 19

100%

234 969

Median Household Income - 1989

9%

263 586

6,047

Mobile

$15,000 - $24,999 $25,000 - $34,999 $35,000 - $44,999 $45,000 - $54,999 $55,000 - $99,999 Over $100,000 Total Households

3,101

Total Housing Units

3-4 5-9

5% 3% 0%

288 145 13 5,755

00%

25% 34% 19% 14%

1,431

7 Or More

Bedrooms In Housing Units None 1 Bedroom 2 Bedrooms 3 Bedrooms 4 Bedrooms 5 Or More Bedrooms

3%

147

Hispanic Households

Households

8 9

Total Housing Units

Households By Race White

16%

501

275 613

Housing Units By

9% 21% 25%

.205

1

636 668

8%

1,095 1 ,403 1 ,364

12-18 19-29

2% 5% 6% 21% 22%

54 162 192

1

00% 49%

2% 4% 7% 9% 9% 12%

5% 3% 0% 100%

22% 58% 18%

2% 100%

$28,323

On

Public Assistance

-

1

989

Renter Occupied Housing Units

Owner Occupied Housing

Units

Total Housing Units

233

4%

3,101

57% 43%

2.352 5,453

100%

Medium Value Of OwnerOccupied Housing Units

$65,970

Figure 4-1

ment house laundry than inflate potential 4.

in a self-service laundry.

This would

laundry revenue.

Competition also holds

down vend

prices in areas with a heavy

concentration of self-service laundries. For example, free dry-

22

Selecting Your Location

ing has been offered as a promotion in tive areas,

blowing the averages right out of the water.

What about

5.

some highly competi-

the nature of the geographical area? There can be

big differences in vend prices between urban and rural areas as

well as in different sectors of the country. If not considered, these factors tend to distort revenue projections based on a

weekly expenditure estimate.

A more accurate revenue projection would be achieved if based on average poundage rather than on an average dollar amount. Inflation

and competition have

little

impact on formulas relying on poundage.

Seasons will have some impact, but the annual poundage of clothes

washed will stay fairly consistent in a given area. Geography will impact, but not as much as you might imagine. A hot climate causes clothes to soil much faster, and thus washed more often. A cold climate requires wearing more clothes. A dry climate produces dust and dirt in large quantities, and a wet climate produces mud. You cannot escape dirty clothes simply by moving from one part of the country to another.

Washer Capacity Over

vs.

the years,

Pounds of Clothes

washer capacity

in top-loading

exaggerated beyond redemption. This

is

washers has been

true of over-enthusiastic mar-

keting departments on the manufacturing level and by sales people on the retail level, all pandering to competition and the public's ongoing

demand

for "bigger."

top-loading

The

home washer

fact is that the is

"20-pound giant capacity"

generally overloaded beyond 10 pounds

of dry clothes and the "regular capacity," beyond 8 pounds of dry clothes.

These

facts

have been supported over the years

the request of both the

On

government and private

the average, a person uses

in testing

conducted

at

sectors.

24 pounds of washer capacity per

week. That's 24 pounds of washer capacity, not 24 pounds of clothes. This ity

is

a significant point. While a

top-load

home washer

is

full

load for the typical large-capac-

10 pounds, the same washer could wash

12 pounds of work pants, but less than 6 pounds of bed sheets per single load.

23

Coin Laundries

The reason

— Road to Financial Independence

pounds of washer capacity instead of pounds of clothes is obvious when estimating revenues generated by your washers and dryers. Based on clothes poundage, 9 pounds of work pants would require two 8-pound-capacity washers. If your washers vend at $1.25 per cycle, you might estimate your revenue to be $2.50. In fact, you would only receive $1.25 because 9 pounds of work pants would almost certainly be washed in one machine. for using

Rated Washer Capacity vs. Actual Usage Another point must be considered when using demographic information to estimate revenue potential. While self-service laundry users have a tendency to overload top-load washers, they also tend to underload front-load washers. In other words, the capacity of a front-load

washer may be rated

more

35 pounds, when the average loaded weight

at

is

25 to 28 pounds of dry clothes. (This affects laundry sizing

like

and revenue projections as you

Once enlightened about

will see later in this chapter.)

these pitfalls,

how do you go

about con-

verting demographic information into an estimate of potential laundry

revenue in your target market? spent per

ment

in

month by

First, calculate the

amount of money

the average household using coin laundry equip-

your target market. To do

this, visit

the nearest self-service

laundries as well as several of the largest apartment house laundries in this area to learn the cost

(Prices offered target

of washing a pound of clothes. (See Figure 4-2.)

up by competitive

self-service laundries in your

market don't always make sense, but they must be used when

determining potential laundry revenue.)

The average person uses 24 pounds of washer capacity per week. In the target market shown in Figure 4-2, this average person would spend $2.02 (24 pounds at 8.40 per pound) per week or $8.75 per month to wash clothes. (For the moment, drying is left out of the equation.) According household

to the

demographics

in the target

illustrated in Figure 4-1, the average

market has 2.5 people (14,439

total

population

divided by 5,755 households). This means that the average household

using coin laundry equipment would spend $21.87 ($8.75 times 2.5 persons) per

month

to

wash

clothes.

24

Selecting Your Location

JAMES CROSSING MARKET PRICING ANALYSIS

Rated

Total

Capacity Of

Pounds

Quantity

Cost

Total

To Wash Per Pound (3

Washers In Pounds

Washer Type

Of

Vend

Washers

Price

12

T/L

8

$1.25

96

$10.00

10.4c

18

F/L

12

$1.50

216

$18.00

8.3c

25

F/L

35

F/L

6

$2.75

210

$16.50

7.9C

50

F/L

4

$4.00

200

$16.00

8.0C

75

F/L

722

$60.50

8.4C

Of Rated Capacity (T)

Revenue Per Cycle (2)

T/L = Top Load

F/L= Front Load - Rated Capacity Of Washer In Pounds Times Number Of Washers - Vend Price Times Number Of Washers (3) - Total Revenue Per Cycle Divided By Total Pounds Of Rated Capacity (T)

Figure 4-2

What about the cost of drying

those clothes? Dryers in self-service

laundries generally dry faster and at less cost than does the type of

dryer usually found in apartment house laundries. For this reason, drying costs are normally determined by the nearest self-service laundry

competitors.

Good

laundry management dictates that the overall dryer

revenue should be between

40%

and

50%

of the washer revenue. This

can be controlled by adjusting drying time and/or the temperature of the dryers. In this market,

revenue. This ity

we

means

estimate drying revenue to be

that the average

46%

household patronizing

of washer this facil-

would spend $10.06 (46% of $21.87 monthly wash expenditure)

to

dry clothes. In short, the average household using a self-service laundry in the target market spends

at least

their clothes.

25

$32 per month

to

wash and dry

Coin Laundries

You need

to

know

$25,000 larly

visit

that at least

20%

than $15,000 and

— Road to Financial Independence 50%

of households earning less

of households earning between $15,000 and

a laundry on a regular basis.

About 30% of renters regu-

15%

use an outside laundry. Overall, approximately

lation uses coin laundry

equipment on a regular

These figures

basis.

have been established over the years by coin laundry

of the popu-

specialists,

and

they are not in dispute.

You now have

the information

you need

to convert

demographic

data into an estimate of total available market revenue using the three

formulas depicted in Figure 4-3 on the following page. The narrow spread

among

the revenue forecast results of the three formulas indi-

Remember, be shared by the com-

cates that the estimates have a high degree of accuracy. this

market revenue

is

not yours alone, but will

peting laundries in the target market.

Don't get bogged down the overall picture.

in percentages

and figures and

You must apply common sense

in

fail to

see

your analysis, as

shown in the next example. The demographics and resulting market revenue forecasts are shown in Figures

4-4 and 4-5 (pages 28 and 29) for a small rural town sur-

rounded by a national

forest.

There are no other towns within a 30-mile

radius and few people live in the surrounding area. ist

trade cannot be

depended upon

produce revenue

to

Figure 4-5 shows major variance

is

sistance.

69%

year long.

all

Why

is this

the case?

based on household income. Figure 4-4 shows that

households

fall into

lower income categories, with

The median household income

is

Formula

64%

14% on

of the

public as-

very low at $17,871, and

of the rental households pay very low rent. The housing

therefore,

tour-

among the three formulas used to

generate the market revenue forecasts.

#1

The seasonal

is

older;

mortgage payments are lower.

What this means is that household expenses (cost of living) are much lower in this town than they are in most metropolitan areas. Consequently, households have as

than their urban counterparts.

much,

And

if

not more, disposable income

disposable income

use to purchase washers and dryers, whether

Formula #2

is

new

26

is

what people

or used.

based on occupied rental housing

Figure 4-4, the number of rental housing units

is

As shown in 26%. In many

units.

low

at

Selecting Your Location

JAMES CROSSING MARKET REVENUE FORECAST BASED ON HOUSEHOLD INCOME Estimated

Household

Households

Income

Under $15,000

1,203

$15M-$25M

1,236

Percent

Households

Using

Using

Laundries

Laundries

50% 20%

601

Per Month Household Laundry Expenses

247 848

(14% Of

$32

Market

Revenue Forecast

$27,136

Total Households)

JAMES CROSSING MARKET REVENUE FORECAST BASED ON RENTAL HOUSING UNITS Occupied

Estimated

Rental

Percent

Households

Housing

Using

Using

Units

Laundries

Laundries

Per Month Household Laundry Expenses

930

$32

30%

3,101

Market

Revenue Forecast

$29,760

(16.2% Of Total Households)

JAMES CROSSING MARKET REVENUE FORECAST BASED ON PERCENTAGE OF POPULATION USING SELF-SERVICE LAUNDRIES Estimated

Estimated

Percent

Population

Average Persons

Households

Total

Using

Using

Per

Using

Population

Laundries

Laundries

Household

Laundries

Per Month Household Laundry Expenses

14,439

15%

866

$32

2.5

2,165

(15% Of

Market

Revenue Forecast

$27,712

Total Households)

Figure 4-3

small communities ents to children,

homes

and

are transferred within the family,

this tends to

from

par-

depress the rental market. Thus, the

market revenue forecast of $3,390 would probably be on the low

27

side.

Coin Laundries

— Road to Financial Independence OAKRIDGE DEMOGRAPHICS Rentals - Breakdown By Rent

Persons By Race White

3,200

96%

Black

11

Asian Other

22 91

0% 1% 3%

3,324

100%

115

3%

Total Persons

Persons Of Hispanic Origin

Persons By Age

1

Over 65

636 566

11% 10% 10% 25% 19% 17%

3,324

100%

-18 Years 9 - 29 Years 30 - 44 Years 45 - 64 Years 12

821

Total Persons

Per Capita Income - 1989

1%

$550 Or More Total Renter Occupied Units

_Q

0%

379

100%

22

2% 4% 7% 26% 31%

Rooms Room Rooms Rooms 4 Rooms 5 Rooms 6 Rooms 7 Rooms 8 Rooms 9 Rooms Or More 1

2 3

Total Housing Units

Black Indian

Asian

Other Total

4

Households

Hispanic Households

1,307 7

98% 1%

6 6 13 1,339

0% 0% 1% 100%

47

4%

Bedrooms In Housing Units None 1 Bedroom 2 Bedrooms 3 Bedrooms 4 Bedrooms 5 Or More Bedrooms Total Housing Units

Persons In Household 1 Person 2 Persons 3 Persons 4 Persons 5 Persons 6 Persons 7 Or More Total Households

171

27% 35% 17% 13%

63 50 2

5% 3% 0%

1,339

100%

356 470 227

Household Income - 1989 Less Than $5,000 $5,000 - $14,999 $15,000 - $24,999 $25,000 - $34,999 $35,000 - $44,999 $45,000 - $54,999 $55,000 - $99,999

3-4 5-9 10 - 19

20 -49 50 Or More Mobile Home Other Total Housing Units

18%

244 112 65 48 19

8% 5% 4% 1%

1,339

100%

Median Household Income - 1989

2

32% 21%

281

Over $100,000 Households

Housing Units In Structure 1 Detached 1 Attached

11%

143 427

Total

51%

39

13% 15% 10%

18

5%

51

58

Housing Units By

$9,169

Households By Race White

17 192

8%

276 357 322 346

Pre-School 5 -1 1 Years

5%

No Cash Rent Less Than $300 $300 - $349 $350 - $399 $400 - $449 $450 - $499 $500 - $549

Year Housing Units Built After 1980 1960- 1980 1940- 1960 1939 & Earlier Total Housing Units

61

109 379 460 219

15%

65 23

9% 4% 2%

1,464

100%

126

2%

32 162

11% 39% 38% 9%

573 558 128

11

15k

1,464

100%

978 57 65

67%

4% 4%

18

1%

34 22

0

2% 2% 0% 0%

281

19%

9 1,464

100%

0

525 639 174

9% 36% 43% 12%

1,464

100%

126

$17,871

Households On Public Assistance

- 1989

Renter Occupied Housing Units

Owner Occupied Housing

Units

Total Housing Units

181

14%

379 1.085

26% 74%

1,464

100%

Medium Value Of OwnerOccupied Housing Units

$40,308

Figure 4-4

Formula #3 is probably the most accurate in its forecast, but unwise to risk $150,000 on "probably." A smarter move would be

28

it's

to

Selecting Your Location

OAKRIDGE

MARKET REVENUE FORECAST BASED ON HOUSEHOLD INCOME Estimated Percent

Households

Using

Using

Households

Laundries

Laundries

Under $15,000

570

$15M-$25M

281

50% 20%

285 56

Household Income

Per Month Household Laundry Expenses

$30

341

Market

Revenue Forecast

$10,230

(25.5% Of Total Households)

OAKRIDGE

MARKET REVENUE FORECAST BASED ON RENTAL HOUSING UNITS Occupied

Estimated

Rental

Percent

Households

Housing

Using

Using

Units

Laundries

Laundries

Per Month Household Laundry Expenses

379

30%

113

$30

Market

Revenue Forecast

$3,390

(8.4% Of Total Households)

OAKRIDGE MARKET REVENUE FORECAST BASED ON PERCENTAGE OF POPULATION USING SELF-SERVICE LAUNDRIES Estimated

Estimated

Percent

Population

Total

Using

Using

Population

Laundries

Laundries

Average Persons Per Household

15%

498

2.48

3,324

Laundries

Per Month Household Laundry Expenses

200

$30

Households Using

(15% Of

Market

Revenue Forecast

$6,000

Total Households)

Figure 4-5

develop a survey form and mail in the target market.

nity tell

you

if

it

The

cost

it

to

every one of the 1,339 households

would be

less than

$500. Let the

wants/needs a self-service laundry.

29

commu-

Coin Laundries

— Road to Financial Independence

Competition If

you see several

self-service laundries in your target market,

you

can be reasonably sure that you are on the right track. This would indicate a high

number of

self-service laundry users in the area. If these

much

laundries are old and rundown, so

the better. If they are modern,

well-run laundries and you are inexperienced, you

may be wise to look

elsewhere.

you find a good location with several old, rundown laundries nearby, try to buy one and remodel. If the owners won't sell, build a new one. A modern self-service laundry will draw many customers away from the old, rundown laundries, causing them to become unprofitable and close. The remaining customers will then be yours. Take a lesson: A well-managed self-service coin laundry with an ongoing modernization program is the best deterrent to competition. If

What

if

apartments in the market area are already providing cen-

tral

laundry

still

be good prospects, especially

facilities for their tenants? if

Don't

fret

the apartment

—

the tenants

may

complex laundries

have any of the following problems:

room

•

Dirty and/or poorly

•

Outdated or broken equipment

•

Insufficient washers

•

History of clothes theft from laundry

•

Removal of clothes from machines by

•

Poor laundry room security

•

Inflexible laundry

lit

laundry

and dryers

to

meet demand

room other tenants

room schedule

Market Trends Thoroughly research market trends before you make a

final deci-

sion on location. Neighborhoods in metropolitan areas are in constant flux.

Since your lease will more than likely be long term,

to visualize the location

your

it's

important

during the eighth, ninth, and tenth years of

lease. Carefully consider the following:

30

Selecting Your Location

•

Are single family

rental units

making way

for large,

modern

apartments with up-to-date laundry facilities? •

Is the

average age of the population rising, falling, or remaining

stable? •

Is

the quality of life in the area improving, deteriorating, or re-

maining consistent? •

Is real estate

investment in single-family rental-houses increas-

ing or dwindling? •

Are neighborhoods generally well maintained, or

are signs of

creeping urban blight visible? •

Are dwellings

Some

in the

neighborhood being replaced by businesses?

highly successful coin laundries are to be found in small

towns or the suburbs rather than in a densely-populated area

in

urban areas.

A coin laundry located

might draw most of

its

customers from

within a few blocks, but one in a small town might pull customers from a 20-to 30-mile radius

if

the

town

features

good shopping.

you decide to locate in a resort area, look for big seasonal tourism. Towns in which businesses serve a large agricultural industry might generate a lot of business from migrant workers during certain times of the year. And while business volume may be lower for laundries in less-populated areas, so is the rent. And rent is a major expense. Colleges and universities provide a huge clientele for a modern If

self-service laundry if the following conditions exist:

•

Neighborhood coin laundries are lacking

•

The school does not provide laundry

•

Most of the

•

Laundry

Make

facilities

students live in dormitories or in off-campus housing

facilities

provided by the school

fail to

meet students' needs

you do a thorough market survey in and around the campus. If a laundry doesn't draw students, it will have few other cussure

tomers.

31

Coin Laundries

— Road to Financial Independence

After you pick your general location, your next step

is

to select a

store site.

THE STORE SITE

for

The important factors to consider in choosing a specific a high- volume self-service laundry are outlined below:

The High-Volume Supermarket High- volume supermarkets make cause the

all

store site

great neighbors to laundries be-

laundry customers buy food on a regular basis. The greater

volume

at the

supermarket, the greater the potential for laundry

customers.

Count

Traffic

Generally, the

more

in all traffic lanes all

traffic, the better.

may

day long

and out of your parking

lot easily,

prevent customers from getting in

causing them to go elsewhere. And,

for obvious reasons, avoid locating

Your

local

on one-way

government can supply a

pass your prospective laundry

But bumper-to-bumper cars

site.

This

traffic is

streets.

count for the roads that

public information, but you

may have to do some digging to get to the right government agency. You may eliminate some of these telephone calls by asking your local reference librarian to locate the right agency and the telephone

number

for you.

Parking

Many

coin laundries

fail

for lack of convenient parking.

Custom-

ers dislike carrying big bundles of clothes for great distances, particularly in

bad weather. Make sure there are enough parking spaces for all

customers when your laundry can't find parking

is

operating at capacity. If customers

on high- volume days, you could lose over 50 per-

cent of your potential revenue. This also pertains to restaurants,

and

if

you're located next

beauty salons, or other businesses where people park

stay.

32

Selecting Your Location

Sometimes

the landlord will designate a fixed

number of parking

spaces for your laundry by painting the space or posting signs. Negoti-

you sign the lease. Designated spaces still require a considerable amount of policing on a day-to-day basis. If ample parking is not consistently available, find another store site. ate this with the landlord before

Visual Exposure Pick a store

site

with good visual exposure so that potential cus-

tomers can spot your self-service laundry from the parking street.

needed

Good

Look

means fewer advertising

visual exposure also

to build

your business and maintain

for lots of

window

lot

its

or the

dollars

volume.

area. This allows

customers to see the

complete interior of the laundry as they approach.

It

not only attracts

customers, but also gives them a sense of security to be able to see is

who

inside before they enter.

Shopping Patterns As creatures of habit people develop shopping

patterns, tending to

shop for goods and services on the way towards work or the major urban center. Because of

this, it's

not unusual for a coin laundry to

draw customers from five to six miles in one direction and from only a few blocks in another. Watch for these patterns when looking for your store site.

Try to locate your laundry between your customers and where they

work or shop.

Picture your market as a long skinny oval with your

laundry located near one end. This

is

the end closest to the major urban

area or to the major places of employment. the

main

traffic

it

oval stretches along

thoroughfare that carries people to work or to shop-

ping. If your store site

because

The

will then

is at

a major intersection, so

have two such ovals as

its

much

the better

market.

Zoning Laws you are considering is not zoned for a self-service laundry, you must petition for a zone change or look elsewhere. Getting a zone reclassified is like wading through glue and takes great patience. If the site

33

Coin Laundries

— Road to Financial Independence shopping center, the owner or leasing agent

If the store site is in a

might help get the job done faster since they often have good contacts with local government

officials.

Utilities

Your store site will require sewer, water and electrical services, and in most cases, natural gas service as well. The monthly cost for these utilities usually runs between 13% and 24% of your gross revenue. In most government jurisdictions, there are additional one-time

"impact fees" for hooking up your sewer and water. Impact fees can be quite substantial

—$2,000

to

$3,000 per washer for sewer hookup and/

or $60,000 to $80,000 for a 2-inch water line If the

line

site

not

uncommon.

happens

to

be the dividing

between two government jurisdictions, check fees and utility costs

for both area.

—not only

for your site, but also for the entire surrounding

Impact fees can vary

have

to

road that runs in front of your

is

to

substantially,

and you

especially

don 't want

compete with a laundry near yours whose owner doesn

't

have that large financial burden.

must meet your needs, the equipment manufacturer's specifications, and local building codes, make sure there Since

is

no

utility services

conflict. If there

is,

install

your equipment according

to the local

building code. If the

equipment

will not operate properly

when

installed accord-

worked out between the equipment manufacturer and the government agency involved. This situation is rare, but it does happen. If all else fails, you may want to consider a ing to code, the problem must be

different brand of equipment. This

is

not as complicated as

Government agencies

are usually very helpful

proached. Their advice

is

Sewer Line As a rule-of-thumb, up

when

it

sounds.

properly ap-

not only valuable, but free.

a four-inch sewer line will generally handle

30 standard-size washers (36 gallon fill per cycle) and a six-inch sewer line, up to 100. These figures may vary depending on local plumbto

ing codes. In rural areas, a septic tank system nicipal sewer service

is

unavailable.

34

may be

necessary

if

mu-

Selecting Your Location

Before signing a lease, ask the local plumbing inspector how

washers will be allowed in your handle 30 washers; but

sewer a

inspector

line, the

If the

if all

store.

line will

may

reduce

number

this

to tear

is

to the

main

signed to learn that

up the parking

same

drastically.

may have

to run

line in the street.

Don't

sewer won't handle your requirements, you

wait until after the lease

normally

the stores in the center are using the

new sewer line from your laundry

$15,000

A four-inch

many

it

will run

you an extra

lot.

Water Tap At 60 pounds per square inch pressure, a 1 '/2-inch-diameter water line should serve up to 30 standard-size washers and a 2-inch line, up to

60 standard-size washers. Local building codes, however,

will be

the final determining factor.

Electrical Service

Normally 240-volt, three-phase current

is

supplied in

new

shop-

ping centers. This electrical service provides for the most cost-efficient use of electricity

and will run any equipment manufactured for

self-service laundries, including

equipment

that requires either 120-

volt or 240-volt, single-phase current. If the

careful

only electrical service available

when

in single-phase, others

240-volt, single-phase, be

Some

selecting your equipment.

same washers

is

do

manufacturers offer the

not, particularly in larger ca-

pacity machines. If you are considering the addition of a dry-cleaning

machine, three-phase current will probably be needed. If

ers

only

1

20- volt service

is

available,

you are limited

to small

wash-

because larger washers are simply not designed to operate on 120

volts.

The current required

to

run gas dryers should be no problem,

whatever the electrical configuration.

Sometimes 208-volt service is supplied. Refer to the equipment specification sheets and be sure to buy equipment that will operate on 208 volts. Both 240-volt and 208-volt service, in either three-phase or single-phase, can be split to run equipment requiring 120- volt, singlephase service.

35

Coin Laundries

Be

sure that

— Road to Financial Independence

you cover

electrician before

of the electrical requirements with your

all

you place orders with equipment manufacturers. Tak-

ing delivery on equipment that won't nitely ruin

work

your location can

in

defi-

your whole day.

Natural Gas Natural gas the gas liquid

is

company.

most

likely available to the store site. If not, contact

If natural

propane gas or

gas

is

not available, you must depend on

electricity (provided

it is

available in the proper

configuration) to heat the water and the dryer drums. Cost will deter-

mine your

selection.

Natural gas requirements generally range from two-to four-million

BTU. The

gas

company

will size the

meter and incoming

line to

supply the volume of gas needed to run your dryers and hot water heater during peak load times.

Space Configuration Store sites

come

in various sizes

and shapes, each offering many

layout and design possibilities. Coin laundries have been built in just

about every imaginable configuration, but a square or rectangle

is

most

common. Occasionally a landlord or leasing agent will try to push an oddlysized, hard-to-lease location onto is

an inexperienced prospect. While

it

possible for a laundry to exist in a space 10 feet wide by 120 feet

long, customers It's

would probably

feel as if they

were

in a

bowling

alley.

best to steer clear of dimensional extremes.

Forecasting Trends

A

store site

may meet

all

the requirements for a

but what about the future? Here are

some

good

site today,

painful possibilities:

•

New

expressways or bridges can divert

•

Road

construction can close streets for months

•

Local improvements

traffic

— sometimes years

in services (such as roads or parks)

can

bring large tax levies

Don't look to your government for financial damages

36

—you won't

get any.

Selecting Your Location

Zoning can be changed causing factories,

warehouses, or

residential units to

retail businesses.

be annexed by larger ones

—

be replaced by

Smaller municipalities can

resulting in increased taxes.

pany employing many people can close or move.

A large com-

Utility costs in

your

municipality can increase substantially while remaining unchanged for

a competitor in another.

As you can

see, careful forecasting is necessary before signing a

long-term lease. Avoid surprises and so-called "bad luck."

Do your home-

work. Spend some time with local government agencies. Haunt the local Planning Commission, in particular. Don't forget to contact the

companies as they are usually aware of development plans

utility

in the area.

The Coin Laundry Location Analysis Survey (Figure 4-6) on page 40 has been used

for

many years by people in the coin laundry industry

to evaluate store sites.

THE SHOPPING CENTER VERSUS A FREESTANDING STORE Stores can either be freestanding or in a shopping center. Although rent

is

generally higher in a shopping center, this location has several

advantages over a freestanding

store:

•

It

draws more customers and from greater distances

•

It

offers greater exposure to potential customers

•

It

allows customers to shop while doing their laundry

•

It

makes customers

•

It

gives

more

feel

more

clout to your advertising

If a freestanding self-service

densely populated area, you

about

•

secure, particularly at night

laundry

is

your only alternative in a

may want to reconsider the location. Think

this:

Why haven't shopping center developers invested money in that location?

•

Where are the residents presently doing their shopping, larly for

•

Where

food?

are they doing laundry?

37

particu-

Coin Laundries

If

— Road to Financial Independence

answers to these questions support a good market for a self-service

laundry, then by

all

means proceed with

a freestanding store.

EVALUATING A SHOPPING CENTER Carefully evaluate a shopping center as a prospective store

There

is

no end

ate for the

to the

problems

that a

owner of a laundry, and

poorly-managed center can

for better or

site.

cre-

worse you are stuck

with the lease.

Once

thriving shopping centers can

It's

maintain a good business in a rundown shopping center,

difficult to

where trash cant.

go into decline over time.

blowing through the parking

is

lot

and space remains va-

A coin laundry in such a center is vulnerable to a competitor, who

opens a laundry in an active center. People love a winner.

Below

are critical questions to ask

and answer when evaluating a

shopping center:

shopping center clean,

Is the

Does

it

attractive,

and well managed?

amply serve people's needs, or must they

Have market demographics been obtained from Are

also

go elsewhere?

the leasing agent?

the center entries and exits convenient in all directions of travel?

What

is

the traffic count

Does a sign

list all

on

streets

the stores? Is

it

bordering the center? highly visible?

What

are the marketing plans for the center?

What

is

the vacancy rate? Is

What

is

the sales

How much time Are the

Does

increasing or in decline?

volume of the anchor grocery is left

on the grocery

stores in the center well

store?

store lease?

managed?

the center have adequate parking?

Does

it

Is there Is the

Among

it

Long-term? Short-term?

serve patrons of nearby motels?

a strong merchants' association?

center profitable for the owner?

you for help in locatchamber of commerce, shopping center

the information sources available to

ing your business are the local

38

Selecting Your Location

owners (managers), commercial ity

companies serving the

area.

real estate leasing agents,

Also be sure

to contact the

and the

util-

government

agencies involved in municipal planning, road maintenance, road construction, water service,

sewer service, zoning, building construction,

and building inspection.

The

local post office

will provide statistics

can supply you with carrier route maps that

on population

distribution

and

density.

pers often publish market reviews with valuable data.

Use

Newspa-

the library,

an excellent source of information on just about everything.

What

are the three biggest influences

on the success of your laun-

dry? Location*, location*, location*. Take your time and find the right one. Your financial future

Don't

trust others to find

are you'll be sorry.

ing a

site.

is at

stake.

your location for you.

you do, chances

And don't rely entirely on demographics when choos-

A thorough market survey is in order before signing a lease.

(Chapter 7 provides additional information on laundry

If

site is a

"winner.")

39

how

to

be sure your

.

Coin Laundries

— Road to Financial Independence

COIN LAUNDRY LOCATION ANALYSIS SURVEY The following Location Analysis form has been prepared simply as guidelines to help store operators evaluate their and provide some information on selecting new locations. Naturally, there is no sure way to guarantee success merely by location as so many other factors enter into overall store management. However, these analysis points have been derived over a long period of time and most of them relate to successful coin-stores: Note:

location

AMOUNT OF TRAFFIC

10%

5,000 to 7,500 cars in 24 hours 7,500 to 10,000 cars in 24 hours 10,000 to 15,000 cars in 24 hours Over 15,000 cars in 24 hours

or greater growth in population over the last 2 years Stable population (developed neighborhood) Unstable population due to possible redevelopment or urban renewal Apartments (without washers & dryers), high density neighborhood, lots of children .... Apartments - no children Single family dwellings - large families Single family dwellings - no children

+5 +8 +10 +15

TRAFFIC FLOW If

traffic (2/3)

If

traffic (2/3)

If

traffic

If

on same side as location on opposite side as location

.

.

evenly distributed road divider restricts traffic flow

.

+4 +2

.

+7 +3 +5 0

-5

+10 -5

+5 .5

ECONOMIC CONDITIONS Or

LLU

t_ 1 IVI 1

Passing Passing Passing Passing

1

o

IVIfcJUIUlll

location location location location

- 25 - 25 - 35 - 45

mph mph mph mph

or less to to to

30 mph 45 mph 50 mph

Over 50 mph

+10 +7 +5 +2

If If

Medium If

0

If

IU

IUW IMULMIIC

If

Shopping center parking lot with 5-10 or more spaces directly in front or adjacent to location

Shopping center parking lot with less than 5 spaces in front or adjacent Shopping center parking lot with all parking away from front of store parking lot but with off-street parking in front or side of store ^tro^t oiue r\i oucci narl^in/"! pdirsiny in in front iruni r\r or cirlo ui ctnro oiure, no parking meters Street parking in front or side of store, with parking meters No parking within 30 ft. of store - available street parking has parking meters Two or more entrance and exits from lot Private parking lot for 5 or more cars

If

+5 +15

to

medium-high income:

to

+10 +10

upper income:

+15 +5

store offers drycleaning store offers only laundry

COMPETITION

+15

+10

Exclusive in area Competitive store in trading area, poorly operated Well operated store in trading area: laundry only laundry and drycleaning

+10

+7

No

+5

+5 -5

-10

ADVERTISING

+2

Shopping center has direct mail ads available Area has local shopping news coverage

0

Handbill distribution is allowed No advertising available

-5

+2 +10

in

area

.

+5 +5 +5 -5

SUMMARY OF CATEGORIES

NEARBY BUSINESS Location in shopping center Close to shopping center Less than 1 mile from shopping center On business street with other service businesses in same block Other adjacent business open 12 or more hours per day - 7 days a week .... Adjacent to pool room, taverns or teenage gathering places

1

store offers drycleaning store offers only laundry

Medium-high

PARKING

|JU|JUIcUIUI

store offers drycleaning store offers only laundry

CATEGORIES

POINTS

Amount of Traffic Speed Limits

+15 +10 +5

Traffic

Flow

Parking

+3

Nearby Business Identification

+5

Population

Economic Conditions Competition

-10

Advertising

IDENTIFICATION Sign visible 300 feet Sign visible less than 300 feet No sign of any type Flush mounted sign

TOTAL

+10 +5 -10

LOCATION RATING

+2

POPULATION trading In trading In trading In trading In

area area area area

over 25,000 15,000 - 25,000 5,000 - 15,000 less than 5,000

+10 +8 +5

Superior

100-125

Excellent

65 - 99 40 - 64

Good Fair

0

Unsatisfactory

15-39 Under 15

The information contained in this analysis has been derived from various sources such as the local Chamber of Commerce where available, Planning and Development Commissions, Building Departments, Utility Companies, and Newspapers. In many instances an actual house count is used to determine the population of the concerned area. All of the above data from the various sources listed is then used to evaluate the location and to determine the type of store to be installed. This analysis is not intended to influence your decision as to whether you should invest in another laundry and/or dry-cleaning center, but rather is intended to be used as an outline of the physical facts of the prospective area; therefore, it must be definitely understood that this survey cannot, and noes not, constitute a guarantee as to the financial success or failure of the installation, as this fact may depend upon conditions beyond the scope of this survey.

Figure 4-6

40

5 BUYING

VERSUS BUILDING

S

HOULD YOU BUY or build? Your decision will depend on three factors:

1.

Availability

2.

Utility

3.

Cost

If there are

no

self-service laundries in

your target market, you

must obviously build a new one or abandon your plans. Even if there are other laundries in your target market, no one may be willing to sell. Either way,

you may not have a choice

if

suitable building sites are

unavailable. If there are self-service laundries for sale,

ask yourself if they have

adequate parking and a location convenient to your prospective customers. If a laundry does not have the potential to beat all your compe-

why spend

money

and remodel? Keep

mind that someone could buy and remodel a competitor or even build a new laundry that could capture the market and seriously erode your profits. tition,

the

to

buy

41

it

in

Coin Laundries

— Road to Financial Independence

Never spend more money for a laundry than it is worth. This may sound obvious, but it happens all the time. Before completing a purchase, compare the total outlay to buy and remodel with the total cost to build a new laundry and run it until it turns a profit. (Chapter 6 explains in detail

how

to establish a dollar value for

an existing laun-

dry.)

Buying and remodeling an existing

facility is tempting,

given the

potential savings:

•

You save much of

the cost of plumbing, electrical, and sheet

metal work, which can range from $40,000 to $80,000 or more in an average-size store.

How much

you save

will

depend on

the extent of the remodel. •

You

save on leasehold improvements because the walls, floors,

ceilings,

and lighting are already

in place, the

amount again

depending on the extent of the remodel. •

You normally save on utility hookup fees, sometimes called "impact fees," unless you are adding additional washers. These fees can reach thousands of dollars.

•

You may save on pending on

•

•

construction permits or inspection fees, de-

how much remodeling

done.

is

You may save by updating existing equipment rather than purchasing all new equipment. Don't skimp on equipment when it comes to energy efficiency as savings here would more than likely be consumed by higher utility costs. You save costs that are related to developing a customer base since fewer promotional dollars are needed to expand an exist-

ing business than to build a •

You save on

start-up

new

one.

and operating

costs.

A coin laundry under

construction produces no income, but you must

still

pay

rent,

loan payments, insurance, taxes, and so on. This creates enor-

mous

pressure to finish construction, open the business, and

build volume.

An

produce enough

existing business, however, will generally

to

cover these expenses. Your energies can

instead be directed towards building base.

42

upon an

existing revenue

Buying versus Building

You may save money on loan costs. It's much easier to borrow money to buy an existing business than to start a new one.

•

Sometimes

the seller will finance a buyout, often at a lower

interest rate than offered

On

the other hand, a

cations, limited only

laundry users like

With

new

site

laundries and

mind,

institutions.

laundry can be designed to your specifi-

by space and

new

all this in

by lending

let's

And

parameters.

self-service

new equipment.

say that you decide to buy an existing

weeks of driving back and forth across the city looking for just the right location, you find it. There are thousands of potential customers and traffic patterns are perfect. There are a number of runlaundry. After

down

crowded on weekends. You decide to save on costs by cutting a good deal, remodeling the store, and capturing the market. Your excitement level is high. You fall asleep at laundries in the area, and

are

all

night counting mountains of imaginary quarters.

Everything looks perfect but. owners, not one wants to if

you're smart.

There

need

is

is

No

obviously

sell. Is it

one wants

room

.

.

After weeks of contacting laundry

time to look for another market? Not

to sell

for a large,

the key to success.

because money

modern

is

being made.

self-service laundry,

The owners won't

sell

and

because they are

making money! Start thinking about where you'll build your new store, starting from scratch. True, it costs more to build a new store than to remodel an existing one, but this should not influence your decision to build is

if

the location

good. Return on investment should be the deciding factor, and the

from a new store in a good market will still beat returns from a remodeled one in a poor market. Remember, a good location is the single most important ingredient for the success of a self-service launreturn

dry.

There are

still

other considerations that will decide whether you

remodel or build new. Coin laundries may be priced much higher than their value; everything is for sale

—

at the right price! If

you can't nego-

good price, the only sensible solution is to build. Coin laundries may be too small or lack enough equipment to accommodate customers during peak load times. If you can't negotiate tiate a

43

Coin Laundries

— Road to Financial Independence

more space or add more equipment, consider building a new laundry that will satisfy market demand. Don't underestimate the value of adequate parking. A new selfservice laundry with good parking will easily take customers from an established laundry with poor parking facilities

enough convenient parking, a coin laundry tential

—always!

Without

will never achieve

its

po-

volume.

Sometimes parking problems can be solved. Look for ways you might add additional parking spaces or make the existing ones more convenient. Providing access to a parking lot at the side or rear of the

laundry by adding another entrance

Inconvenient

traffic

flow

may

is

possible, if the city will allow

rule out a laundry.

Watch out

road dividers that prevent customers from turning into the parking

it.

for lot

from their normal direction of travel, forcing them to drive many blocks out of their way.

Look

for other inconveniences before deciding.

Other factors that can influence your decision to buy or build

in-

clude:

•

Poor

•

Restrictive lease

•

Intolerable landlord

•

Undesirable physical layout

•

Insufficient time remaining

•

Landlord's unwillingness to negotiate a

visibility

Often the decision to build a is

on lease

new

new

lease

laundry or to buy an existing one

a personal one. In this case, no formula applies because either deci-

sion could be correct.

44

6 EVALUATING

AN EXISTING COIN LAUNDRY

BUYING AN ESTABLISHED coin laundry can be quite a challenge.

some

The owner or business broker

"rule of thumb," usually based

selling price. Ignore this.

than a buyer

is

The

is

almost certain to give you

on gross revenue,

to justify the

dollar value of a business

is

no more

willing to pay. Base the value of the laundry on the

following combination of factors:

1

.

Value of assets

2.

Profit

3.

4.

Cash flow Return on investment

5.

Lease terms

(if

space

is

leased)

VALUE OF ASSETS The most common mistake

make

is

that inexperienced coin laundry buyers

overvaluing the equipment and leasehold improvements. The

machines may be painted and waxed and looking good, but they must

45

Coin Laundries

be replaced

if

— Road to Financial Independence

they are old and worn out or use too

much

energy. Re-

placement can run many thousands of dollars! Frequently, buyers purchase coin laundries based on what appears to

be a good profit picture. Unfortunately,

if

a substantial investment to

worn out equipment must be added

replace

price, building

an entirely

new

to the laundry's

laundry with

all

purchase

new equipment might

be more economical. Before placing a value on the equipment, you will need to

know

the following:

1

.

Age of the equipment

2.

Life expectancy

3.

Salvage value

4.

Replacement cost

5.

Present condition

6.

Cost to recondition or repair

7.

Cost to upgrade for energy efficiency

Equipment manufacturers and distributors can tell you the age of the equipment if you supply them with a list of model and serial numbers, and cross checking this information with both of them will eliminate errors and expose misleading statements. Other good sources of information include parts supply companies. Sometimes even they can date your equipment if given model and serial numbers. A seller, who is also the original owner, should be able to give you a copy of the original purchase invoices for the equipment. If not, don't assume that the equipment is the age of the laundry since the owner may have purchased used equipment in the first place. Calculating the

equipment there

is

is

more

practical

life

expectancy of a particular brand and type of

difficult.

life

There

expectancy.

is

You

actual

life

expectancy and then

are only interested in the

latter.

Some laundries have old, beat up washers and dryers that waste energy and need constant

repair. In truth, the practical life

expectancy of these

machines may have ended 15 years ago. Estimating practical initially

life

you can learn from

expectancy comes with experience, but

others. Talk with

46

equipment manufacturers

Evaluating an Existing Coin Laundry

and

companies, equipment service techni-

distributors, parts supply

and experienced coin laundry operators. The information they

cians,

give you should help you to practical life expectancy

make

and salvage value for most equipment.

Replacement costs are easy

ment manufacturers and

a fairly accurate estimate of the

to determine.

distributors.

Be

Get quotes from equip-

sure to add in freight, han-

dling charges, and installation costs in order to get the total replace-

ment cost

for a machine.

Some

multi-store owners get firm quotations

before purchasing the laundry, including written offers to buy the old

equipment. If

you

are a novice to the field, get help to determine the present

condition of the equipment, the cost to recondition or repair

update

it

in order to

make

it

energy

efficient.

it

and

to

Consider hiring a quali-

fied consultant or a reputable service technician to act as one. If the

equipment cians

is

maintained by an outside service firm, the service techni-

who work on the equipment can be

a valuable source of informa-

tion.

Equipment manufacturers and distributors can help, but remember that their main interest is to sell new equipment. This can influence their advice. Beware that they may also spread the news of your pending transaction, sparking the interest of other buyers and inflating the price. If the seller

to see written

has been doing most of the maintenance and repair, ask

maintenance schedules and review them carefully.

ten maintenance schedules can't be produced

it's

If writ-

likely that the equip-

ment has been poorly maintained. Place a dollar value on each item of equipment, based on the number of years of useful life that remains. Set up a depreciation schedule for each type of equipment as shown in Figures 6-1 and 6-2 on the following pages.

Of the two types of depreciation shown, illustrated in Figure 6- 1

assumes

by the same amount each pectancy of the washer

is

the "straight-line"

method

that the value of the asset decreases

year. In this

seven years,

example, the practical

at the

end of which time

life it

ex-

could

be sold to someone (such as the owner of a small apartment house) for $100. The replacement cost of the washer

47

is

$950, including delivery

Coin Laundries

— Road to Financial Independence

DEPRECIATION SCHEDULE (Straight Line

Method)

MODEL 507 WASHER Annual Depreciation©

Fractional

Year

Part

New

•

•

1

2

•

3

•

•

•

•

•

•

•

•

4

• •

5

Asset Value

6

•

7

•

$121.43

1/7

$121.43

1/7

$121.43

•

•

$950.00

•

•

•

$828.57 $707.14

•

•

•

1/7

$121.43

•

•

•

1/7

$121.43

•

1/7

$121.43

1/7

$121.43

•

•

•

•

• •

1/7

•

$585.71

•

• •

•

$464.28

•

•

$342.85

•

•

•

$221.42

•

•

•

•

•

$850.00

*

$100.00*

Salvage Value

Amount To Be Depreciated ($850) Equals Value When New Minus Salvage Value (T)

The Amount To Be Depreciated ($850) Divided By The Total Number Of Years Asset To Be Depreciated (7)

Figure 6-1

and

installation. It will

decrease in value by $850 over the seven-year

period, or at the rate of $121 .43 per year. If the age of the washer were five years, the dollar value can

The it's

cost to repair and maintain a

appearance deteriorates

attractive to

ducing ure 6-2

be established

at

at

$342.85.

machine increases with age, and

an increasing

rate.

This makes

it

less

customers and, therefore, less valuable as an income-pro-

The "sum-of-digits" method of depreciation seen in Figsliding scale depreciation rate, which provides a more ac-

asset. is

a

curate assessment.

method of depreciation, a value of $343 can be established for a five-year-old washer. The sum-of-digits method evaluates the same machine at $191, a difference of $152. Just who gets what portion of the $152 depends on the condition and appearance Using the

straight-line

48

Evaluating an Existing Coin Laundry

DEPRECIATION SCHEDULE (Sum-Of-Digits Method)

MODEL 507 WASHER Annual Depreciation©

Fractional

Part©

Year

Asset Value

New

$950.00

1

7/28

$212.50

$737.50

2

6/28

$182.14

$555.36

3

5/28

$151.79

$403.57

4

4/28

$121.43

$282.14

5

3/28

$91.07

$191.07

6

2/28

$60.71

$130.36

7

1/28

$30.36

$100.00*

28

28/28

$850.00

*

Salvage Value

Amount To Be Depreciated ($850) Equals Value When New Minus Salvage Value

© ©

Denominator Equals Sum Of The Numbers In The Year Column (28) Equals The Numbers In The Year Column Taken In Reverse Order

— Numerator

The Amount To Be Depreciated ($850) Divided By The Denominator Multiplied By The Numerator

(28)

Then

Figure 6-2

of the machine and the negotiating skills of buyer and seller

of the coin laundry

would cost

the buyer

is

the

pricing the washer at $500, the washer

$200 ($500

maining years of practical

seller. If

life.

A

$100 - 2) per year for the two renew washer would only run $121.43 -

per year based on straight-line depreciation.

Many

self-service laundry

owners are using old or outdated equip-

ment that not only looks bad, but also breaks down frequently and consumes too much energy. It's not unusual for an inexperienced buyer to come along and pay $500 per washer for 15-year-old washers. Since the cost to rebuild each easily run $350, to customers.

washer and update

$850 would be

it

for energy efficiency could

the cost for washers

still

unattractive

New washers could be had for $950! And because of the

49

Coin Laundries

— Road to Financial Independence

age, the actual market value of the rebuilt washers wouldn't be

much

higher than the $100 salvage value.

You can

see that judging assets accurately

expires before the practical

life

of an asset

is

is

essential. If the lease

over and the landlord will

not renew the lease, the asset must be sold. If the value of the asset

was

overestimated, a loss results.

To underline this point, look at what can happen to an inexperienced buyer. Suppose you are looking for a second income. A business broker then shows you "the best deal in town," a coin laundry priced at $75,000, "but you can get it for $65,000." According to him, the business generates over $23,000 a year in profit. When you ask for details, he produces the following:

JOHN DOE LAUNDRY 6326 STAIN STREET ANYTOWN, USA 1997 PROFIT Total

Revenue

STATEMENT $60,984

•

Expenses:

$18,000

Rent Utilities

•

Insurance

•

Repair

•

Supplies

•

•

12,197

•

2,700

•

2,818

•

360

•

285

Taxes

1,408

Miscellaneous Total

Expenses

Profit

Figure 6-3

50

•

37,768

•

$23,216

Evaluating an Existing Coin Laundry

He

you that three full years remain on the lease. Because the landlord is a "good ol' boy," there should be no problem when it comes time to renew. "Suppose the lease is not renewed?" you ask. The brotells

you not to worry because you will still make at least $70,000 in three years, and there's even more potential. In addition, all of that "valuable equipment" can be sold and part of the proceeds used to pay

ker

tells

off any loan balance.

Armed

who

with this information, you negotiate with the owner

agrees to take $65,000

if

you come up with cash. The broker knows

that a lending institution will not

make

a loan on the business because

of the short lease. Instead, he advises you to "take a second mortgage against your

home

speed up the loan process and avoid having to

to

write a complicated business plan in order to get the loan."

This sounds good, and you put up $10,000 from your savings and take out a second mortgage loan interest. (This is the

on your home

maximum amount

10%

for $55,000 at

that the

mortgage company

would lend against the equity in your home.) To hold monthly payments down, you borrow the money for 7 years. The monthly payments are $913, including principal and

interest.

After three years in business, you are unable to increase your vol-

ume because your equipment is

old and run-down.

then refuses to renew the lease, and the equipment

The "good is

ol'

boy"

sold as follows:

SALE OF EQUIPMENT Item

Quantity

Price

Total

Washers

32

$100

$3,200

Dryers

16

$300

4,800

Changers

1

$800

800

Miscellaneous

-

$500

•

500

$9,300

Figure 6-4

Your loan balance of $10,000,

all

is

$36,000 and there

is

your original investment

of which should be paid from the proceeds of the busi-

51

Coin Laundries

The

ness.

— Road to Financial Independence

intake for the three years

was paid to

was $69,648, of which $32,868

the lending institution as principal and interest. Here's

what

happened:

INVESTMENT SUMMARY Cash From Business ($69,648

-

$36,780

$32,868)

Sale Of Equipment Total

9,300

Cash

$46,080

Less:

Loan Balance

$36,000

Original Investment

10,000

Restoration Of Leased Premises

7,100 $53,1 00

Total Deductions

Total Dollars Returned (3 Years)

($7,020)

Figure 6-5

In short, in three years

you

lost

over $7,000, plus the interest that

your money would have earned during that period. lease

And remember that

you signed but didn't read carefully? Under "Restoration of Leased

Premises," the lease requires you to restore the leased premises to original condition at your expense

—

in this case, the

$7,100 shown

its

in

Summary. Three years of hard work lost you $7,020. A trip to Las Vegas might have been more fun and achieved the same end. Inexperienced coin

the above Investment

laundry buyers can

happen

fall

prey to such scenarios.

Make

sure this doesn

y

t

you by following the steps outlined in this booh. Much has been said about the value of the equipment, but what about the value of the leasehold improvements the electrical wiring, plumbing, walls, ceiling, etc.? When negotiating with a seller, keep to

—

this in

1

.

2.

mind: Leasehold improvements have no value beyond the Leasehold improvements have no value

52

if

life

the laundry

is

of the lease. unprofitable.

Evaluating an Existing Coin Laundry

It's

impractical and often a violation of the lease to

remove

lease-

hold improvements. For that reason, they cannot be sold and will not contribute any cash if the lease expires or

if

you go out of business.

This doesn't stop a seller from attaching some value to them, however,

when

setting the selling price of the laundry. If that happens,

you don't pay more

for

them than

make

sure

their depreciated value.

To determine the value of the leasehold improvements, use the same procedure used to assess the equipment. Set up a straight-line depreciation schedule. Since there is no salvage value, divide the original cost of the leasehold improvements by the number of months on the lease. This tells you how much the leasehold improvements should be depreciated for each month that they were used. (Depreciation of leasehold improvements is covered in detail on pages 291-292.) When you purchase a coin laundry, you will usually find it necessary to upgrade or make additional improvements. Examine every nook and cranny to see what needs to be re-covered, painted, repaired, cleaned, rebuilt, thrown out, replaced or ignored. Make a list and estimate the cost of needed improvements. Use this information to your advantage when negotiating with the

seller.

PROFIT Profit is what's left of the revenue after expenses are deducted. seller is at the

Since this flated.

is

mercy of the buyer if the business

common

You must

that

lease.

not making a profit.

profit picture is

verify the accuracy of revenue figures

Many expenses and the

knowledge, the

is

sometimes

is

harder to determine.

because a self-service laundry

is

One

in-

and expenses.

can be determined by looking over the

Revenue

A

utility bills

of the problems

a cash business,

it's

is

easy to cheat

Laundry owners who don't cheat may imply that they do when they produce monthly revenue statements, leading you to asthe government.

sume

that the

revenue

is

greater than

it

appears.

Estimating the Revenue

What can you do when the

selling price of a laundry

revenue, yet the seller cannot document

53

it

to

is

based on

its

your satisfaction? Fortu-

Coin Laundries

nately,

you don't need

— Road to Financial Independence

to rely

on the

seller since

you can determine

annual revenue with reasonable accuracy from the water usage.

If the

come up with the water bills, go directly to the Water Comsome shopping centers the landlord meters water used by a

seller can't

pany. In

coin laundry and can provide you with figures.

Quick Estimate Before you can accurately convert water usage to revenue, you

must estimate the amount of water used for purposes ate

that

do not gener-

washer revenue, such as cleaning, restroom usage,

utility sinks,

washer

testing, leaks, etc.

cumstances,

this will

range from

age of wastewater usage to dries increase in size

Once you

Unless there are some highly unusual

total

3%

to

5%

of the

total.

cir-

(The percent-

water consumption decreases as laun-

and volume of revenue.)

establish a percentage for water wastage, multiply

it

by

the annual water consumption to get the wastewater usage. Subtract that figure

from the

total

water consumption. This yields the cubic feet

of water used by the washers to produce revenue.

You can now com-

pute the annual washer revenue.

Water usage feet to gallons

is

usually measured in cubic feet. First, convert cubic

by multiplying

it

by 7.48 1 (gallons per cubic

foot).

Next,

divide the gallons of water that the washers used per year by the gallons of water used per washer cycle. This will be the that the

number of cycles

washers ran during the year. Finally, multiply the cycles by the

price per

wash

to get the

annual washer revenue. The formula

is

as

follows: Ft. Water To Produce Yearly Revenue

Cu.

7.481

Gallons

x

Per Cu.

Cycles

Annual

Price

Ft.

Per

Water Used

Year

x

Charged Per

Wash

=

Washer Revenue

Per

Washer Cycle Figure 6-6

You may need tor to

to contact the

manufacturer or equipment distribu-

determine water usage per cycle. Provide them with a model and

54

Evaluating an Existing Coin Laundry

serial

the

number, usually found on a metal plate located somewhere on

washer cabinet It

would pay

—usually

to contact

the rear.

both the manufacturer and the distributor

and cross check the figures for accuracy. In one instance, a Tuthill water

meter certified by a water meter calibration lab showed a consider-

able variation between the manufacturer's published water usage and the actual usage.

Avoid assumptions when

it

comes

to

water usage. Just because

you document the water usage for one brand of 35# capacity washer doesn't mean that another brand would use about the same. There can be significant variations as illustrated below:

RANGE OF WATER USAGE PER CYCLE FROM ACTUAL TEST RESULTS ON DIFFERENT BRANDS Gallons Per Cycle

Low

Type Of Washer

High

32.3

—

34.7

8# Front Load Washers

30.5

—

35.1

35# Front Load Washers

66.0

—

79.9

50# Front Load Washers

63.4

—

101.7

Top Load Washers 1

Figure 6-7

you have any questions about the accuracy of your water usage figures, ask your attorney to structure the purchase offer based on a If

thorough

final inspection

vance that you plan since pressure

fill

of the laundry. Don't

to test the

tell

the seller in ad-

washers for usage with a water meter

switches can be adjusted, and the cycles on

washers can also be adjusted for water usage.

55

many

Coin Laundries

— Road to Financial Independence

Suppose a coin laundry has 28 top loading washers gallons of water per cycle.

239,394 cubic dry

is

feet of

that

5%

of the water

other than generating revenue. If the price ers

produced $50,040

in

is

is

used for purposes

revenue in the past 12 months:

239,394 Cu.

Ft.

11,970 Cu.

Ft.

227,424 Cu.

Ft.

5% Wastage

Used By Washers To Produce Revenue

227,424

x

this laun-

$ 1 .00 per wash, the wash-

Water Used During Last 12 Months Estimate

34

reveals that the laundry used

water during the past 12 months. Since

you estimate

small,

The water bill

that use

7.481

=

50,040 Cycles

x

=

$1.00

$50,040

34 Figure 6-8

Assuming the laundry was closed on Thanksgiving and Christmas, it

operated a total of 363 business days during the 12-month period.

Therefore, each washer averaged 4.9 cycles per day

—50,040 cycles

per year divided by 363 days divided by 28 washers. This

is

slightly

lower than the national average of 5 cycles per day.

But what about dryer revenue? As mentioned usually

fall

in

Chapter

4,

it

will

somewhere between 40% and 50% of the washer revenue,

depending on

how

the dryers are adjusted. For example, dryers can be

adjusted as to the amount of time they will run on a specific amount of

money, such as a

quarter.

Temperature can also be adjusted

to increase

or decrease drying time.

For a quick estimate, many

in the coin laundry industry calculate

50% of washer revenue. Using this figure in the above dryer revenue would be $25,020. Add this to the $50,040 in

dryer revenue at

example,

washer revenue for a

total

revenue of $75,060 from the washers and

from other tion

services, such as

To

you will add revenue estimates vending and drop-off laundry. (See sec-

dryers for the 12-month period.

on "Other Revenue Sources"

this,

later in this chapter.)

56

Evaluating an Existing Coin Laundry

not the same model.

some

when

not as easy to determine revenue

It's

You can

still

make

all

of the washers are

a quick estimate, but

it

requires

shows a quick estimate of washer a medium- size laundry with 4 different types of

additional figuring. Figure 6-9

and dryer revenue

in

washers:

FRED'S SELF-SERVICE LAUNDRY 659 ELECTRIC STREET

ANYTOWN, USA

LAUNDRY REVENUE - QUICK ESTIMATE PART (Calculate Total Water

I

Used To Produce Revenue From Washers)

_________ _____

Water Used In 1998 - Waste Water Estimated At 4.0% Water Used By Washers To Produce Revenue

Total

PART (Calculate Water

In

Gallons

Of

Of

Water Used

Washer

Washers

Per Cycle

Per Cycle

TL

32

FL FL FL

12 6

32 33 78

4

101

$1.25 $1.50 $3.00 $4.00

12# 18# 35# 50#

Average

Vend

Price

Cycle

All

Total _ .

2,171

2,292

In

1998

-

Washers $40.00 $18.00 $18.00 $16.00 $92.00 |

III

Washer .

In

x

PART Washer Revenue

All

|

1998

1998)

In

Total

x

$92.00

Revenue

A||

=

Washers

|n

1998

$199,732

=

IV In

-- -- -- --

50%

Of Washer Revenue Total Revenue From Washers And Dryers In 1998

Figure 6-9

57

Washer Revenue

Total

One Cycle

Revenue From Both Washers And Dryers

Dryer Revenue Estimated At

One Cycle

Washers (T) 396 468 404

4,975,705

Total

Total

Revenue

1,024

Washers

(Calculate

Total

2,292|

Cycles

Total Gallons

One

Cycle)

Gallons One Cycle

Revenue From Washers

=

One

In

|

PART Water Used By Washers To Produce Revenue In 1998

|

Washers

All

All

1) — Number Of Washers Times Gallons Water Used Per Cycle 2) — Vend Price Times Number Of Washers

(Calculate

-

II

Used And Revenue Produced By

Number

Type

-

1998

83,026 Gallons 207.32 1 Ga llons 4,975,705 Gallons 5,1

1998)

-

_____ -

-

-

$199,732 $99,866 $299,598

Coin Laundries

If this

month

— Road to Financial Independence

laundry was open a

total

of 363 business days during the 12-

period, each washer averaged 5.9 cycles per day

washer cycles divided by 363 days. This

is

— 2,171

total

higher than the national

average of 5 cycles per day.

Detailed Estimate

wad of revenue estimate. Make

Before you sign a purchase agreement and fork over a big earnest money,

you may want a more detailed

several trips to the laundry, both as an observer and as a customer.

Weekends are the busiest and will allow for more accurate estimates. The more visits you make, the greater the accuracy of your figures. On each visit, launder as many dirty clothes as you can gather in different models of washers and dryers. Use a logbook to record the following information:

1

.

The non-revenue (non- washer) producing areas where water may be used or wasted

2.

The number of times each washer type

is

used. (This will in-

clude washers that are just being unloaded as you enter and just being loaded as

own 3.

4.

you

leave.

Don't forget

to include

your

use of the washers.)

The type and number of washers you use, including the amount of money that you spend on each to wash your clothes The total amount of money you spend to dry your clothes during each visit

Talk with other laundry customers during your

visits.

They'll in-

form you of any equipment changes, price changes or special promotions during the past 12 months that may affect your revenue estimates. If so,

make

the necessary adjustments to your revenue figures.

Your logbook should provide enough information

to develop with

accuracy a water wastage chart, a percentage (of total water use) factor

by washer

The

type,

and a percentage of dryer revenue

chart (Figure 6-10)

on the following page

is

to

washer revenue.

an example of how to

estimate water usage for purposes other than producing washer revenue:

58

Evaluating an Existing Coin Laundry

FRED S SELF-SERVICE LAUNDRY 659 ELECTRIC STREET ANYTOWN, USA

WATER WASTAGE CHART

1998

(Total

Water Use

Water Consumption - 5,183,026 Gallons)

May

Jan.

Feb.

Mar.

April

Washer Repairs

3,987

3,987

3,987

3,987

3,987

Restroom

6.510

6,090

6,510

6,300

6,510

1,860

1,740

1,860

1,800

1.860

930

870

930

900

930

Toilet

Restroom Sink Sink

Utility

June

July

Aug.

3,987

3,987

3,987

3,987

3,987

3,987

3,987

47,840

6,300

6,510

6.510

6,300

6,510

6,300

6,510

76,860

1,800

1,860

1,860

1,800

1.860

1,800

1,860

21,960

900

930

930

900

930

900

930

10,980

Sept.

Oct.

Nov.

Dec.

Total

Complimentary Washes Evaporative Cooler(s)

General Cleanup Misc. (Leakage, Etc.)

Total

465

435

465

450

465

450

465

465

450

465

450

465

5,490

1,550

1,450

1,550

1,500

1,550

1,500

1,550

1,550

1,500

1,550

1,500

1,550

18,300

15,302 14,572 15,302 14,937 15,302 14,937 15,302 15,302 14,937 15,302 14,937 15,302

181,430

Percent Water Wastage

3.5%

(181,430 + 5.183,026)

Notes: 1

.

Laundry hours are figured

at 15

hours per day.

maximum

7.

of 20 per week using a maximum of 46 gallons of water per test cycle. Restroom toilet usage is estimated at 3.5 gallons (old style toilet) with a flush every 15 minutes during the store hours. Restroom sink usage is estimated at 1 gallon every 15 minutes during store hours. Utility sink is estimated at an average of 25 gallons per day. Not applicable. (An estimate of the number of gallons used if free washes are provided to laundry employees and/or customers.) Not applicable. (An estimate of the number of gallons used if a laundry is cooled by evaporative coolers.)

8.

General cleanup

9.

Miscellaneous non-washer water usage

2. 3. 4. 5. 6.

Washer

repairs are figured at a

is

estimated to

consume a maximum is

of

estimated at a

15 gallons per day.

maximum

of

50 gallons per day.

Figure 6-10

While some might question the need to break down water wastage on a month-by-month basis, remember that your entire revenue projection is

based on water usage. As you make projections, consider the

number of days holidays, for

60

to

all

in

each month, including the number of weekends and

of which affect water usage. (Weekends usually account

70%

of the volume.)

Examine water bills fluctuations could

carefully,

mean

watching for unusual changes. Wild

estimated water

bills,

mistakes, changes in

equipment, or catastrophic wastage due to burst pipes,

etc.

Question

anything that seems unusual.

Once you have

a gallon figure for non-revenue producing water,

you can develop a detailed estimate of washer revenue using the chart (Figure 6-1 1) on the following page.

59

1

Coin Laundries

(

— Road to Financial Independence

FRED S SELF-SERVICE LAUNDRY 659 ELECTRIC STREET ANYTOWN, USA

WASHER REVENUE - DETAILED ESTIMATE PART

Used To Produce Revenue From Washers)

(Calculate Total Water

Water Used

Total

In

-

1998

I

-- -- -- --

Water Used By Washers To Produce Revenue

PART (Calculate Percent

181 ,430 Gallons

-

-

1998

In

5,183,026 Gallons

-

-

Waste Water (From Waste Water Wastage Chart)

|

5,001,596 Gallons

II

Washer Use

Factor)

Percent

Type

Total

Water

Washer Use

Of

Visit

Visit

Visit

Visit

Visit

All

Washer

#1

#2

#3

#4

#5

Visits

Per Cycle

12# TL

18

21

9

16

14

78

32

2,496

18# FL

10

8

4

6

12

40

33

1,320

35# FL

2

6

5

4

3

20

78

1,560

50# FL

2

1

2

3

2

10

101

(?) - Total -

2J

All Visits

Times Gallons Of Water Per Cycle

Total Gallons Of

Divided By

The

Total

Gallons (?)

Factor

1,010

39% 21% 24% 16%

6,386

100%

(

Each Washer Type The Total Gallons Column

Total Of

PART

III

(Calculate

Revenue From Washers

In

1998)

Percent

1998 Total

Of

Washer Use

Gallons

Washer

Factor

Of Water

Water Gallons Used Used Per Washer Per Type (?) Cycle

12# TL

39% 21% 24% 16%

5,001,596

1,950,623

32

60,957

$1.25

$76,196

5,001,596

1

,050,335

33

31,828

$1.50

$47,742

5,001,596

1

,200,383

78

15,390

$3.00

$46,170

800,255

101

7,923

$4.00

$31,692

Type

18# FL

35# FL 50# FL

5,001,596

100%

Cycles Per

Year (5)

- Gallons Used Per Washer Type

3J-

Divided By Gallons

Price

Per Cycle

1998

Washer Revenue

$201,800

5,001,596

V) - Total Gallons Of Water Times The Percent Washer Use Factor jT)

Average

Vend

Used Per Cycle

Cycles Per Year Times Average Vend Price Per Cycle

Figure 6-1

60

Evaluating an Existing Coin Laundry

number and types of washers in use during each of your laundry visits. You can now develop a percentage usefactor for each as shown in Part II of the Detailed Estimate. Part III uses the use-factor to develop the total amount of water used by each washer type, which leads to the number of cycles and then to the total Your log

will provide the

revenue.

Notice that there

is

Quick Estimate and the washers in tial

1%) between Detailed Estimate of washer revenue from a difference of $2,068 (or

differences in results can occur between these to

unusually low and

its

one of the models

high.

When

in

is

the

Estimates are not always this close. Substan-

this laundry.

mating washer revenue when the vend price in

the

two methods of esti-

wash a pound of clothes use-factor

is

unusually

doubt about which figure to use, rely on the Detailed

Estimate.

Before you can determine the

total

revenue, you must

figure

still

dryer revenue. Figure 6-12 on the following page shows how.

Again, the information will

you drying revenue

as a percentage of

lates total dryer revenue. total

come from your logbook.

Add

this to

washer revenue. Part

II

I

gives

calcu-

washer revenue and you have the

washer and dryer revenue for the past 12 months.

The more you observe on your laundry racy of your numbers. Since dryer revenue

of total laundry revenue, in this case stick

Part

it's

visits, the is

a substantial percentage

definitely to

your nose into other people's business. Try

others are spending on the washers

generate a

Effect

Of Dryer Load

Size

your advantage to

to find out

—and then on

more accurate dryer-revenue

greater the accu-

how much

the dryers. This will

to washer- revenue percentage.

On Dryer Revenue

Dryers dry by a combination of heat and airflow. Severe overloading can reduce drying time drastically by impeding airflow.

who

puts

spend a

two

total

1

A customer

8-pound washer loads into two 30-pound dryers might

of $1.50 (750 in each dryer) to dry clothes. Another cus-

tomer might cram the same two loads into one dryer and end up spending the same amount of money, if not more. They will also spend a lot longer in the laundry

—waiting

for their clothes to dry.

61

Coin Laundries

— Road to Financial Independence

FRED S SELF-SERVICE LAUNDRY 659 ELECTRIC STREET ANYTOWN, USA

TOTAL REVENUE FROM WASHERS AND DRYERS - DETAILED ESTIMATE

PARTI (Calculate Percentage Of Drying

Revenue To Wash Revenue) Percent

Type And Number Of Washers Used

Visits

To Laundry

12#TL

35#FL

18#FL

50# FL

Money

Money

Spent

To Wash

Spent To Dry

Clothes

Clothes

Drying

Revenue To Wash Revenue (?)

1

$4.00

$1.75

43.8%

2

$6.00

$2.75

45.8%

3

$4.50

$2.25

50.0%

4

$6.00

$2.50

41 .7%

5

$5.75

$2.50

43.5%

$26.25

$11.75

44.7%

(7) - Money Spent To Dry Clothes To Wash Clothes

Divided By

Money Spent

(2) - Total Money Spent To Dry Clothes Divided By Spent To Wash Clothes

Total

Money

PART (Calculate Dryer

Total

Revenue And

Revenue From Washers

In

Total

II

Revenue From Washers And Dryers

1998

________ ------

1998 Dryer Revenue Equals 44.7% Of Total Washer Revenue Total

Revenue From Washers And Dryers

In

1998

-

-

In

1998)

$201,800

-

$90,205 I

$292,005

Figure 6-12

Don't be too concerned about variations in the sizes of loads people put in the dryers because this will not significantly affect the dryer-to-

washer-revenue in their

ratio. Specific

brands and models are fairly consistent

drying efficiency. In other words, each dryer will take about

same amount of time and energy to evaporate a pound of water. Larger loads have more water to evaporate; they take more time but generate more money. the

62

Evaluating an Existing Coin Laundry

Based on water usage, you will find that the washers produced $201,800 in revenue and the dryers produced $90,205, for a total of $292,005 for the

year. This is a fairly accurate estimate.

your figures with the

him

to

show you how

revenue, he

may

Now compare

shows more revenue, ask wash clothes without water. If he shows less

seller's. If the seller

to

not be reporting

ures again to determine

why

it all.

In this case,

examine the

fig-

there are differences.

You can establish a sales history by analyzing past water bills. Investigate downward sales trends thoroughly to explain declines. A sharp drop in water consumption could mean the owner purchased new energy-saving washers.

means

that sales

A gradual drop in water consumption most likely

have decreased. Find out why!

Other Revenue Sources Check for other revenue sources such

as

from a drop-off laundry

service or vending machines. Drop-off laundry

is

usually priced by the

pound. Check sales tickets to find out the poundage of clothes washed

and how much revenue was produced for the

year.

Since you have already estimated washer revenue based on water use,

you must now deduct

enue so that your total achieve clothes.

from the drop-off laundry revlaundry revenue estimate will not be inflated. To part of this

you must first develop an average cost to wash a pound of (Figure 6-13 on the next page shows the calculation.)

this,

Next, multiply the average cost per pound by the total pounds of drop-off laundry for the year. Finally, deduct this figure from the total

revenue shown on the drop-off laundry sales tickets to reach an adjusted annual revenue figure for the drop-off laundry.

Notice the use of average washer capacity instead of rated capacity.

Washers are rarely loaded

to the rated

(maximum)

capacity. This

particularly true with drop-off laundry because the clothes are

carefully sorted into smaller loads based Further,

is

more

on color and fabric types.

heavy loading causes washability problems, leading

to cus-

tomer complaints. Tests done over the years on various types, sizes and brands of

washers have found the average load size to be approximately the rated poundage.

63

73%

of

Coin Laundries

— Road to Financial Independence

WASHER VEND PRICE PER POUND CALCULATIONS Washer Type And Rated

Number Vend

Of

Average

Capacity

Cost

Total

Capacity© Washers

Price

Pounds

Total

To

Of Average Capacity

Revenue

Wash

(2)

Per Cycle (D

Per

Pound

10# TL

7.3#

32

$1.00

234

$32.00

13.70

18# FL

13.1#

12

$1.50

157

$18.00

11.50

35# FL

25.6#

6

$3.00

154

$18.00

11.70

50# FL

36.5#

4

$4.00

146

$16.00

11.00

691

$84.00

12.20

T/L

@

- Top Load

F/L- Front Load

0 - Average Loaded Capacity (2) (3) (?)

Is

73%

Of Rated Capacity

- Average Capacity Of Washer In Pounds Times Number Of Washers - Vend Price Times Number Of Washers - Total Revenue Per Cycle Divided By Total Pounds Of Average Capacity

Figure 6-13

The laundry owner and/or attendants may not be using every type of machine to wash drop-off laundry. If this is the case, find out which types are normally used and figure these into your per-pound price calculations.

For example,

if

only the top-load washers are used for

drop-off laundry, figure the cost per pound at 13.70 instead of 12.20.

Your estimates

You can

will be even

more

accurate.

get the revenue produced

by vending machines by check-

ing invoices for the vended products, such as laundry soap, soft drinks,

candy,

and a

etc.

Never accept a verbal

grin. If the

figure, especially if

owner is cheating

the government,

it

includes a wink

why not cheat you

too.

Verify All Expenses

Expenses are much easier usually kept for tax purposes. penses.

Be

to verify

Ask

because accurate records are

the seller for a record of

sure to ask about any unusual expenses that

64

all

may be

exin-

Evaluating an Existing Coin Laundry

curred in the future, such as assessments for sewer, water, road im-

provements,

mation

if

By

etc.

asked for

knowingly withhold

law, sellers cannot If

it.

this infor-

they do and you suffer damages as a result,

you may have grounds for a lawsuit. Use the following list of expenses

as a guide

when

evaluating an

existing coin laundry:

Rent

•

Outside Services

Interest

•

Accountant Fees

Advertising

•

Operating Supplies

Utilities

•

Maintenance and Repair

Taxes

•

Depreciation

Insurance

•

Sign Rental

Wages

•

Annual Permits

Telephone

•

Inventory for Resale

Attorney Fees

•

Security System or Service

Office Supplies

There

may

The and

be others. Check carefully before making a commitment.

three

major expenses are

A

utility costs.

charges.

Read

rent,

copy of the lease

and contain a myriad of payments

Base rent

is

there are employees),

and rent-related

are 35 (or more) pages long

to the landlord.

was 168 pages

(As a consultant,

some

I

long.)

usually stated in dollars per square foot of space and

payable monthly. There the base rent. In

(if

will detail rent

Some

the lease carefully.

audited one lease that

wages

is

may also be a clause that periodically increases

leases, the lessee is required to

pay the landlord

a percentage of gross revenue above a predetermined amount. For ex-

ample, a lease might specify quarterly payments of 6V2 percent of rev-

enue be

in excess of

$25,000 during the quarter. These payments would

in addition to the

Many

monthly base

rent.

leases allow the landlord to charge each store

tion of the expenses of maintaining

owner a por-

and operating the shopping

center.

These expenses are usually divided among the storeowners, based on the percentage of the shopping center space that each store occupies.

65

Coin Laundries

The following examples

— Road to Financial Independence are taken

from an actual

Management Fee Utility

lease:

Landscaping Charge

Room Charge

Parking Lot Maintenance

Water

Security Service

Sewer Charge

Sprinkler Service

Trash Removal

Real Estate Taxes

Sign Rental

Insurance

Parking Lot Lights

•

As

a rule, rent plus all other charges specified in the lease should

not exceed 25 percent of gross revenue. If they do, revenue must be

increased or the rent reduced to bring this expense in

line. If

you

are

unsure that you can increase revenue, do not purchase the laundry until

—

you renegotiate the lease. If you can't do either walk away! Most of the expenses of coin laundries are fixed they remain

— same, whether revenue increases or decreases. expenses sewer and expenses — they Utility

electricity) are variable

natural gas,

the

(water,

will vary

with the volume of business. These expenses can be 40 percent (or

more) of washer/dryer revenue

in old laundries with outdated equip-

new machines, look for an average of 1 8 to 20 Sometimes you can modify the old equipment to make it more

ment. If the laundry has percent.

energy

efficient.

This

If a self-service

is

covered in

later chapters.

laundry has one or more employees, thoroughly

analyze wages and related employee expenses. In addition to wages,

you are required to pay a portion of the Social Security Tax, Worker's Compensation Insurance, and State and Federal Unemployment Taxes. Check for other taxes levied by the state, county, and city governments. You will be required to withhold from the employee's paycheck Federal Social Security/Medicare Taxes, Federal Income Taxes, State Income Taxes (in some states), and the employee's portion of the Worker's Compensation Insurance premium. The seller will have this information because detailed employee records are mandated by law. For additional information, study the "Employer's Tax Package," a package of tax laws and forms available from the IRS and from the state,

county, and city taxing authorities.

66

Evaluating an Existing Coin Laundry

Depreciation

a major expense. In the long run,

is

difference between your success

—

it

can mean the

or failure. Although you are not

putting cash out, the value of everything in a coin laundry decreases

monthly by a specific dollar amount. Sooner or

you will need to use that money to replace worn-out equipment. Bad managers are often forced to sell when equipment needs replacing. Don't be "conned" by a seller, only to find out later that you've money. You cannot determine

lost

depreciation and deduct for all the

it

later,

profitability before

you determine

from revenue. Set up depreciation schedules

equipment and leasehold improvements. Use as a guide the

examples shown

earlier in this chapter. (See

Chapter 15 for additional

information on depreciation.)

The depreciation schedules used here are different from those established by the Internal Revenue Service. Federal depreciation schedules, which you must use when determining your tax liability, are based on an average of equipment.

brands and models of a broad classification of

all

When you

existing coin laundry,

establish depreciation schedules to evaluate an

you

are basing

them on

the practical life expect-

ancy of specific equipment.

There are other expenses

too,

such as interest on

money used

to

build or buy a business. Laundry owners need operating supplies, in-

cluding cleaners, brushes, waxes, firm

is

Sometimes an outside service

hired to clean carpets, windows, or to perform a daily janitorial

service. If there are

vending machines, an inventory of

soft drinks,

must be bought and maintained. Secusystems and lighted exterior signs are sometimes leased monthly,

candy rity

etc.

bars, laundry soap, etc.

rather than purchased outright. There can also be taxes other than those

associated with employees, such as business licenses, property taxes, sales taxes, etc.

Be

sure to expose every expense to the light of day to

put yourself in the best possible bargaining position.

Calculating Profit

Now that you have developed accurate revenue patterns and documented

all

expenses, subtract the expenses from the revenue. The dif-

you are not satisfied with this figure, don't buy the business unless you are sure you can increase revenue, cut expenses, or do both. ference

is

the profit. If

67

Coin Laundries

— Road to Financial Independence

The most obvious remedy for an unsatisfactory net profit is to lower the offer. This would reduce two major expenses: depreciation and interest on the money you borrow for the purchase. It would also provide you with more cash because your monthly loan payments would be smaller.

The Estimated

Profit

Worksheet

estimate profit and net cash return

6-14 will help you to

in Figure

when evaluating

a potential acquisi-

tion.

CASH FLOW You might make lack of cash

is

the

good profit but still not have any cash. Since major cause of bankruptcy, you must always know a

your cash position. There are three adjustments to make to net before you can determine cash flow

—

the

profit

amount of monthly or yearly

cash your business will pay:

1

.

If

you borrow money

to purchase a coin laundry,

part of your profit to repay the loan principal.

payments from net profit. (The

interest

you

will use

Deduct these

on the loan has already

been taken as a business expense.) 2.

As an entrepreneur, you will estimate your tax burden and make quarterly payments to the taxing authorities. These tax pay-

ments must be also be deducted from net

profit

when

calculat-

ing your cash flow. 3.

Since depreciation place equipment,

is it

an expense that

is

not paid until you re-

increases your cash flow.

Add

it

back

into

the net profit.

You should now know if the business can make a profit and how much cash it will provide you on a monthly or yearly basis. If you find that the business makes a very good profit but provides little or no cash flow, you are borrowing too much money for an overpriced business or your down payment is too low (too highly leveraged) or both. If you fail to negotiate a better purchase price and/or can't make a larger down payment walk away. Highly leveraged buyouts are for

—

68

Evaluating an Existing Coin Laundry

ESTIMATED PROFIT WORKSHEET Revenue:

Washers & Dryers

$

Drop-Off Laundry

Vending Total

Revenue

$

Less Cost Of Vended Items

Gross

$

Profit

Less Operating Expenses: Rent

$

Utilities

Payroll

Depreciation Interest

On Loan

Maintenance & Repair Operating Supplies Insurance Advertising

Taxes Property Taxes Payroll

Miscellaneous Total

Net

Expenses $

Profit

Adjustments:

Less Loan Principal Payments

$

Less Estimated Income Taxes

Add Back Depreciation Expense Total Adjustments

Net Cash To Owner

$

Figure 6-14

69

Coin Laundries

the big boys, with

— Road to Financial Independence

megabucks

in reserve.

egory, there's likely to be bankruptcy

Unless you

fall in that cat-

on your horizon.

RETURN ON INVESTMENT

A

business's return on investment (ROI)

is its

annual net profit

divided by the selling price. Business investors use this information to

compare one investment opportunity with

another.

They

also consider

other factors, such as competition in the marketplace, length and terms

of the lease, and the condition of the laundry.

People with money to invest often ask "What's the average return

on investment

in the coin laundry industry?" It's hard to say. Five dif-

show

ferent investors looking at an existing self-service laundry could five different

ROI

estimates depending on loan structure and plans in-

volving employees. Anything that affects revenue or expenses automatically has an effect on ROI.

Savvy business investors don't ask

this question.

They make

their

own estimate using information in the Estimated Profit Worksheet (Figure 6-14).

Return

On Equity

Another seldom discussed, but equally important tool for measuring the value of a business

is its

return

on equity (ROE).

cash put in by the investor divided by the annual net

ROE

is

the

profit.

you put $30,000 into a savings account, you might receive a 3% ($900) annual return. The securities market might return 14% in dividends and appreciation, but with more risk. With the same $30,000 you could purchase a small self-service laundry that would produce If

$1,500 in cash every month equity.

—

a

60%

The trade-off is a much greater risk of losing your $30,000. You

are also going to spend a lot of time It's

annual return on your $30,000

the old

economic

and energy running the laundry.

principle: "Somethin' for nothin' ain't."

Inexperienced entrepreneurs sometimes base buying decisions on

how much they must borrow to buy

a business rather than on return on

Use

the Estimated Profit Worksheet to

investment. Avoid this mistake. tell

you

if

there

is

ample cash

left

over to satisfy your needs and pro-

70

Evaluating an Existing Coin Laundry

An

vide a safety net against mistakes.

experienced multi-store owner

might chance operating a new store on a small cash margin, but the inexperienced would be wise not

to.

TERMS OF THE LEASE Before a purchase, make sure you are thoroughly familiar with

Do you

of the terms and conditions of the lease. the expenses rights?

you

will

have relative

Your obligations? Put

all

written

fully understand all

to the lease?

Do you know

communications with the

by your

the landlord in writing, but only after scrutiny

communication can do much

all

your

seller

attorney.

to eliminate confusion

and

Good

and mis-

understanding which can lead to poor tenant-landlord relations. If

you

are to realize a

must have ample time Landlords can evict

good return on your investment, the

left. If

lease

not, renegotiate the lease before the sale.

new owners when

leases expire. If the lease

(or almost up), the seller really has nothing to sell except a lot of

is

up

used

was once a self-service laundry. Sharp business people are constantly on the prowl for expired coin laundry leases. In one instance, a laundry owner tried to sell a business for $45,000. The prospective buyer strung him along until the lease equipment stored

in a space that

expired and then negotiated a

new

lease directly with the landlord.

owned

a condition of the previous lease, the landlord

improvements, which he then gave

was eventually able

to

buy

the

to the

all

As

the leasehold

new owner. The new owner

equipment from the previous owner for

was increased by 57 percent within nine months, a return on investment of 660 percent! Opportunities as good as this one are rare. Take some time to check less than $2,000, a savings of $43,000. Profit

out

all

the coin laundries in the market, looking for those that are run-

down and

unprofitable. Learn if the landlord

lessee and

how much

tent.

time

is left

on the

lease.

You can usually uncover a good business

is

dissatisfied with the

Be

patient, but persis-

opportunity, particularly

in a metropolitan area.

Before assuming a lease, check with local government agencies.

Are there any recent or pending zone changes in the area? Are there any road building or improvement plans afoot? Are there any property

71

Coin Laundries

— Road to Financial Independence

easements that could potentially effect your business? Check building permits in your marketing area for competitive coin laundries or shop-

ping centers that might contain one.

Remember

new shop-

too, that a

ping center will alter consumer habits and shopping patterns.

If an-

other municipality should annex your location, what impact would this

have on you?

Should you ever pay more than a laundry afford

it

and the return on your equity

is

is

worth? Only

and no place for a new competitor

you can

good. But be careful! The

laundry must be situated in an excellent location, with tion

if

to build.

And

little

competi-

don't forget to

check cash flow.

Be

good negotiator when buying a business. Leverage your negotiations by making sure the seller knows, beyond any doubt, that you intend to own a self-service laundry in the area, that if you cannot purchase this laundry at the right price, you will build a new one. The message will be understood. Be careful when negotiating with several coin laundry owners at the same time. It's easy to become confused. Evaluate each offer or counteroffer to see how it affects the return on investment. If you don't, chances are you will pay too much. All good negotiators have one thing in common patience. Don't become too intense. Stay loose! Much of what is wrong with management in America today is the lack of patience, a tendency to sacrifice long-term gain for short-term results. Don't let this happen to you. a

—

72

SURVEYING THE MARKE1

IMPORTANT MANAGEMENT DECISIONS

must be made when

buying or starting a business. Once acted upon, many of these decisions cannot be altered without

why

it's

huge

financial losses resulting. That's

important to base your decisions on

survey of your market will provide those

Buying a coin laundry or ing the market

is like drilling

starting a

an

cal survey. This is gambling,

money. Taking the time

their

small sacrifice to

make

oil

facts,

not conjecture.

A

facts.

new one without

well without

first

first

survey-

doing a geologi-

and smart investors don't gamble with to thoroughly survey

your market

is

a

to guarantee success.

WHAT YOU NEED TO KNOW A business

depends on customers. You need

to

know yours

inti-

mately before you spend money or make commitments. Don't hire contractors,

purchase equipment, or sign a lease before you can answer

these questions:

•

Who

•

What

are your prospective customers?

are their needs?

73

Coin Laundries

•

When

•

Where

•

Why

The

— Road to Financial Independence

need your product or service?

will they

are they presently getting that product or service?

should they do business with you?

size of

your store will be based on answers

to these questions.

This information will also guide you in selecting and purchasing your

equipment and influence your pricing and business hours. your advertising program on the survey information, fewer

results with

it

If

you base

will yield better

dollars.

THE PROSPECTIVE CUSTOMER DATA SHEET When looking for prospective customers, one-on-one contact. The question doors and

visit

tionnaires?

is:

there

Would you

is

no

substitute for

personally knock on

with prospective customers until you filled out 500 ques-

Not

Would you do

likely.

it

to avoid a loss of

$150,000? To

become a millionaire? You can become a millionaire through owning and operating profitable coin laundries. You make them profitable by planning shrewdly and eliminating costly mistakes. The purpose of your market survey is to help you do both. Use the Prospective Customer Data Sheet (Figure 7-1) to record the survey information. Process as

you can. The more the

The importance of

many

prospects as

better!

the Prospective

Customer Data Sheets cannot

be overemphasized:

1.

They

2.

good and revealing the needs of your prospects. They will save you thousands of dollars in start-up costs. Promotions to your prospective customer list will shave months

are your insurance against failure, proving whether the

location

is

off the time

it

takes for revenue to equal expenses (break-even

point.) 3.

They

will

make

impress a loan

financing your business easier. If you want to officer,

Customer Data Sheets

simply pull out a stack of Prospective that

prove the potential.

74

Surveying the Market

PROSPECTIVE CUSTOMER DATA SHEET Street

Name_

Address

Phone Number

Zip

Code

Household Size

(number

of people)

Presently Doing Laundry At: Self-Service Laundry

(name)

Apartment House Laundry

I

I

Mostly At

Parent Or Friend

Home

Other (describe)

Do You Use A Coin Laundry For Rugs And Other Large Items? Most Convenient Day For Doing Laundry

Yes

No

Time

Washer Preference:

n

Top Load

12# Front Load

18# Front Load

25 # Fr° nt L ° ad

35# Front Load

50# Front Load

75# Front Load

Other (describe)

Dryer Preference:

I

|

O

Single

Load-Home

Style

I

30# Capacity-Single Drum 50# Capacity

Single

|

Load-Home

Style (Stacked)

30# Capacity-Double Drum (Stacked)

75# Capacity

Other (describe)

Most Frequently Shopped Grocery Store:

Name If

Using

A

Location Central Laundry

Room Or

Self-Service Coin Laundry,

What

Is

Your Biggest

Complaint?

Figure 7-1

While the information gathered on the Prospective Customer Data Sheet is critical, too much detail would defeat its purpose. Most people

75

Coin Laundries

— Road to Financial Independence

don't like answering a lot of questions, particularly personal ones, or filling

out long questionnaires.

Keep

it

short to avoid antagonizing pro-

spective customers.

GATHERING INFORMATION Don't hire someone cally unable to

do

it

to

do the survey for you unless you are physi-

yourself.

through the eyes of others.

You won't

"get the feel" for your market

A good market survey demands good judg-

ment, something that someone else won't necessarily have.

You cannot survey your market by Walking

bile.

good

is

exercise.

driving around in your automo-

Get used

to

it.

Go

to

where your pro-

spective customers live, call on them, and find out where they are wash-

Then

ing their clothes. all

visit

each laundry

facility

mentioned, including

multi-family housing units, motels, competitive laundries, and as

many

single-family

homes

as possible.

Multi-Family Housing Since

become

many

familiar with every apartment

will fall into

1

.

of your prospective customers will live in apartments,

No

complex

in

your market. Each

one of five categories:

central laundry facilities in the complex,

and no washer or

dryer hookups in the apartments. 2.

A central laundry facility in the complex, but no washer or dryer hookups

3.

Individual washer and dryer hookups in every apartment, but

no 4.

in the apartments.

central laundry facility in the apartment complex.

Individual washer and dryer hookups in every apartment and a central laundry facility in the apartment complex.

5.

Washers and dryers furnished

in all or

some apartments.

Experienced coin laundry owners are excited to find an apartment

complex without central laundry facilities or individual washer and dryer hook ups in the apartments. In this case, every tenant in the apart-

76

Surveying the Market

ment complex is a prospective customer and you should spective Customer Data Sheet for each tenant.

fill

out a Pro-

apartments have laundry hookups but there are no

If the individual

central laundry facilities in the apartment complex, survey every apart-

ment. For each tenant that does not

own

a washer and/or dryer,

out

fill

Customer Data Sheet. What if the apartment complex has a central laundry facility? Tenants in an apartment complex with a central laundry facility may still a Prospective

be prospects for your laundry

meet

their needs.

Study

it

if that central

laundry facility doesn't

carefully. Talk to the tenants.

Prospective Customer Data Sheet for every tenant

if

Then

fill

out a

any of the follow-

ing conditions exist:

4.

Washing or drying prices are too high. Laundry room hours are inconvenient. Laundry room is dirty and/or poorly lit. Equipment is old and poorly maintained.

5.

Problems exist with

6.

Number

1

.

2. 3.

theft of tenants' clothes

of washers and dryers

is

from laundry room.

insufficient to

meet

tenants'

needs.

Be

when

wash and dry a load of clothes. The coin slide on a single-load dryer may take two quarters, but this doesn't mean that you can dry a load of clothes for 500. The dryer may actually require $1 to dry a load. In some cases, the tenants careful

may even be paying Even

if

figuring the actual cost to

$1 .50 to dry a large load of blue jeans or towels.

the tenants can dry a load of clothes for 500, they

may

still

be prospects for a self-service laundry. Access to 30-, 50- and 75-pound dryers less

means

that

customers can dry more clothes

faster,

and for a

lot

money.

Double or triple-load washers laundry

facilities at

are normally not available in central

apartment complexes.

If

they are, there are gener-

enough of them to meet demand. Visit with the tenants and learn their preferences. Those who prefer large-load washers are good prospects for you. Time to pull out a Prospective Customer Data Sheet. ally not

77

Coin Laundries

— Road to Financial Independence

Motels

Keep your dry

local motels

literature

facilities.

and "bed-and-breakfast" lodgings supplied with

and advertising material since travelers often need laun-

good

Establish

relationships with the

owners and manag-

because they are potential users of your large-

ers of these businesses

load washers for laundering bedspreads, throw rugs and other bulky items.

Competitive Laundries Visit every competitive laundry in

your market. You can determine

amount of business that each is doing by using the quick estimate method described in Chapter 6. The total figures will tell you how much self-service laundry business is presently being done in your market. Use this information to estimate the amount of revenue you can expect the

your laundry to produce.

Avoid the temptation of limiting your market survey tive laundries.

may

The

fact is that

many of your

to

competi-

prospective customers

not be using the self-service laundries in your market. If they are

rundown and

dirty,

many

tenants will opt to use the

more convenient

central laundry facilities in their apartment complex. Others will drive

great distances to use clean,

able nearby.

modern

self-service laundries not avail-

A major reason for surveying

your market

is

to learn the

needs of your prospective customers in order to meet those needs and get their business.

Single-Family It is

Homes

both too time consuming and impractical to contact every

single-family

home

in

your market. Pick neighborhoods with the

least

expensive single-family homes, where the residents are more likely to

be self-service laundry prospects. Visit as many of these homes as you can, filling out Prospective

Customer Data Sheets

for residents with-

out washers and/or dryers.

For residents of more affluent neighborhoods, use a mailing

company to distribute your ProspecThe cost is usually very reasonable be-

vice or door-hanger advertising

Customer Data Sheets. cause you share distribution expenses with other businesses. tive

ser-

78

Surveying the Market

Have your Prospective Customer Data Sheets

printed on a return-

address, postage-paid card. Attach a letter explaining that

you

are plan-

ning to build (or remodel) a self-service laundry in the area and need

on the returned cards

their advice. Information

will

make you

far

more

than the mailing will cost you.

Motivate prospects to

fill

Data Sheets by promising drying

at

out and return the Prospective Customer

them

to mail

your new coin laundry.

free

coupons for washing and

If legal in

your area, drawings for

prizes can be an effective inducement.

USING SURVEY INFORMATION The market survey provides the data you need to estimate monthly revenue from your new self-service laundry. Monthly revenue, in turn, will determine store size

and equipment needs. Before you can de-

velop an operating plan or apply for financing, you must estimate your revenue.

By

visiting all competitive laundries during

your market survey,

including self-service laundries and central laundry facilities in multi-

family housing, you will learn the charges to wash and dry a load of clothes. This information will influence

your pricing.

The Prospective Customer Data Sheets

you what type of laundry equipment your prospects prefer and the times of day they do their laundry. This will suggest the type of equipment you purchase and your tell

hours of operation. Remember, to turn prospects into customers, you

must meet their needs. It

can take months for a new business to reach the break-even point,

where revenue equals expenses. Meanwhile, you pay the expenses well as part of your loan each month. Advertising to a tive

list

of prospec-

customers will make your business grow faster with a smaller

vestment of advertising dollars.

It

as

will also reduce the time

it

in-

takes to

break even, saving you even more money.

The Prospective Customer Data Sheets

also

show where your pro-

spective customers are buying their groceries. Since this information

is

valuable to a grocery store manager, suggest a joint advertising pro-

gram

to the

manager of the

store nearest you.

79

Some grocery

store

man-

Coin Laundries

— Road to Financial Independence

agers will even pay 100 percent of the cost is

if

you supply the

list.

This

another opportunity for you to gain customers and reduce your ad-

vertising costs.

ESTIMATING MONTHLY REVENUE Since your monthly revenue estimate will be the basis for

many

must be accurate. The market survey is designed so that you can make two separate estimates from two different sets of figures. You can then compare the figures for accuracy. important financial decisions,

Using Information

From

it

Prospective Customer Data Sheets

Before summarizing information from the data sheets, study each carefully. If

something doesn't add up,

Most people

tion.

will

be pleased

at

call the

your

prospect for clarifica-

interest in their

comments.

Next, separate the data sheets into groups according to the following classifications:

•

Users of competitive coin laundries

•

Users of apartment house laundries

•

Occasional coin laundry users (rugs, blankets,

•

Non-prospects

(all

etc.)

others)

Now total the number of persons under "household size" for prospects using competitive laundries and apartment house laundries. Since

you are not going

to get all of these prospects,

the percentage of laundry users

you

your goal

is

to estimate

will capture in each of these cat-

The comments in the "complaint" section of the data sheets help you here. Part I of Figure 7-2 shows the format for these

egories. will

computations.

Once you have estimated

the

number of laundry

prospects,

you

can determine the annual washer and dryer revenue they will generate, using the formula in Part

The estimate

is

II

of Figure 7-2.

conservative because you are not figuring in rev-

enue generated by occasional coin laundry customers

who will use your

laundry to wash rugs, blankets, quilts, sleeping bags, and so on.

80

Surveying the Market

ESTIMATED ANNUAL REVENUE

FROM PROSPECTIVE CUSTOMER DATA SHEETS PARTI (Estimate

The Number Of Prospects From The Data Sheets)

Number

Total

Of Data Sheets

Number

Estimated

Of People

Percent That Are Prospects

427

1,218

33%

402

459

918

50%

459

—

Users Of Competitive Coin Laundries

Number Of Prospects

Users Of Apartment

House Laundries Total Prospects

861

PART (Calculate Annual

Number Of

Of Washer

Prospects

861

Revenue From Washers And Dryers) Washer

24 Pounds x

Capacity

x

24

x

II

x

0

Vend

x

Per Pound

@

.084(8.40)

Weeks

Dryer

Price

x

Revenue Factor

®

x

52

1.5

Per

x

Yearly =:

Year

=

Wash/Dry

Revenue

$13£ ;,391

G) The Average Person Uses 24 Pounds Of Washer Capacity Per Week. (2) (3)

See

Figure 4-2 (Page 25) For

Vend

Price Per

Pound

Calculations.

Dryer Revenue Estimated At 50% Of Washer Revenue. (Multiply Washer Revenue 1.5 To Get Total Revenue.)

Times

Figure 7-2

Using Information the

From A Survey Of Competitive Laundries

To estimate the sales volume of each competitive coin laundry, use "Laundry Revenue-Quick Estimate" method shown in Figure 6-9,

81

Coin Laundries

— Road to Financial Independence

ESTIMATED ANNUAL REVENUE

FROM SURVEY OF COMPETITIVE LAUNDRIES

A

•

•

•

Yearly

Percent

Yearly

Revenue

Wash/Dry Revenue

C

•

Other Sources

•

Capture

$112,518

Competitor B Competitor

Estimated

Wash/Dry Revenue (D

Competitor Competitor

Estimated

•

•

97,631

•

78,462

•

•

•

•

30% 20% 40%

•

•

$33,755

•

19,526

31,385

©

•

54,000

$138,666

Total

(T)

Apartments, Homes, Transient, Etc.

(2)

See "Laundry Revenue-Quick Estimate" (Chapter

6,

Figure 6-9)

Figure 7-3

Chapter

6.

Next, estimate the percentage of business you expect to

gain from each.

You can then use

potential revenue

this

information to estimate yearly

from your washers and dryers (see Figure

The percentage of customer capture

7-3).

will probably conflict in the

two methods of estimating annual revenue. This happens because one percentage is based on laundry prospect comments on the Prospective Customer Data Sheets while the other derives from your personal observations of competitors' laundries.

The estimate of the percentage of business you will take from your competition is more of a "guesstimate." Just give it your best shot. Normally, you will draw a higher percentage from the laundry nearest you. Keep in mind that new laundries attract customers because: •

They're modern

•

They have convenient parking

•

They're clean

•

They're more accessible

82

Surveying the Market

Compare both estimates. Don't substitute one for the other because you need to consider both for accuracy. Later you will learn other ways to use this information to plan

and develop a profitable self-service

laundry.

83

Coin Laundries

— Road to Financial Independence

"Business without profit

is

not business any

more than

a pickle

is

candy."

—Charles Frederick Abbott "To get

profit without risk, experience without danger,

without work,

is

as impossible as

it is

to live without

—A.

84

P.

and reward

being born."

Gouthey

8 PLANNING THE SIZE

OF YOUR STORE

T

HE INEXPERIENCED TEND The excitement

level

is

to overbuild a

new

coin laundry.

up, and they are vulnerable to high-pres-

sure sales tactics by equipment manufacturers and distributors. But be-

ware!

When

a laundry

is

too large for

its

market, you can suffer huge

financial losses, or even face bankruptcy.

The days of inexpensive

making rent one of your three biggest expenses. Deciding how much space you will need to operate is important because it will have a major influence on profit. Plan your needs carefully before you sign a lease. It's better to undersize than to oversize your laundry. If your laundry is too small to handle market demand, you will still make a substantial profit and you can always build another laundry in the same area.

On the other hand,

store space are gone,

a coin laundry that

is

too big for

its

market will

be a tremendous financial drain. $1

As an example, suppose you rented 2,900 square feet of space at 4 per square foot per year. You then prepared the space for the equip-

ment and

installed

36 washers and 20 dryers. Later you learn

that a

laundry with 26 washers and 15 dryers requiring only 2,400 square

85

Coin Laundries

feet of space

8-1

would

— Road to Financial Independence

actually have satisfied

consumer demand. Figure

shows how much you'd have spent unnecessarily:

THE FINANCIAL PENALTY RESULTING FROM OVERSIZING A LAUNDRY

Excess Equipment Costs Washers (Excess Of

1

$21 ,767

0)

Dryers (Excess Of 5) Additional In-Line Total

1

Water Heater

6,823 2,400

Excess Equipment Costs

$40,990

Excess Construction Costs Extra

Sewer Impact Fees

Extra Water

$10,000

Tap & Meter Fees

9,000

750

Extra Equipment Installation Charges

Excess Leasehold Improvement Costs Total

7,500

Excess Construction Costs

$27,250

Excess Annual Operating Expenses Rent

$7,000

240

Insurance

Heating

& AC

450

Interest (First Year)

Property Taxes

(First

1

,659

476

Year)

Depreciation (10 Year Straight Line) Total

Excess Operating Expenses

Total

Excess Costs And Expenses

4,435

$14,260

— First Year

Figure 8-1

86

-

•

•

$82,500

Planning the Size Of Your Store

As you can

you would have spent approximately $40,990 more than necessary for washers and dryers and extra water heating capacity see

would never have been used. This means borrowing more money than needed. And it must be paid back out of profits if there are any. that

—

What happens

to construction costs? In this

example, the sewer

impact fees were $1,000 per washer. (These fees can be two or more

some jurisdictions.) And the ten extra washers required larger pipe for more water delivery, meaning substantially higher water tap fees and higher water meter charges. Even at a conservative estimate of $15 per foot, you would have paid $7,500 more in leasetimes higher in

hold improvements for the 500 square feet of extra space leased.

It all

adds up to an additional $27,250 that you borrow and pay back from profits

each month.

Chances are your business would not survive these mistakes. did,

would

it

cost

penses for the in the next

two

you an estimated $14,260

first year,

years.

If

it

in excess operating ex-

with only slight reductions in these expenses

And this doesn't include miscellaneous expenses,

such as maintenance of the extra equipment, additional cleaning, and the cost to operate excessive water heating capacity.

In short, if

you

built a

36-washer coin laundry

would only support one with 26 washers, $82,500 This

is

It

in excess costs

takes

know-how

to estimate the right

would be over in the first year.

amount of space for a selfby studying other self-ser-

you can learn Develop an eye for detail and use your common

sense.

particularly at the following variables:

•

Layout

•

Size and shape of the space

•

Number and types of dryers Number and types of washers Amount of unused or wasted space

•

market that

a heavy price to pay for a sloppy market survey!

vice laundries.

•

the result

and operating expenses, just

service laundry. Fortunately,

Look

in a

Don't

try to

measure everything with a hand rule or you

will dis-

rupt the business and aggravate the owner. Instead, estimate overall

87

Coin Laundries

— Road to Financial Independence

dimensions by using floor reference.

Check

tiles

or 2-foot by 4-foot ceiling panels as a

the size of the laundry,

dimensions, and use

aisle widths,

and other

information to sketch store layouts. You can

this

study them later to see

its

how

they could be improved or

how you might

eliminate wasted space.

You can use

a small 25-foot auto-wind steel measuring tape to cal-

culate aisle widths quickly without disturbing customers. Another

measuring tool cost, try to

is

an electronic distance meter.

If

you can't

handy

justify

its

borrow or rent one. This small meter provides a high degree

of accuracy

when measuring

ceiling heights, aisle widths,

and overall

space.

The more

you analyze, the more informed you will be. Talk with customers as you visit various laundries. Find out what they like (or dislike) and what additional services they would like to have. Take all of it into account when you design your own laundry. It won't be long before you develop a knack for designing good store layouts and become proficient in the use of space. Show your plans to equipment manufacturers and distributors (or consultants) to get their input. (Many even have computer programs to assist in laundry layouts.) In the final analysis, however, your best judgment should stores

prevail.

Your space requirements depend on

several interacting factors:

•

Business potential

•

Projected load- spread

•

Space

•

Services offered

•

Equipment mix

•

Customer amenities

•

Equipment-use-factor

availability

BUSINESS POTENTIAL You make

most profit when you size your store to best match the business volume you expect. If your store is too big for the market, the

your excess expenses will cut into your profit.

you lose the opportunity

If your store is too small,

for a bigger profit.

Increase the odds of success: Determine your business potential by

thoroughly analyzing demographic reports (Chapter 4), use of Prospec-

88

Planning the Size Of Your Store

Customer Data Sheets (Chapter 7), and the data you gathered while surveying the market. Later in this chapter you will learn how to apply all this information to settle on your equipment mix, a major influence on your space requirements. tive

AVAILABILITY OF SPACE Unless you have enough land in the right location to build the size

and

your market will support, you're limited

style of laundry that

retail

space that's available for purchase or lease.

ters offer the best

chance

New

to

shopping cen-

amount of space that you want. fixed, you can often negotiate the

to get just the

Although the depth of a building

is

width (storefront).

There are many advantages

•

to

new

construction:

Concrete floors can be poured after the sewer lines are down. This saves the cost of cutting, removing, and re-pouring part of the

•

In

new

floor.

construction,

you can often persuade a landlord

special requirements at •

to

pay hauling charges and dump

cost.

fees.

Landlords often provide allowances for ceilings, lighting, wall treatment and floor covering for these costs

If

meet

New construction eliminates the cost of "gutting" a leased space and then having

•

no charge or below market

to

when remodeling

you can't find

retail

space in

new

construction.

You bear

existing space.

new

construction, you'll be limited

to what's available in existing space currently for lease.

The

size

and

shape will already be determined for you, and you'll have to plan your layout around existing doors and windows. Avoid odd shapes, such as triangles to

and long, narrow rectangles, which can pose

good laundry layout. Always plan your layout before signing a

lease.

real challenges

Your market may

support a laundry with 28 washers and 17 dryers that would 2,600-square-foot-rectangle. If the space

might find yourself limited

to

is

fit

in a

L-shaped, however, you

23 washers and 13 dryers. You'll have

89

Coin Laundries

less revenue, but

solution

still

— Road to Financial Independence

have

—negotiate lower

to

pay for the same square footage. The

rent or find a better

site.

EQUIPMENT MIX There

is

a tendency in the industry to classify laundry size by the

number of washers. This worked

in the old

days when most of the

washers were top loaders of approximately the same rated capacity.

Most modern

laundries, however, offer several sizes of front load

wash-

ers in addition to the top loaders.

Today, a better

way

poundage of clothes

that

to classify laundry size is

by the

can be washed per cycle in

all

total rated

the washers.

For example, a laundry with fourteen 18-pound front-load washers, eight

35-pound front-load washers, and four 50-pound front-load wash-

wash 732 pounds of clothes in one cycle. This is a total of 26 washers. It would take 61 top-load washers to do the same job. And the top loaders would require 66% more "footprint" space, plus 15% to ers could

25%

additional space for aisles.

Market demographics and customer preferences determine the amount and type of equipment you choose, which in turn, determines

how much

space you need. Figure 8-2 compares space requirements

and return per square-foot-of-space for a popular brand of top-load and an equally popular brand of front-load washer.

These calculations are based on the washers being

installed back-

to-back. Front-load washers are bolted to the floor and require

two

feet

of space behind them for sewer lines, electrical connections, water pipes,

and servicing. The top-load washers are movable for servicing and are installed back-to-back, with

one foot of space for

utilities.

These

fig-

ures are based on specific brands vended at the stated prices. Brands of different sizes

would

alter these figures.

50# FL washer requires twice the floor space of a 1 2# TL washer, but it will wash twice the poundage at double the revenue for the same square foot of floor space. In other words, the larger the washer, the less space required to wash a given poundage of

As

clothes.

the chart indicates, the

There

is

a flip side to this. For maximum customer convenience,

large capacity washers are often

matched with

90

large capacity single-

Planning the Size Of Your Store

WASHER CAPACITY AND REVENUE RETURN COMPARISON PER SQUARE FOOT OF FLOOR SPACE Pounds Washer

Square Feet Capacity

Required For Each

Rated

Revenue

Capacity Per Sq. Ft.

Vend

Price

Price

Per

Per Cycle

Conversion

Return Per Cycle Per Sq. Ft.

And Type

Installed

Of Washer

Washer

12# TL

5.84

2.05

$1.00

8.30

17.00

18# FL

6.53

2.75

$1.50

8.30

23.00

25# FL

7.36

3.40

$2.00

8.0C

27.20

35# FL

9.77

3.58

$2.75

7.90

28.10

50# FL

11.25

4.44

$4.00

8.0C

35.50

©

Floor

Space

@

Pound (3)

Floor

Space

(4)

TL Top Load Washer

Washer

FL

Front Load

(T)

Square Feet Of Washer Footprint Plus The Space Required Behind Washer For Service And

(2)

Rated Capacity Of The Washer Divided By Square Feet Required For Each

(3)

Washer Vend

(4)

Price Per

Price Divided

Installed

Utilities

Washer

By The Rated Capacity Of The Washer

Pound Times The Pounds Of Washer Capacity Per Square Foot Of

Floor

Space

Figure 8-2

drum dryers instead of the space-saving double-drum dryers. The tradeoff

is

a slight increase in floor space requirements.

Experienced laundry owners often keep an eye out for small laundries with old, outdated single-load washers

and dryers

in

markets that

will support large capacity machines. If the laundry has a history of

much the better for it can usually be purchased at a "fire-sale" price. It is then remodeled and updated with new large-capacity washers and space-saving double-drum dryers, providing a much marginal

profits, so

greater profit

from the existing space. Remember,

of equipment

—

Dryer mix

it's

is

the

pounds per hour

that

it's

not the quantity

produces revenue.

influenced by washer mix. In an ideal laundry, there

should be enough drying capacity to keep up with the washers during periods ends.

when the laundry is operating at its maximum, such as on week-

The following chart (Figure 8-3) is a general guide to help you select

91

Coin Laundries

dryers.

It is

— Road to Financial Independence

based on washers of several sizes that are standard

in the

coin laundry industry.

OPTIMUM DRYER LOAD SIZES RATED DRYER CAPACITY TO RATED WASHER CAPACITY (Weight Of Dry Clothes

Rated Capacity Of Dryer Drum

Mi rv\ k fit NumDer ut

% Over (+) ur unaer [-) Optimum Load

Washer Loads

Rated Capacity

Of Dry Clothes

i

•

•

.

.

75#Drum

.

.

Pounds)

Washer Type And

OUff LMUlll

50# Drum

In

k"\ /-\

2

•

1

•

•

•

1

.

.

3

.

.

.

•

.

.

2

•

•

1

•

•

1

.

5

.

3

.

.

•

•

•

18# FL

•

25# FL

•

12# TL

•

18# FL

. •

•

2 •

CO/ +0 /o

•

7°/ -f/o

• •

i

+27%

•

•

•

35# FL

•

.

• •

25# FL

•

1

•

.

12# TL

•

1

12# TL

•

• •

18# FL

•

•

•

•

•

25# FL

•

35# FL

•

50# FL

•

•

•

• •

•

-4% +12% -24% +4% +7% +12% +1% -31% +1%

One 75-Pound Washer Requires The Use Of Two 50-Pound Note: Percentage of optimum load

is

based on average washer load

Dryers.

size, not the rated

capacities listed above. This background information resulted from tests (conducted by the

author) on top-load washers from

one manufacturer and

front-load

washers from another

manufacturer. Both manufacturers are internationally known and highly respected. (These

percentages

may

vary slightly from manufacturer to manufacturer.)

Figure 8-3

92

Planning the Size Of Your Store

Overloading a dryer decreases flow,

combined with an increase

rated, increases the drying time.

to dry

much

efficiency.

in residual

The reduction

in air-

water that must be evapo-

Underloading a dryer causes the clothes

An optimum

dryer load

is

the average load size

which drying time matches wash time. (A or seven-percent overload will have a negligible effect on the overall

(measured six-

faster.

its

in dry clothes) at

drying capacity.)

There are six factors that affect drying speed:

1.

Heat

4.

Clothes Load

2.

Air Flow

5.

Residual Water

3.

Drum

6.

Drum

Size

Configuration

Not all dryers are equal in drying efficiency. Some brands and/or models are more efficient than others because they have a better balance of heat, volume of air, and direction of airflow in a drum specifically designed to provide

(Chapter 10 explains

how

maximum to select

exposure of heated

air to clothes.

your dryers.)

EQUIPMENT-USE-FACTOR The equipment-use-factor for a self-service laundry is the daily average of wash cycles (turns) for all the washers for the entire month. You must be familiar with this term because it is part of calculating space requirements.

For example, suppose a laundry has the following washers:

WASHERS Quantity

8

10

6 _2_

26

Description

12# 18# 35# 50#

TL FL FL FL

Total Lbs.

Vend

Capacity

Price

96 180 210 100 586 Figure 8-4

93

$1.00 $1.50 $2.75 $4.00

Return Per Cycle

$8.00 $15.00 $16.50 $8.00 $47.50

Coin Laundries

— Road to Financial Independence

26 washers ran one cycle, they would produce $47.50 in revrevenue from all of the washers totaled $7, 1 25 for the month

If all

enue. If

of June, the laundry

is

said to be doing five turns (cycles).

To

divide $7,125 by $47.50 and then divide the result by the

this,

number

30 days = 5 turns per day average).

of days in June ($7,125 + $47.50

Most

arrive at

laundries operate in the range of three turns per day on the low

side to ten turns per

about

day on the very high

side.

The

industry average

is

five.

how

Here's

your space requirements: The amount of

this affects

space you need depends on the amount of equipment you need to pro-

duce the revenue you need based on an estimated equipment-use-factor of (x) turns per day. If the turns per

day don't meet your expecta-

you have more equipment than you need occupying more space than you need. This means that the return on your investment will be tions,

marginal

Chapter

—

at best

at worst,

you could be forced

into bankruptcy. (See

6.)

Why not design a laundry for maximum turns per day and save on equipment and space? There are

limits. In theory,

washers averaging

28-minute cycles plus 5 minutes to load and unload could run a maxi-

mum of 25 all

washers

complete cycles at

in a

14-hour day. Unfortunately, running

maximum turns would require a continuous line of people

waiting to use the

first

machine available every day

that the laundry is

open. Simply put, people in this country will not stand in line to do their

wash.

LOAD-SPREAD If

you could design a laundry

for an equipment-use-factor of 12

turns

and actually achieve 12 turns every day, you would become very

rich,

very

fast.

The

reality

is,

however, that customers don't present

themselves in a steady stream from the time you open until you close.

There are many

idle hours.

when they

People tend to do their laundry on week-

work and so a high percentage of the business volume is achieved inside a few hours. A laundry that does 60 to 70 percent of its business on weekends is said to have an "uneven" load-spread, while a laundry whose business ends or

at night

are off

94

Planning the Size Of Your Store

volume

is

steady throughout the entire

week has

a "uniform" load-

spread.

Load-spread influences the equipment-use-factor which affects the

amount of equipment you need

to handle the

volume. This, in

turn,

A

more uniform load-spread means that you need less equipment to meet market demand. From a cost standpoint, you would be better off owning a laundry influences the size of your store.

with 26 washers running

at

seven turns producing $9,975 in revenue

per month than one with 37 washers running

same $9,975 ment and space the

in revenue. In the

at five turns

producing

former instance, you need

less equip-

same revenue. But

you have an uneven load-spread, 26 washers may not satisfy market demand. For example, what if your market area has only one major employer and all the employees work the same weekday hours? Most customers would use the laundry on weekends, leaving much of your equipment idle Monday through Friday. If your market area has many employers, however, the chances are that hours of employment would vary considerably. As a result, you could have a more even load-spread throughout the week, requiring fewer machines and less space to bring in the

same

to generate the

if

dollar volume.

Load-spread becomes a factor

in a resort area

where business

is

You would need to plan a self-service laundry to handle mardemand during the three or four months of the peak tourist season.

seasonal. ket

Your laundry would experience considerable

idle capacity the rest of

the year.

Sometimes you can improve your load-spread by reducing on days

that are consistently slow.

the day they

do

prices

Some of your customers will change

their laundry to take

advantage of the price reduction.

Your overall business will increase because your laundry will not be as crowded and fewer customers will be turned away. Washer turns and load-spread affect the number of dryers you need. In a laundry with an even load-spread, idle.

You can

some equipment will usually

then get by with a total rated dryer capacity equal to total

rated washer capacity

—

1

to

1

.

If

most of the business

ends, every machine will be used non-stop for

can become a bottleneck. To prevent to

set

washer capacity

this,

is at least 1.5 to 1.

95

make

is

done on week-

many hours and

dryers

sure the dryer capacity

— Coin Laundries

— Road to Financial Independence

You have to know the load-spread before you can figure what equipment-use-factor you will use when planning the size of your laundry. The Prospective Customer Data Sheets (Chapter 7) provide this information. Each sheet asks the day and the time of day that the prospect prefers to

do laundry. Sort the stack of sheets

into seven piles

by day-

of-week. Next, total the number of people per household for each stack,

and chart

this

information (Figure 8-5).

LOAD-SPREAD CALCULATIONS

Of People

24 Pounds Per Person

•

127

3,048

•

62

1,488

•

81

1,944

89

2,136

•

72

1,728

•

•

•

8.4%

183

4,392

•

•

•

21.2%

247

5,928

•

•

861

20,664

Number Day

Monday Tuesday

Wednesday Thursday Friday

•

•

•

•

•

•

Saturday

Sunday

•

Percent

Of Total •

•

•

•

14.8%

7.2%

•

•

•

9.4%

•

10.3%

28.7% 100.0%

Figure 8-5

The

chart indicates that

50%

of the business

is

likely to be

weekends, with Sunday being the most active day spread.

On

done on

—an uneven

load-

Sunday, every washer in the 26- washer laundry (described

would have to run ten turns to keep up with demand (5,928 pounds divided by 586 pounds per turn). This means that every washer in the laundry would be running non-stop for about six hours

in Figure 8-4)

and

that's a lot

of use.

This laundry

is

designed for an equipment-use-factor of five turns

week divided by 586 pounds per turn dimarket provided a more even load-spread, you

per day (20,664 pounds per

vided by 7 days).

If the

96

Planning the Size Of Your Store

could reduce the amount of equipment which would increase your turns. This would cut construction costs, equipment costs, and expenses, and

you would everything

realize a greater return is

on your investment. In business,

a trade-off.

SERVICES OFFERED Plan your space needs around the services you will stance, a wash-and-fold service will

offer.

need counter space.

It

For

in-

will also

require plenty of space for clothes-storage and for sorting, folding, and

packaging. ditional

A large wash-and-fold business

will call for installing ad-

washers and dryers behind the counter to be used by the atten-

dant only.

Besides vending machines, laundry owners often combine their laundries with mail boxes, food service, shoe repair, key manufacturing,

and check cashing. For

ideas,

rectories of franchised businesses.

especially those that require

contribution to the

little

check the Yellow Pages and the

di-

Make a list of compatible businesses, space but can still make a significant

number of customers and your revenue.

CUSTOMER AMENITIES Amenities don't directly pay for the space they occupy, but they

While they take up costly space and can sometimes be expensive to build and maintain, if your laundry doesn't feature them, your customers may be drawn away by a laundry that definitely attract customers.

does.

By

you are usually required to have at least one restroom, sometimes two, and they must accommodate a wheelchair. Enclosed law,

play areas for children attract customers as does a comfortable lounge area with a large screen television.

Some

laundries even have an exer-

room complete with the latest in equipment. Use your ment on how much space the amenities warrant. cise

97

best judg-

Coin Laundries

— Road to Financial Independence

ANALYZING DATA SHEETS TO DETERMINE WASH-LOAD SIZES The machinery mix will pretty

that

meets your prospective customers' needs

much determine how much

retail

space you need. Don't

mix may be out of balance due to changes in market demographics. Or they may even have miscalculated the equipment mix in the first place. In Part I of Figure 7-2 (Chapter 7), you estimated potential customers using 886 of the Prospective Customer Data Sheets from your market survey. From a total of 2,136 people in all the households, you determined that 861 were prospects for your laundry. Figure 8-6 now shows how to arrive at the best equipment mix or ratio of small washers to large washers based on household size. First, separate the 886 data sheets into three piles according to household size: 1 to 3 people, 4 people, and 5 or more people. Next, record the number of people in each of the three categories. Finally, rely

on competitive laundries for

this since their

determine the percentage of the 2,136 people that each group represents.

Households consisting of 4 people could use either small or large

washers. Split this percentage (32%) between the other two categories to arrive at

47%

(prospects for small washers) and

53%

(prospects for

large washers).

Notice that the load-size percentages are established using data sheets

—

2,

1

36 people. This

is

because

all

886

we want the machinery mix

meet the needs of the entire market. The quantity of equipment, however, is based on the number of people (861) that were estimated to be prospects for your laundry (Chapter 7, Figure 7-2).

to

The last step in Figure 8-6 is applying these percentages by formula to the 86 prospects in order to arrive at the pounds per cycle for both small and large washers. Complete the first half of the formula to 1

—

pounds per day for small and large washers a total of 2,952. The second half of the formula is based on average turns per

get the average

day.

ESTIMATING AVERAGE TURNS PER DAY Average turns per day

is

an estimate, but

close to reality as possible because

98

you

it's critical

will use

it

that

it

be as

to determine the

Planning the Size Of Your Store

Analysis Of 886 Prospective Customer Data Sheets

—

—

The 886 Data Sheets

=

2,136 People

=

861 People

Households Using Apartment House Laundries & Competitive Coin Laundries

All

Households Listed

In

Households Estimated To Be Actual Prospects

Calculation Of Percentages Of Washer Load Sizes Based On Size Of Household

Weighted

No. Of People

Washer Load Size

Household Size

Percent

Percent

47%

790

31% 32% 37%

2,136

100%

100%

1-3

People

Small

Wash Loads

662

4

People

Split— Small/Large

684

5+

People

Large

Wash Loads

53%

Calculation Of Rated Pounds Per Cycle For All Washers By Size Of Wash Load Based On The Number Of People Estimated To Be Actual Prospects

Weighted

Actual

Percent

Prospects

Lbs.

Washer Capacity

Per Person Per

Pounds

Week

Per 7 Days

Per

47% 53%

x

861

24

x

861

24

Day

Pounds

Turns

*

Per

Day

=

Per

Turn

Week

*

7

=

1,387

7

=

1,565

-

5

=

277 (Small Wash Loads)

5

=

313 (Large Wash Loads)

2,952

590

Figure 8-6

number of washers and dryers in your laundry. If you don't have enough equipment to handle peak demand, customers will walk out. And they won 't come back! This drops your average turns per day, and you lose revenue. Too much equipment also causes your turns to drop. Your construction costs and operating expenses go up, and you lose profit.

99

Coin Laundries

It's

— Road to Financial Independence

worth repeating that your equipment must handle peak demand.

Review the load-spread calculations in Figure 8-5. The heaviest use, on Sunday, is estimated to be 5,928 pounds of laundry. If all the washers turned ten times (about the maximum you could expect), you would be washing 593 pounds per turn (5,928 + 10 = 593). Now divide 2,952, the average

pounds per day

in

Figure 8-6, by 593 to get the average

day (2,952 + 593 = 4.97). Use arrive at the pounds per turn.

turns per

mula

to

five turns per

day

in the for-

Will the laundry do ten turns on a Sunday? That depends entirely

on the manager.

If

customers

come

in

and can't do

cause the washers and dryers are idle but other customers

manager

to

who

are off shopping

—

remove those clothes and

this situation persists, fire the

investment. (Laundry

is

with the clothes of

you haven't trained the up the machines, do so. If

no. If

free

manager.

management

filled

their laundry be-

It's

either that or lose

your

covered in detail in Chapter 23.)

Perhaps you plan to have an unattended laundry, or you question

whether you can find good management. In

mate of turns per day for your peak day tion:

(5,928 pounds

+

8 turns

average pounds per day -5-741 day).

Use four turns per day

reduce your

this case,

to eight.

Here

is

esti-

the calcula-

= 741 pounds per turn), and then (2,952 pounds per turn = 3.98 average turns per

in the

formula to arrive

at

pounds per turn.

CALCULATING EQUIPMENT MIX From your calculations

in Figure 8-6,

you found

that

your laundry

would wash an average of 277 pounds per turn in small washers and 313 pounds per turn in large washers. Your next step is to convert this to quantities and types of washers (as shown in Figure 8-7). A study of your Prospective Customer Data Sheets indicates that in the smaller washers, there is a slight preference for front loaders.

A

mix of eight 12-pound top-loaders and ten 18-pound front-loaders provides a total rated capacity of 276 pounds per turn (96 + 180). This is only one pound short of the 277-pound estimate in Figure 8-6 you

—

can't get closer than that.

100

Planning the Size Of Your Store

MACHINERY MIX CALCULATIONS

—

- Washers

Dryers

—

Rated

Total

Rated

Total

Capacity

Pounds

Capacity

Pounds

And Type

Per Turn

And Type

Per Turn

8

12# TL

96 7

30# Double

420

10

18# FL

180

6

35# FL

210

6

50# Single

300

2

50# FL

100

2

75# Single

150

586

15

Quantity

26

Quantity

870

Figure 8-7

Further study of the data sheets reveals that pacity washers, the 3 5 -pound-capacity the 50-pound-capacity.

A

mix of

per turn (210 + 100). This estimate in Figure 8-6

is

—and

the large ca-

preferred three to one over

35-pound front-loaders and two

six

50-pound front-loaders provides a

is

among

total rated capacity

of 310 pounds

only three pounds short of the 313-pound that is certainly close

enough.

Next, choose your dryers based on your washer mix (in Figure 8-

The 30-pound dryers are the only double-drum dryers currently available. You need two for the 12-pound top-load washers and five for the 18-pound front-load washers, a total of seven (14 drums). Match 3).

35-pound washers with six 50-pound dryers and the two 50pound washers with two 75 -pound dryers. You have 15 dryers with a the six

total rated capacity

pacity

—almost

of 870 pounds to serve 586 pounds of washer ca-

a 1.5-to-l ratio.

The dryers should keep up with

the

washers even during the heaviest day.

Why

so

much emphasis on equipment mix? Because customers

will often wait for the idle,

and

this will

machines of

their choice, letting others stand

reduce turns on your busiest days.

101

Coin Laundries

— Road to Financial Independence

CALCULATING SPACE REQUIREMENTS Based on your estimates, you will build a laundry with a rated capacity of 586 pounds per turn using 26 washers and 15 dryers. This laundry will serve your 861 prospects

at five turns

per day.

The

turns

could be increased to six and possibly as high as seven under capable

management by running price reduction promotions on slow days generate a more even load-spread. In addition to washers and dryers,

coin and

bill

you

will

to

need a water heater, a

changer, clothes-folding tables, a soap vending machine,

and seating. You

will also

need a small amount of additional space

if

you plan on vending machines for coffee, soft drinks, candy, or food. Game machines would add further to your space needs. A lounge area with tables and seating means even more needed space, as would the addition of an enclosed children's play area.

You have and by

learned a lot from studying other self-service laundries

now know how much space is necessary for a coin laundry with

26 washers and 15 dryers, including the necessary peripheral equipment. This could be as

little

as 1,800 square feet in a rectangular space

with ideal wall lengths, no services, and few customer amenities. In the final analysis, the size of the space

is

limited only by what

you can

afford.

THE 25 PERCENT RENT RULE Experienced self-service laundry owners pense below 25 percent of the

total

try to

keep

total rent ex-

washer and dryer revenue. You

would be wise to do the same, unless you expect significant additional revenues from services or other businesses operated from the same space.

Operating

at five turns for

363 days per

year, the laundry in Figure

8-4 would generate $86,212 in washer revenue. Dryer revenue,

mated

at

$125,007

45% in

if esti-

of washer revenue, would add $38,795, for a total of

revenue per year. Given

lated expenses should be kept

this,

annual rent and

all

rent-re-

below $31,252 ($125,007 x 25%).

102

— Planning the Size Of Your Store

Total rent of $ 1 6 per square foot per year

+

On

would

limit

your space

to

you could negotiate a rate of $14, you could afford 2,232 square feet, and $10 would allow you 3,125 square feet. If the space available is too large 1,953 square feet ($31,252

$16).

the other hand, if

(too expensive) for your laundry, consider adding other services for

greater profit to pay for the extra space. But

do

this

only after you have

negotiated the lowest rent possible.

There

is

more than one way

always. Since rent

most

is

efficient layout.

to lay out a laundry in a

given space

one of your biggest expenses, always

You

distributor can give

Finally, listen to the advice

from

you some

distributors

try for the

ideas.

and others

in the in-

dustry because they often provide a fresh outlook on problems. In the end, though, you are the person

market survey.

If

who walked

someone knows more about

you haven't done your job

right.

103

the streets and did the the market than

you do,

Coin Laundries

"Men

are able to trust

— Road to Financial Independence

one another, knowing the exact degree of dis-

honesty they are entitled to expect."

—Stephen Butler Leacock "Trust everybody, but cut the cards."

—Finley

104

Peter

Dunne

9 HOOKUPS AND CHARGES.

UTILITY

NO MATTER WHERE

you build a self-service laundry, unless it includes a private well and septic system you will be using public water and sewer. And you are going to be paying fees to connect to these systems.

hookup fees," "impact fees," or "tap-on fees" (and unprintable names by laundry owners), they could easily Sometimes called

run a quarter of the

"utility

total cost

of building your laundry.

Do

not sign a

you verify all utility hookup and use charges in your area! Unscrupulous equipment distributors might recommend locations

lease before

and

sell

equipment

to prospective laundry

owners without informing

hookup fee. Be cautious! If you don't learn about the fees until after you sign the lease, you could lose a lot of money. Utility hookup fees can be substantial as much as $3,000 or more to hook into the sewer for each washer in your laundry, not including them of the

utility

—

the cost of labor or materials. In other words,

it

the cost of installation for a 24- washer store.

must also pay a monthly sewer charge as

105

well.

could run $72,000 plus

And

that's not all!

You

Coin Laundries

The

— Road to Financial Independence hook

cost of a water tap (the one-time cost to

line) in

some

into the

jurisdictions could be equally as high. In

the country, ranchers are

still

main water

some

getting shot over water rights.

parts of

Some coin

laundry owners must pay $50,000 to $70,000 in water hookup fees for the

same reason

—water

scarcity.

THE WATER SUPPLY SYSTEM— IMPACT ON PROFIT Coin laundry years.

traffic patterns

Monday was once known

have changed considerably over the

"wash

day," and laundries experi-

Monday

with a uniform load-spread

as

enced a high volume of traffic on

throughout the rest of the week. In those traditional days, dad earned the

wages and

mom took care of the home. Housekeeping was done on

a predictable schedule

— and you could plan

a business based

on

it.

many heads of single-parent households work two jobs, and sometimes as many as three jobs. Other households consist of Today,

couples, or two-parent families where

adolescents work.

As

all

the adults and sometimes the

a result, 60 to 70 percent of the laundry business

can concentrate in one or two weekend days.

Under these circumstances, an improperly sized water system could cost you money. An undersized water system will increase the fill-time on your washers during your busiest days when all the washers are likely to be running at the same time. This will reduce the number of washer and dryer cycles during your peak days (weekends), and your laundry loses turns your most profitable turns. Many laundry owners are unaware of the effect their water system is having on their turns until a qualified laundry consultant shows them on paper. They'll argue that their new laundry doesn't need a 272-inch meter when their other laundry operates perfectly on a 2-inch. Oh re-

—

can be tested with a stopwatch.

ally! Fill times

one minute to

fill

when

to

fill

all

when running

A washer that takes just

alone and up to three or four minutes

washers are running simultaneously means an under-

sized water system.

At

five fills per cycle, the

10 to 15 minutes to

fill

during peak load times, causing the loss of one

washer

and possibly two cycles during your best days

106

—a

is

taking an extra

real profit killer.

— Utility

Industry veterans

Hookups and Charges

may

brag about saving $30,000 in fees by

underreporting peak-demand water-usage figures to inspectors so a smaller water meter and/or water pipe could be used. Ironically, washer

and dryer turns

lost as a result

of this deception surely cost that

in profit during the first year of operation alone

much

and every year there-

after.

Conversely, an oversized water system causes you to pay too in water

hookup

fees.

And your sewer

on the formula used by your

fees could increase, depending

sewer department

local

much

to establish them.

Your water system should be properly sized during the planning stages

—before

construction begins because

it is

changes

later.

SIZING

YOUR WATER SUPPLY SYSTEM

To properly

size a water supply

very expensive to

system for your laundry,

make

first cal-

maximum water demand in gallons per minute (GPM). Maximum demand occurs when all present (and future) washers fill at the same time. To make this calculation, request the following information culate

from your equipment

distributor or manufacturer for

each model of

washer.

•

Minimum and maximum

acceptable water pressure in pounds

per square inch (PSI) at the water valve inlet fittings •

Average number of gallons per

•

The water flow

rate in

fill

GPM for the minimum acceptable water

pressure and for each additional 15 PSI up to the

maximum

acceptable water pressure

The example tion

in Figure 9- 1

you need and how If

to record

your water system

inlet valve, the

1

is

it.

designed to deliver 40 PSI

8-pound washer

fills at

the rate of 9.3

at the

washer

GPM but takes

The 35-pound washer takes 14 gallons to fill, GPM. The 50-pound washer draws at 30.2 GPM

only 7 gallons to

draws only 9.3

on the following page shows the informa-

fill.

107

but but

Coin Laundries

— Road to Financial Independence

WATER DEMAND SPECIFICATIONS

— Water Pressure

At

Washer Valve

Inlet

(Max.)

(Min.)

Washer Model 1loft Hit

—

25 PSI

40 PSI

7.0

9.3

70 PSI

55 PSI

85 PSI

Prnnt LUdU r»aH PiOlu I

(7 Gal. Per

Fill)

GPM

Fill

OO+r

lUlll I_1

Expenses Rent & Rent Related Fixed

Utility

nvAU

Expenses

utilities

Depreciation

On Loans

1

2,138

2,120

2,102

2,084

2,066

2,048

2,029

Equipment Maintenance

50

50

50

50

50

50

50

50

Property Maintenance

82

82

82

82

82

82

82

82

Interest

75

75

75

75

75

75

75

75

Insurance

300

300

300

300

300

300

300

300

Advertising

500

500

500

500

500

500

500

500

Property Taxes

263

263

263

263

263

263

263

263

55

55

55

55

55

55

55

55

450

465

465

450

465

450

465

465

Operating Supplies

Accounting & Legal Janitorial Service

Miscellaneous Total

Net

Expenses

Profit

Turns Per Day

100

100

100

100

100

100

100

100

$10,194

$10,196

$10,178

$10,170

$10,217

$10,209

$10,280

$10,282

($7,409)

($6,359)

($5,225)

($1,050)

$1 ,388

$2,479

$5,235

$6,162

1.47

1.96

2.53

2.94

3.62

4.09

4.84

5.13

OPERATING PLAN FORECAST You now have

you need for your Operating Plan Forecast. The above Operating Plan Forecast was developed from the estimates in this chapter. Your Operating Plan Forecast shows that your business will run at a loss for the first four months. During Month 5, you will make a small profit.

There

is

13. After that,

all

the revenue and expense estimates

a steady increase in average turns-per-day through

your turns-per-day

start to level off.

296

Month

Developing an Operating Plan Forecast & Cash Flow Projection

PLAN FORECAST ssing Laundry

Feb.

Mar.

April

May

June

July

Aug.

Sept.

Oct.

Nov.

9

10

11

12

13

14

15

16

17

18

Total

$17,885

$21,861

$21,950

$22,759

$22,278

$22,796

$23,358

$22,568

$24,032

$22,967

1,073

1,312

1,295

1,366

1,337

1,368

1,401

1,354

1,442

1,378

19,234

$18,958

$23,173

$23,245

$24,125

$23,615

$24,164

$24,759

23,922

$25,474

$24,345

$332,780

$3,106

$3,796

$3,749

$3,952

$3,869

$3,959

$4,056

$3,919

$4,173

$3,988

$55,668

536

656

648

683

668

684

700

677

721

689

9,614

$3,642

$4,452

$4,397

$4,635

$4,537

$4,643

$4,756

$4,596

$4,894

$4,677

$65,282

$15,316

$18,721

$18,848

$19,490

$19,078

$19,521

$20,003

$19,326

$20,580

$19,668

$267,498

$3,847

$3,847

$3,847

$3,847

$3,847

$3,847

$3,847

$3,847

$3,847

$3,847

$69,246

417

417

417

417

417

417

417

417

417

417

7,506

200

200

125

60

20

25

25

50

100

125

1,695

1,897

1,897

1,897

1,897

1,897

1,897

1,897

1,897

1,897

1,897

34,146

1,992

1,973

1,954

1,935

1,915

1,896

1,876

1,856

1,836

1,816

35,647

50

50

50

50

100

100

100

100

100

100

1,200

82

82

82

82

82

82

82

82

82

82

1,476

$313,546

75

75

75

75

75

75

75

75

75

75

1,350

300

300

300

300

300

300

300

300

300

300

5,400

500

500

500

500

500

500

500

500

500

500

9,000

263

263

263

263

241

241

241

241

241

241

4,602

55

55

55

55

55

55

55

55

55

55

990

420

465

450

465

450

465

465

450

465

450

8,220

100

100

100

100

100

100

100

100

100

100

1,800

$10,198

$10,224

$10,115

$10,046

$9,999

$10,000

$9,980

$9,970

$10,015

$10,005

$182,278

$5,118

$8,497

$8,733

$9,444

$9,079

$9,521

$10,023

$9,356

$10,565

$9,663

$85,220

5.29

5.84

5.96

6.08

6.15

6.09

6.24

6.23

6.42

6.34

You

will break even

between Months 4 and

5.

Exactly

how much

revenue must your laundry generate just to break even? Use the

lowing formula

to find out:

B/E

=

F

S-V B/E

F

S

V

= = = =

Break-even sales

in

dollars

Fixed costs in dollars Sales expressed as 100 percent Variable costs as percent of sales

297

fol-

Coin Laundries

As you can even sometime

see from your Operating Plan Forecast, you will break in October.

$10,217, variable costs

revenue)

is

— Road to Financial Independence

October fixed costs

(total cost

(total

expenses) are

of sales) are $2,759, and sales

(total

$14,364. Divide variable costs by sales to get variable costs

as a percent of sales ($2,759

+ $14,364 = 19.2%). Now follow

the

formula. B/E

$10,217

=

$10,217

=

-

100% -19.2%

Your laundry

will break

enue. At this revenue figure,

age each day? (This

is

=

$12,645

.808

even when you reach $12,645

how many

turns

in total rev-

must your washers aver-

a trick question.) Vending sales represent 6 per-

cent of washer/dryer revenue, therefore, washer/dryer revenue

be $1 1,929 ($12,645 +

by the

1.06). Next, divide $1 1,929

October ($1 1,929 - $120.75 + 31). The answer

is

revenue

total

per turn of $ 1 20.75 (Figure 15-12). Last, divide the result by 3

would

1

days in

an average of 3.19

turns per day.

At

this point,

review your market survey to make sure that your

potential customer base is sufficient to guarantee your revenue projec-

This

tions.

is

not the time to

make

a mistake. If

you

aren't sure that

your market will provide an average 6 turns per day, take the following steps:

1

.

Survey your market again

be sure you fully understand

it.

2.

Resize your coin laundry to

3

Develop the Operating Plan Forecast for the resized coin laundry,

.

scrutinizing

tential fit

fit

your market.

all figures.

Don't shoot yourself

fit

to

in the foot

your laundry. The key

by trying

to

make

to success is tailoring

the market potential. If your profit isn't big

the market po-

your laundry

to

enough and you can't

reduce your costs, abandon the market and look elsewhere. You get rich

by owning a few highly profitable self-service laundries, not by

struggling along with marginal ones!

298

Developing an Operating Plan Forecast & Cash Flow Projection

CASH FLOW PROJECTION Businesses

fail

because entrepreneurs don't watch their cash flow.

Your Operating Plan Forecast shows that the laundry will eventually make a good profit. The Cash Flow Projection tells you how much

money you need to start your business. You already know the cost of building your self-service laundry. You have construction bids from subcontractors and equipment bids from distributors and manufacturers. So how much cash do you need? Assume you find that the total cost to build your laundry is $341,990, including construction and equipment. Your next step

determine the amount of cash you need to it

operating until

Look first

at the

it is

Cash Flow Projection on

—expenses

to

your laundry and keep

profitable.

18 months of operation.

expenses

start

is

You

that require

will

the following pages for the

have a number of pre-start-up

payment before you open

for busi-

you get a key to the door, your landlord will require advance payment of $6,720 for a deposit and your first month's rent. During the 90 days it takes to construct your laundry, you will pay the utility companies for service fees, deposits and utilities. For a new business, the gas and electric companies require deposits of 76th of the estimated annual bills. The utility companies will ness. Before

make an size

—

estimate based on receipts from other laundries of similar

in this case, a total of $3,296. If you

deposits will be refunded to

cent interest

— it

you during Month

a laundry without

in the dark.

Your

utility

power tools, and you

an estimated $419.

you must pay

Add this

to deposits of

and water meter charge are $3,296 for a

total

of $3,715

for fixed utility expenses before your laundry even

opens for business. You also need air

certainly

usage for the 90-day construc-

tion period along with the service charges

that

13, including 10 per-

a total refund of $3,626.

You cannot build cannot build

pay your bills on time, these

to estimate the cost of heating and/or

conditioning during the 90-day construction period.

An

initial

stock of operating supplies must be laid in at an esti-

mated cost of $300. You

will purchase insurance prior to construction

299

Coin Laundries

— Road to Financial Independence

CASH FLOW James Cross

Prior

To

June

July

Aug.

Sept.

Oct.

Nov.

Dec.

1

2

3

4

5

6

7

Start-Up

Beginning Cash Balance

Cash On Hand

$0

$500

$500

$500

0

3,870

5,331

6,882

Cash Sales Utility

Deposit Refunds

Cash

Injection

Total

Cash

$500

$500

$500

$500

,289

14,364

15,705

19,204

0

1 1

0

0

0

0

0

0

0

18,775

7,370

6,337

5,221

1,064

0

0

0

Available

$18,775

$11,740

$12,168

$12,603

$12,853

$14,864

$16,205

$19,704

Rent & Rent Related

$6,720

$3,847

$3,847

$3,847

$3,847

$3,847

$3,847

$3,847

Costs

0

925

1,274

1,645

1,850

2,353

2,573

3,146

3,715

417

417

417

417

417

417

417

125

20

25

25

50

100

125

200

0

160

220

284

319

406

444

543

0

2,138

2,120

2,102

2,084

2,066

2,048

2,029

Cash Paid Out Variable

Fixed

Utility

Utility

HVAC

Expenses

Utilities

Items For Resale Interest

Loan

On Loans

Principal

0

2,121

2,138

2,156

2,174

2,192

2,210

2,229

Owner's Withdrawal

0

0

0

0

0

1,356

2,429

5,166

Equipment Maintenance

0

50

50

50

50

50

50

50

Property Maintenance

0

82

82

82

82

82

82

82

Operating Supplies

300

75

75

75

75

75

75

75

Insurance

625

300

300

300

300

300

300

300

1,620

500

500

500

500

500

500

500

0

0

0

0

0

0

0

0

2,120

55

55

55

55

55

55

55

0

450

465

465

450

465

450

465

3,050

100

100

100

100

100

100

100

,240

$11,668

$12,103

$12,353

$14,364

$15,705

$19,204

$500

$500

$500

$500

$500

$500

$500

$500

$0

$1 ,897

$3,794

$5,691

$7,588

$9,485

,382

$13,279

$0

$263

$526

$789

$1,052

$1,315

$1,578

$1,841

Advertising

Property Taxes

Accounting & Legal Janitorial Service

Miscellaneous* Total

Cash Paid Out

$18,275

Ending Cash Balance

$1

1

Other Data - Accumulated Depreciation

Property Tax

Liability

$1

1

"Miscellaneous Start-Up Expenses Include:

Loan Costs Working Currency Business Licenses Other Total

— — — —

$2,200

500 250 100 $3,050

for $625. Prior to opening your laundry,

you

will

spend $1,620 for a

promotional mailing, plus signs and banners for your windows, an-

nouncing that "a new coin laundry

is

coming soon

to this location."

Miscellaneous pre-start-up expenses are explained in detail on the Cash

Flow

Projection.

300

Developing an Operating Plan Forecast & Cash Flow Projection

PROJECTION Laundry

ing

Jan.

Feb.

Mar.

April

May

June

July

Aug.

Sept.

Oct.

Nov.

8

9

10

11

12

13

14

15

16

17

18

Total

$500

$500

$500

$500

$500

$500

$500

$500

$500

$500

$500

$9,000

20.355

18,958

23,173

23,245

24,125

23,615

24,164

24,759

23,922

25,474

24,345

332,780

0

0

0

0

0

3,626

0

0

0

0

0

3,626

0

0

0

0

0

0

0

0

0

0

0

38,767

S20.855

$19,458

$23,673

$23,745

$24,625

$27,741

$24,664

$25,259

$24,422

$25,974

$24,845

$384,173

$3,847

$3,847

$3,847

$3,847

$3,847

$3,847

$3,847

$3,847

$3,847

$3,847

$3,847

$75,966

3,335

3,106

3,796

3,749

3,952

3,869

3,959

4,056

3,919

4,173

3,988

55,668

417

417

417

417

417

417

417

417

417

417

417

11,221

220

200

200

125

60

20

25

25

50

100

125

1,820

576

536

656

648

683

668

684

700

677

721

689

9,614

2,011

1,992

1,973

1,954

1,935

1,915

1,896

1,876

1,856

1,836

1,816

35,647

2,247

2,266

2,285

2,304

2,323

2,343

2,362

2,382

2,402

2,422

2,442

40,998

6,075

5,012

8,372

8,589

9,281

9,344

9,297

9,779

9,092

10,281

9,359

103,432

50

50

50

50

50

100

100

100

100

100

100

1,200

82

82

82

82

82

82

82

82

82

82

82

1.476

75

75

75

75

75

75

75

75

75

75

75

1,650

300

300

300

300

300

300

300

300

300

300

300

6,025

500

500

500

500

500

500

500

500

500

500

500

10,620

0

0

0

0

0

3,156

0

0

0

0

0

3,156

55

55

55

55

55

55

55

55

55

55

55

3,110

465

420

465

450

465

450

465

465

450

465

450

8,220

100

100

100

100

100

100

100

100

100

100

100

4,850

$20,355

$18,958

$23,173

$23,245

$24,125

$27,241

$24,164

$24,759

$23,922

$25,474

$24,345

$374,673

$500

$500

$500

$500

$500

$500

$500

$500

$500

$500

$500

$9,500

$15,176

$17,073

$18,970

$20,867

$22,764

$24,661

$26,558

$28,455

$30,352

$32,249

$34,146

$2,104

$2,367

$2,630

$2,893

$3,156

$241

$482

$723

$964

$1,205

$1,446

The ending cash balances the

in the

Cash Flow Projection might scare

owners of certain businesses, but for a coin laundry, these balances

are sufficient because there are

few accounts payable, no uncollectible

accounts, no payroll, and the equipment generates

301

new cash

hourly.

Coin Laundries

— Road to Financial Independence

The Cash Flow Projection shows you from an

tions (preferably

Month 4 of you need a

operation.

will

need

to

interest bearing account) of

Added

$341,990

to

make cash

injec-

$38,767 through

to build the coin laundry,

of $380,757. Your loan will provide $256,500. This

total

leaves a total of $124,257 that you will need in cash.

You can fail

why

see

businesses

fail.

People don 't plan

to fail.

They

because they don't plan. Your Operating Plan Forecast and Cash

Flow Projection take away the guesswork. They are tools that help you make good management decisions and increase your chances of success.

ANALYZE THE INVESTMENT Now

you have completed your Operating Plan Forecast and Cash Flow Projection, use the information to compare this investment with other investment opportunities. The following points will help you compare this laundry with other laundries, or, for that matter, any that

other type of business:

1

.

Percent Return on Investment (ROI)

(ROE)

2.

Percent Return on Equity

3.

Percent Pre-Tax Net Profit

4.

Potential

Cash Withdrawal

Return on Investment (ROI) Simply

stated, the

ROI

is

the annual net profit divided

dollars invested in the business.

Add

the Operating Plan Forecast for the 1

through Month

12),

and the

total

by the

total

shown on first 12 months of business (Month is $27,013. The total for the next 6 the

monthly net

profit

months (Month 13 through Month 18) is $58,207. The cost to build the laundry is $341,990. It takes an additional $38,767 in cash just to reach the break-even point. This adds up to a total investment of $380,757. The ROI for the first year is therefore 7 percent ($27,013 $380,757). Based on the next 6 months (Month 13 through Month 18), you would project an ROI exceeding 31 percent for the second year ($58,207 x 2 + $380,757).

302

3

Developing an Operating Plan Forecast & Cash Flow Projection

Return on Equity (ROE) Compute your ROE by dividing your annual net profit by your equity, that is, the $124,257 that you must provide to start this business. Your ROE for the first year is 22 percent ($27,013 $124,257). Based on the next 6 months, you would project an ROE exceeding 94 -s-

percent for the second year ($58,207

Pre-Tax Net Profit This shows your net

x2^ $124,257).

profit as a percentage of total revenue.

You

by dividing net profit by total revenue. Add the total revenue shown on the Operating Plan Forecast for the first 12 months determine

this

of business (Month

The

total for the

1

through Month 12), and the

total is

next 6 months (Month 13 through

$186,501.

Month

18)

is

$146,279.

The annual pre-tax net profit for the first year is 14 percent ($27,01 $186,501). Based on the next 6 months, the annual pre-tax net profit would be expected to equal or exceed 40 percent ($58,207 $ 1 46,279).

-s-

-s-

Potential

A

Cash Withdrawal

may be profitable but have a poor Too much money is needed every month

business

cash flow.

requiring the

keep

just to

owner

it

to inject cash into the business

going. If the

(or to

even negative)

pay off the debt,

on a monthly basis

owner doesn't have other businesses or a

high-paying career to "feed"

this business until the

debt

is

paid

off, it's

bankruptcy time.

Look

at

"owner's withdrawal" on the Cash Flow Projection to de-

termine the maximum amount of cash available to the owner on a month-

by-month basis. No cash is available until Month 5. The next 7 months show a total of $46,280 in available cash. During the first 6 months of the second year (Month 13 through Month 18), the laundry generates $57,152

in available

cash for the owner, or an average of $9,525 per

month.

Now that the picture is complete, you can compare the returns from this

summary following page shows what you can expect from your money in

investment to your other investment opportunities. The

on the

this laundry.

303

Coin Laundries

— Road to Financial Independence Year

7%

Return on Investment (ROI) Return on Equity (ROE)

Pre-Tax Net Potential

Profit

Cash Withdrawal

Once the loan is paid off, and

cipal

Year 2

22% 14%

34% 94% 40%

$46,280

$114,304

would be an

additional $4,250 (prin-

cash available each month.

If

you maintain your

your cash withdrawal would be over $13,775 per month.

turns,

What

to

interest) in

there

1

you don't have $124,257 in cash to invest? You will have decrease the size of your laundry or borrow more money. Either if

you develop an Operating Plan Forecast and a Cash Flow Projection that reflects these changes. You'll be sorry if you way,

it is

critical that

don't.

What

enough to support you? You can crease your cash returns by doing one or more of the following: 1

.

if

your cash flow

in-

Increasing revenue

2.

Decreasing expenses

3.

Extending the

And

isn't

life

of the loan

again, be sure to develop an Operating Plan Forecast and a

Cash

—

Flow Projection that incorporates the changes don't "wing it." You might reduce your cash injections considerably by doing more advertising in the first few months of operation, but don't rely on this. Success should not depend on a jack rabbit start. Your business must be adequately financed. Before starting your business, don't neglect to assess your personality.

Many

own

people are not emotionally prepared to operate on

their

own. They flourish with a steady job and the guidance of supervi-

sors.

Others are unwilling to take

wards without

risks,

risks.

304

and there are usually no

re-

Developing an Operating Plan Forecast & Cash Flow Projection

A successful entrepreneur must be willing to delay gratification, to now in order to "have it all" in, Every former employee who becomes an entrepreneur soon

forgo the $56,000 luxury automobile the future.

learns the real

only

if

meaning of hard work and

you're ready.

305

stress.

GO FOR

IT!

—But

Coin Laundries

— Road to Financial Independence

"Many speak the truth when they they mean the riches possessed by

say that they despise riches, but other men."

—Charles Caleb Colton (1780-1832)

"I've

been rich and I've been poor; rich

is

better."

— Sophie Tucker

306

16 ATTENDED VERSUS UNATTENDED LAUNDRIES

LAUNDRIES DO NOT yourself, or

run themselves. Either you do the work

you must hire and manage employees who do the work

for you. This chapter looks at the pro's

and con's of attended coin laun-

dries.

Some

laundry owners feel that self-service laundries should be

tended. Others don't, and, in fact, over half of

all

at-

laundries are unat-

tended. This argument has raged for as long as coin-operated laundries

have existed.

Make

this decision for yourself, but

make

it

before con-

struction begins.

Unattended stores should be well lighted and designed

to elimi-

nate hiding places for perpetrators. Everything should be visible from the

windows, including the coin changers. Whether your laundry

is

attended or unattended, video cameras should be installed to cover every square foot of space. This will decrease criminal activity and dis-

courage false

liability claims.

307

Coin Laundries

— Road to Financial Independence

ADDED REVENUE FROM EMPLOYEE SERVICES If

your laundry

is

small to medium-size and you are going to have

employees, they must provide additional revenue or

your

will cost

ating at your designed capacity. to a

Knowledgeable storeowners

maximum of

try to limit

15 percent of gross revenue

—

includ-

ing the revenue generated from employee-performed services.

of the most

you

with employees you would have a loss, even oper-

profit. In fact,

employee costs

it

common

Some

services are:

•

Wash-and-fold (no ironing)

•

Ironing

•

Alterations and

•

Stain removal

mending

combined with other businesses that have employees. These employees supervise the coin laundry, and both businesses share in the employee cost. Dry cleaning and convenience Self-service laundries can be

food markets are examples. Part-time attendants are hired to supervise the coin laundry after the other business closes and

Your decision

to

employees leave.

have employees should not be an afterthought

because any services an attendant performs should be included

market survey and analyzed.

If

your services are not

in

in

your

demand, the

attendant won't generate any revenue. There goes your profit.

ADDED COSTS FOR LEASEHOLD IMPROVEMENTS

the

You will require additional leasehold improvements, depending on services you plan to offer. You may need a sales counter. Employ-

ees need seating, as do the additional customers. Don't forget shelves for

packaged clothes and clothes racks

clothes,

in sufficient quantities to store

sometimes for long periods of time. There are never enough

places to hang garments.

You will need a separate workroom for services like mending, ironing, and stain removal. The workroom should be well lighted and have

308

Attended versus Unattended Laundries

The doors should have locks. When chemiremoval), the workroom must have forced air

plenty of extra storage space. cals are

used (for stain

ventilation.

ADDED COSTS FOR EQUIPMENT An

attended coin laundry also requires additional equipment, de-

pending on the services you plan to

offer.

The equipment

for a

wash-

and-fold laundry service might include:

•

Cash

•

Scale for weighing clothes

•

Calculator

•

Telephone

•

Wrapping paper dispenser

•

Tape dispenser

u

Clothes bagging stand

•

Bins or baskets for clothes

•

Iron

•

Sewing machine

If

register

you expect

to

have a high-volume self-service laundry and also

a high- volume wash-and-fold business at the

same

time,

you

will

need

additional large capacity washers and dryers. These machines should

be located behind the sales counter or in the workroom, inaccessible to coin laundry customers. To prevent mistakes, plan your laundry so that

your attendants can

tag, sort

and fold clothes away from self-service

customers.

Don't make your attendants compete with self-service customers for washers, dryers,

and clothes-folding

and promotes clothes sion

theft, lost clothes,

when your laundry

is

busy.

It

tables.

mixed up

also reduces

ticularly during high- volume times,

This angers customers orders,

and confu-

equipment cycles, par-

such as on weekends. Lost cycles

are lost revenue.

309

Coin Laundries

— Road to Financial Independence

ADDED OPERATING EXPENSES Attended coin laundries also bring a number of additional expenses.

You will need more space, and this means more rent expense. The amount of extra space you will need depends on the types of services you

offer

and the volume of business you expect from them.

Accounting expenses will roll

records and to

may even need

file

rise

because of the need to maintain pay-

quarterly and annual payroll tax reports.

to file reports with

You

county and/or local governments.

A telephone will become necessary, and you will have to advertise your services. You will also need to purchase office and operating supplies,

such as hangers, tape, wrapping paper, laundry additives, clothes

bags, chemicals, toilet paper, hand soap, and the like.

PAYROLL EXPENSES Your

expense will be your payroll.

largest additional operating

Besides an hourly wage, an employer

is

required to pay payroll taxes

based on the dollar amount of the payroll. Contact

state

and

local tax-

ing authorities to get a package of tax instructions, pamphlets and forms called the "Employer's

Tax Package." For your federal tax package,

contact the nearest offices of the Internal Revenue Service and Social Security Administration.

you to pay unemployment insurance and accident insurance when you have employees. Business license fees are often based on the dollar amount of your payroll or the number of people you employ. Check carefully! Your state, county, and local governments may also have other taxes in store for you when you become Your

state requires

an employer.

Use this

checklist to estimate payroll taxes for your Operating Plan

Forecast and Cash Flow Projection:

V V V

Federal Social Security Tax Federal State

Unemployment Tax

Unemployment Insurance

310

Attended versus Unattended Laundries

V Worker's Compensation

Insurance

v

Business License

V

Miscellaneous Local Taxes

As an employer, you become are required to withhold taxes

You from your employees' wages and make a collector for the government.

periodic payments to the taxing authorities. Contact federal, state and local taxing authorities for specifics.

The following list is provided as

a

guide:

Employee's Federal Social Security Tax Employee's Federal Income Taxes Employee's State Income Taxes Employee's State Unemployment Insurance Workers' Compensation Insurance (Employee's Contribution) Miscellaneous Taxes

CAUTION: These

lists

constantly being added or

and they

Make

you contact

all

not cover

amended

may even

city levels

sure

may

all

required taxes.

at the federal, state,

Laws

are

county, and

vary from zone to zone within a

city.

the taxing authorities that have jurisdiction

over your location.

local office of the U.S.

Minimum Wage and Hour Laws Department of Labor. Among other

things, these laws specify limits

on employee age, wages, and hours

You can from the

get a copy of the Federal

worked. Study these laws carefully because there are substantial penalties for violations.

Most

states

ployee relationships, and your

have laws governing employer-em-

state's

Department of Labor can give

you a copy of them.

you have never been an employer, this probably sounds complicated. It all becomes fairly routine, however, once you work with it. Your accountant can set up a system for you. If you do it yourself, the taxing authorities can answer your questions as they arise. (See Chapter 21 for more information on accounting procedures.) If

311

Coin Laundries

— Road to Financial Independence

The important thing to remember when figuring employee costs is that you pay a number of taxes in addition to wages. These taxes can be 12 percent (or more) of the hourly wage, depending on the location of

your business. The full

minimum

cost to have your coin laundry attended

time would be over $3,000 per month. This

ployee per

is

just for one em-

shift!

ATTENDANTS

— THE ADVANTAGES

Why have employees? The main reason is to increase profits

with

amount of additional investment in leasehold improvements and equipment. The key to that profit is a strong demand for services, skillful employee management, and meticulous control of operating a small

expenses.

What about an

many unattended launand marginal profits. By adding atten-

existing laundry? There are

dries for sale with excess space

dants and offering much-needed services, a wise buyer can increase

revenue from the existing customer base and maximize revenue per square foot. If space permits and the lease allows, an owner can add an entirely different business or business franchise.

There are other advantages.

Many

laundry owners feel that an

tended coin laundry draws more customers than one that

Some customers attendant. There

feel is

more secure

if

is

at-

unattended.

the self-service laundry has an

also less opportunity for vandals and thieves to ply

their trade.

Without attendants, you must do basis

—or

method

all

of the cleaning on a regular

hire an outside cleaning firm.

You

for handling customer complaints

instruct the

customers on

how

to use the

will

and refunds.

And who

in several languages.)

— THE DISADVANTAGES

A laundry attendant position offers low income, few efits,

and

little

will

machines properly? (Some

equipment manufacturers offer instructional signs

ATTENDANTS

have to develop a

(if

any) ben-

chance for advancement. This means that you will

312

at-

Attended versus Unattended Laundries

tract

employees with limited

skills

and

motivation.

little

Employee turn-

over will be high, and you will be running a continuous training pro-

gram. The result will be frequent errors,

You can

also expect a

many

of them costly.

number of employee-related problems,

in-

cluding illness, absenteeism, emotional fluctuations, and poorly-maintained time schedules. there will

in

still

Even with employees running your

business,

be a need for constant supervision.

Employee theft, one of the biggest problems facing small business America today, is responsible for a substantial number of business

failures. It doesn't take

much

new

to destroy a

When you add employees, you

business.

also increase your legal exposure.

Customers for a variety of reasons, including attendant saults

insults or as-

and stolen property, have sued laundry owners. Employees can

also file lawsuits against employers for a variety of reasons, real or

imagined. These suits are costly, no matter

who

wins.

Employees may also develop attitude problems, presenting a serious obstacle to good customer relations. They will require constant supervision if you are to maintain good customer relations. Despite all the potential for increased revenue through employees, never forget that a clean,

well-managed unattended laundry

managed one

will

outperform a poorly

that is attended.

EMPLOYEE OR INDEPENDENT CONTRACTOR There has been a trend

in recent years for businesses to replace

employees with independent contractors.

A true independent contrac-

tor is a business and, as such, is subject to all the tax

independent business. For

this reason, the

pay employment taxes, insurance, and

all

laws governing an

employer

is

not required to

other state and federal

man-

dated costs involved with hiring and supervising such employees.

The

Internal

Revenue Service and

you) determine independent contractor

the state taxing authority (not

status!

The IRS has forced many

small businesses into bankruptcy by declining independent contractor status.

313

Coin Laundries

— Road to Financial Independence

Here are some of the charges

that business

owners can

face:

Federal and state employment taxes from the date employment

•

began Worker's compensation insurance payments from the date

•

employment began

Heavy

•

and assessments from the Internal Revenue Ser-

fines

vice and state taxing authority

Back overtime payments

•

as calculated

by federal and

state tax

auditors •

Lawsuits by the employee

•

Lawsuits by others accidentally injured by your employees while

if

injured on the job

working on company time

The not

all!

financial impact

on a business can be devastating. And

that's

—and corporate

status

The IRS can hold you personally

liable

will not protect you.

Now

that

you have been enlightened, you may

still

may want

hire an independent contractor rather than an employee.

you do, review Figure 16-1 meet the parameters.

To

to see if the

to

But before

job description and the worker

further protect yourself, discuss your plans with a competent

tax attorney.

Have

the attorney

draw up a contractor agreement

(or

by the independent contractor. Insist that the independent contractor be incorporated, and get a copy of the certifi-

contract) to be signed

cate of incorporation for your files.

all

Meet with the independent contractor and insist to be invoiced for work. Keep copies of all correspondence and invoices as well as

copies of the contractor's stationery and calling cards. Also,

your cause

if

the independent contractor

is

it

helps

doing work for others and

is

advertising his or her services.

from the Internal Revenue Service. Ask for Form Determination of Employee Work Status for Purposes of Fed-

Finally, get help

SS-8

—

Employment Taxes and Income Tax Withholding. When you fill out the form, provide detailed, honest answers to obtain an IRS ruling eral

on independent contractor

status.

314

Attended versus Unattended Laundries

INDEPENDENT CONTRACTOR VS EMPLOYEE (Internal

Revenue Service Test Parameters)

A

"yes" answer to any of these statements may be sufficient to classify a worker as an "employee". It is likely, however, that the Internal Revenue Service would consider the answers to more than one statement before

making 1

that determination.

You

.

instruct the

worker

in

how, when, where and whether the work

should be done. 2.

You must

3.

The worker becomes substantially a part of your company operation.

4.

The worker must personally perform done by his or her employees.

5.

The worker does not have employees supervises and pays.

6.

Your company has a continuing relationship with the worker.

7.

You

8.

The worker works

9.

All

1

0.

1 1

.

tell

is

the work rather than have

— people only he or she

it

hires,

virtually full-time for you.

not control the

sequence

of

events to follow.

require frequent significant progress reports.

2.

You pay on

1

3.

You reimburse You

undertaken.

done on your premises.

The worker does

1

14.

is

the worker what hours of work to follow.

the work

You

worker before the job

train the

the basis of time put for costs not

furnish the tools

in,

rather than type of

covered by the contract.

and equipment required

1

5.

The worker has no significant investment in

1

6.

The worker

1

7.

The worker works only

1

8.

The worker does

will

work done.

for the work.

his or her own business.

realize neither profit nor loss from the job. for you.

not offer services to the general public.

19.

You can discharge

20.

The worker can terminate

the worker. the relationship without penalty.

Figure 16-1

315

Coin Laundries

— Road to Financial Independence

AN ALTERNATIVE possible to increase your revenue and have your laundry super-

It's

vised without hiring a single employee. Consider subleasing part of

your space to another entrepreneur whose business requires very space. This person can operate a business

little

from the subleased space

with a relatively small investment.

The types of businesses

that could

be conducted from a subleased

space are limited only by the imagination. You would be wise, however, to

money

choose one that will

attract additional

laundry customers.

order and check cashing service would be a good choice.

A

Some

laundry owners sublease their wash-and-fold service. Others, their

mending and

ironing.

Other businesses or services you might consider include:

Car wash

Parcel service

Beer taps

Mail box service

Ice

cream

Vending machines

Coffee bar

Matchmaking

Snack bars

Copier and fax service

Shoe

Hair care and manicure

repair

service

Video games

Internet

Tanning beds

Coin-operated exercise machines

Two

computer service

you must think about before you sublease part of your space: First, make sure that your lease does not prohibit you from subleasing. Second, there are strict legal definitions as to what constitutes an employee. Review the laws. things

The provisions of the sublease are just as critical to your success as your main lease. A bad sublessee can destroy your business if the sublease is too weak to protect you. Consult your attorney and ask for help in preparing the

Many

document.

department stores and mass merchandisers sublet space

within their stores. Their attorneys develop strong leases that protect

them from abuses by

lessees.

Get your hands on and review as many of

316

Attended versus Unattended Laundries

these leases as possible before developing your own. tion that

It's

a free educa-

might save future problems.

Your success

will not

depend on whether your laundry

or unattended or whether or not part of your space

another business.

It

will rest

decisions, something

on your

ability to

is

is

subleased by

make good

you can't do without necessary

attended

business

facts.

Conduct a detailed market survey for all businesses you plan to operate from your location. Estimate revenues and determine expenses of each. Develop an Operating Plan Forecast and Cash Flow Projection based

Why

on

this information. If

you

take that chance?

317

don't,

you are courting

failure.

Coin Laundries

"Yesterday is

is

— Road to Financial Independence

a cancelled check;

the only cash

you have

tomorrow

—so spend

it

is

a promissory note; today

wisely."

— Kay Lyons

318

17 GETTING FINANCED

YOU DON'T HAVE the proper attitude about money, getting IFfinancing can be a nightmare instead of a challenge. Money only is

a tool, just another item to be purchased for your

Many people

select a business

new

coin laundry.

based on the amount of money they

believe they can borrow. This kind of thinking limits success.

no

Money

from equipment or leasehold improvements. It's purchased the same way, by getting bids and buying the best deal availis

different

able in the marketplace.

YOUR BUSINESS STRUCTURE Before you approach a lending

institution,

you must first decide on

owner had "S" corporation or "C" corchoices in some states have

the legal structure of your business. In years past, a business

four choices: proprietorship, partnership, poration. In the last decade, however, the

expanded

1

.

2.

to eight:

Sole Proprietorship

General Partnerships (GPs)

319

Coin Laundries

— Road to Financial Independence

3.

Limited Partnerships (LPs)

4.

Limited Liability Partnerships (LLPs)

5.

Limited Liability Limited Partnerships (LLLPs)

6.

Limited Liability Companies (LLCs)

7.

"C" Corporation

8.

"S" Corporation

Some

of these forms are restricted to professional organizations,

such as medicine, law or accounting

lowing

you

—depending on

Summary of Business Legal

state law.

The

Structures (Figure 17-1) will

folfill

in.

Under no circumstances should you make this decision on your own! Get help from a qualified law firm, preferably one that specializes in business law.

FINANCIAL SOURCES Money is plentiful. You actually have more sources for money than you have for washers and

dryers.

Four main sources of financing are

private lenders, leasing companies, suppliers, and lending institutions.

Private Lenders

Those who purchase money from a private source generally get it from family members or close friends. Other sources might be a partner or a group of private investors. Private sources usually

more

demand

control than leasing companies or lending institutions.

Leasing Companies Leasing companies buy equipment and then lease owner. Normally the equipment

is

it

to the

laundry

leased at a fixed rate for a predeter-

mined amount of time, such as five years. At the end of the contract, the laundry owner is usually able to purchase the leased equipment at a predetermined price.

Most laundry equipment lease. If

lasts

you cannot negotiate a

end of the

lease, find

much

longer than the term of the

satisfactory purchase

another leasing company!

320

agreement

at the

Getting Financed

SUMMARY OF BUSINESS LEGAL STRUCTURES Number Busisness Classification

Sole Proprietorship

Liability

Full

owner's

ity.

Personal and

liabil-

One

Type

Of

Of

Owners

Owners

Taxation

restrictions.

No corporation tax. The owner is taxed

No

owner.

business assets are at

as an

individual.

risk for busi-

ness debts. Full ity.

partner

Each

liabil-

partner's

A minimum

of

two

No

No corporation tax.

restrictions.

Individual partners

partners.

General

personal and busi-

are taxed on their

Partnership

ness assets are at riskforall business

share of the net income.

debts.

Limited

Partnership

General partner has full liability.

At least one gen-

Limited partners

ited partner.

have no

Corporation

and one

lim-

debts unless theytake an active role in management.

ability for

li-

business

debts or obliga-

Any

individual or

entity

may be

a

Limited partners cannot exercise any con-

taxed as individu-

partners are

als.

or direction

trol

over the business.

A minimum

of

one

No

Both corporation taxes and indi-

restriction.

shareholder with no maximum limit.

vidual shareholder

taxes.

No shareholder ability for

Corporation

lim-

ited

tions.

"S"

No corporation tax. General and

general or limited

partner.

liability for

business

No shareholder "C"

eral

li-

business

A minimum

of

shareholder

debts or obliga-

maximum

tions.

shareholders.

of

one

to

a

fifty

Excludes corpora-

No corporation tax.

and nonresi-

dent aliens. Lim-

Shareholders are individually taxed

ited to individuals,

on income they

estates and certain

ceive.

tions

re-

trusts.

No member

A minimum

Any

or

entity

Limited

ity

Liability

debts or obliga-

of one two members, depending on state

tions.

law.

Company

for

liabil-

business

individual or

may be

member.

a

No corporation tax. Each members is taxed as an

indi-

vidual.

Figure 17-1

Leasing

is

generally the most expensive

way

to finance a

new

laundry, but there are advantages. Leasing companies are usually flexible than banks, willing to tailor a

program

to

fit

more

your needs. In

age of variable rate loans, you can often lease your equipment fixed rate.

321

coin

this at

a

Coin Laundries

— Road to Financial Independence

Leasing companies sometimes lease more than just equipment. They

might cover

Look

all

or part of the construction costs and utility impact fees.

in the Yellow

Pages for the names of leasing companies, or ask

your equipment distributor for a recommendation. Suppliers

Equipment manufacturers and distributors often have financing available to laundry owners who purchase their products. Some even finance the purchase of equipment from other (non-competing) manufacturers. In rare cases,

known and

to finance

utility

equipment manufacturers/distributors have been

an entire laundry, including leasehold improvements

impact

fees.

Lending Institutions

Many

small businesses buy their

institutions.

money from commercial

lending

These include banks, savings and loan companies, and

nancial service companies. In most cases, this

money

is

fi-

expen-

less

make a greater profit. Prices for money can vary considerably among banks. Be sure to compare prices and sive.

This means you are able to

lending terms before making any decisions. Visit the U.S.

and it

Small Business Administration office nearest you

talk with the loan officers.

can provide you with a

the area larly

who

when

These

lists

list

The SB A

rarely

makes

of banks and other lending institutions in

are anxious to loan

money

to small businesses

85- to 90-percent of the loan amount include the

their telephone

direct loans, but

names of the persons

is

—

particu-

backed by the SBA.

to contact, their titles

and

numbers.

Alternatives

Lending

institutions generally require

borrowers to pledge their

assets, including real estate, as collateral for the loan.

As an

tive,

consider a loan on the real estate rather than pledging

eral.

The

interest rate

may

it

alterna-

as collat-

be lower and the payback can be made over

a longer term.

What about a combination? You could

split the

lending sources by

leasing the equipment and taking out a real estate loan to pay the cost

322

Getting Financed

of construction. Before you

make any

decisions, discuss

natives with a well-qualified accounting firm

—and

all

your

alter-

take their advice.

BEGIN EARLY Many experienced business people start lining up potential sources of financing even before they select their location. By that time, you should have a

list,

and met with each one on your

Typical loans for coin laundries

fall in

list at least

once.

the range of $100,000 to

$300,000. Banks classify loans of this size as "small loans," and some

making small loans to new businesses. Make sure you eliminate these banks from your list during your first call so you don't waste any time.

banks are just not interested

in

ESTABLISH A RELATIONSHIP you someone who walked Imagine

that

bank loan officer. How would you treat unannounced and asked for a loan for some

are a in

vague business idea without presenting a written plan? Obviously, not very well.

When

meeting with bank loan

officers,

you must be pre-

pared. It

takes as

to find

much

effort to arrange satisfactory financing as

it

does

your business location, conduct a market survey, negotiate your

lease, build the laundry,

and purchase equipment. In

fact, all

of these

steps are required if you expect to get the best financing deal available in the marketplace.

and ask

Prepare for every meeting. Never walk into a bank

to see a loan officer unless

At the appointment, the loan officer that

you have an appointment.

briefly state the purpose of

you may be shopping

for

your

visit.

money sometime

the next 12 months, that you're there to find out if the

Inform within

bank makes

loans in the range of $100,000 to $300,000 to small businesses. If not, don't waste the loan officer's time or yours.

bank does make these loans, what next? Inform the loan officer that you face several months of hard work before you have a business plan. If you proceed with the business, you will present a complete plan, including a financial statement. In the meantime, you If the

323

Coin Laundries

— Road to Financial Independence

want to meet with the loan

know

Let the loan officer

officer occasionally to discuss

your progress.

that suggestions will be valued.

important to develop a solid, long-term business relationship

It's

with your banker. This cannot be accomplished unless both parties are totally honest. let

Have

periodic meetings during your planning stage, and

your banker share

in the

development of your business.

for lending institutions to turn

down

harder

It's

financing for businesses they help

plan.

Remember, you

are looking for

more than

lender that will contribute to your success

financing.

—not

You want

a

just short term, but

long term. Base your choice on the answers to these questions:

1.

How much

control

is

the lender likely to exercise over your

business? the lender's services include retirement planning?

3.

Does Does

4.

Is the

lender qualified and willing to provide you with tax advice?

5.

Is the

2.

it

include estate and succession planning?

lender well connected enough in the

community

to help

your business? 6.

How likely are you to lose your personal contact with the lender through promotion, transfer or merger?

WHAT THE LENDER WANTS TO KNOW The lending institution will look at two things before lending money you and your proposal to see if you have the necessary

—

—

knowledge and experience to succeed in your proposed business. Make the lender aware of any training or help you may have received from manufacturers, distributors, business seminars, consultants, or books.

Questions will be asked about your personal history. Your character traits, like stability

and honesty, and a good credit

rating, will also

be

scrutinized.

The lender

will

examine your personal financial statement

to de-

you have enough collateral to secure the loan. (Collateral can be a home, vehicles, or other items of value.) Don't try to predict termine

if

324

Getting Financed

Someone with $150,000 estate may find it more difficult to borrow money than

the evaluation of your financial condition.

cash and no real a

homeowner with only

a small

amount of cash.

THE PROPOSAL Type your formal proposal and put

it

into an attractive binder. In-

clude your personal resume, business plan, and request for financing.

Resume

Personal

Will the loan be repaid?

every loan

Now

it's

officer.

—On time? This

the

main concern of

Your personal resume should address

time to brag, to toot your horn, but

truthfully.

is

make

sure that you do

Develop your resume around the following

•

Personal history

•

Education

•

Work history

•

Character

•

Credit references

•

Achievements

•

Personal references

•

Financial Statement

that concern. it

points:

traits

Your resume should show how your knowledge and experience would contribute to a successful self-service laundry business. It makes little

difference whether

you are a janitor, a manager, an accountant, a

mechanic, a construction worker, or a salesman since are required to build

all

those talents

and operate a successful coin laundry. Think about

that!

Business Plan

The main focus of your proposal

will be

on the business. Your plan

should include everything that you have accomplished in preparation

325

Coin Laundries

for the construction of

— Road to Financial Independence

your laundry and include the following:

•

Why you Why you

•

Your market survey

•

Your analysis of the market survey

•

A justification of your revenue projections

•

selected the coin laundry business selected the location

•

How How

•

Pictures of

•

A drawing of the store layout

•

The

•

A copy of the proposed lease

•

The

•

The estimated construction and equipment

•

Your advertising program

•

Your Operating Plan Forecast

•

Your Cash Flow Projection

•

Your request for a loan

•

you determined the

size of the store

you selected your equipment

modern

self-service laundries

logic supporting your layout

lease

amendments you negotiated costs

You will find it easy to write your business plan if you use the same step-by-step procedures outlined in Chapter 15. Be prepared to answer questions and

to justify

your figures.

Request For Financing

Be specific in your request for a loan. Tell the loan officer exactly how much money you want and how it will be used. State the interest rate you want and the number of months you need to pay back the principal.

Don't be afraid

to

haggle on the points.

shows good busibe sure to secure a

It

ness sense to try for a low interest rate. In any case,

fixed interest rate. It's

better to request too

ing for too

much money

much money can be argued

326

than not enough. Since ask-

as taking a conservative ap-

—

—

Getting Financed

money is a danger signal to you don't know what you're doing.

proach. Not asking for enough officer. It

At

suggests that

end of

the

plan for a to revise

new

it,

this chapter,

you

the loan

will find an outline of a business

self-service laundry. Feel free to use this outline as

or to discard

it.

The choice

is

it is,

yours.

THE PRESENTATION Your formal proposal

is

complete, and you have several typed cop-

You are now ready to make your presentameeting with a number of different lending institutions,

ies in attractive binders. tions. After

you

select

two or three of the best

possibilities. Start

making appoint-

ments with them. Arrange

to

meet with the loan

officer

and other bank

officers in-

volved in the loan decision. Allow enough time to present your proposal and answer questions. Hold your meeting in a private

banks have conference rooms). Ask

that there

room (most

be no telephone calls or

other interruptions. Present a copy of your proposal to each person at the meeting.

Be confident when making your proposal. lines in this

them

used the guide-

book, your proposal will be as good as any they have seen.

you can't answer one, make a note to get back Don't guess\ If you have followed this book, your busi-

Encourage questions. to

If you've

later.

If

ness plan will withstand the toughest examination. In fact,

has

it

already

yours!

Use CAUTION! When you institution, the is in

leave your proposal with the lending

information that you took months to gather and process

control of others. Should

it

fall

into a competitor's hands, the

you would be devastating. Have your attorney draft a strict non-disclosure statement to be signed by an officer of the lending insti-

damage

to

tution before

you make your presentation.

WALK!

327

If

an officer won't sign

it

Coin Laundries

IF

— Road to Financial Independence

YOU ARE TURNED DOWN If for

Usually

1.

some reason your

it's

The

for

request for financing

denied, ask why.

one of the following reasons:

lender's asset-to-loan ratio

is

temporarily out of balance,

according to legal guidelines. (Not your 2.

is

fault.)

Because of limited funds, the lender is making loans only

most solid customers, large depositors. (Also not your 3.

The lender doesn't

feel that

you are prepared

to

to the

fault.)

assume the

re-

sponsibility. 4. 5.

The project is not feasible. You failed to communicate.

Make

the necessary corrections (if any are required), and present

adequate financing,

One will

institutions.

The hard work is if you have to. Persistence usually pays

cessful.

times,

Do

you are sucalready done; present your proposal 50 more

your proposal to other lending

alternative

this until

off. If

the Small Business Administration.

is

they have been turned It's

good

still

can't get

try alternative sources.

sometimes make small business loans directly

you win.

you

down by

The

SBA

to entrepreneurs if

two banks. Keep fighting until main event the construction and

at least

practice for the

—

operation of your business.

HELP IS AVAILABLE Call

SCORE (Service Corps of Retired Executives). Sponsored by

the U.S. Small Business Administration and funded

by Congress,

this

association of active and retired business people has been helping small

businesses since 1964. offered, including the

0245

to locate the

FREE

counseling in every area of business

is

development of a business plan. Call 1-800-634-

SCORE office nearest you.

328

Getting Financed

TAKE ADVANTAGE OF GOVERNMENT PROGRAMS The U.S. Small Business Administration can ernment programs designed

to help individuals

tell

who

you about govfall into

certain

"minority" classifications, such as of race, religion, nationality or gender. Visit the

SBA office nearest you and ask what programs

able. If there is a

program

that fits

ness and that's what this book

is

your needs, use

about.

329

it.

are avail-

That's good busi-

Coin Laundries

— Road to Financial Independence

OUTLINE OF A BUSINESS PLAN FOR A

NEW

SELF-SERVICE LAUNDRY

COVER SHEET

PROPOSED NAME OF BUSINESS PROPOSED ADDRESS OF BUSINESS NAME, ADDRESS & TELEPHONE OF OWNER(S) STATEMENT OF PURPOSE FOR BUSINESS PLAN FEASIBILITY STUDY OF BUSINESS & LOCATION ANALYSIS OF FINANCIAL RETURNS

DETERMINE FINANCIAL REQUIREMENTS SECURE ADEQUATE FINANCING PROVIDE OPERATING STRATEGIES TABLE OF CONTENTS

I.

OWNER

PROFILE

PERSONAL QUALIFICATIONS, SKILLS & RELATED BUSINESS EXPERIENCE PERSONAL FINANCIAL SUMMARY FORMAL EDUCATION

ABILITIES

SPECIAL TRAINING

MEMBERSHIPS IN PROFESSIONAL ORGANIZATIONS REASON(S) FOR CHOOSING THE SELF-SERVICE LAUNDRY BUSINESS II.

THE BUSINESS INDUSTRY HISTORY INDUSTRY TRENDS DESCRIPTION OF THE BUSINESS LEGAL STRUCTURE OF THE BUSINESS DESCRIPTION OF BUSINESS INSURANCE

III.

THE MARKET

POTENTIAL— SHORT TERM & LONG TERM FORECASTS DESCRIPTION— DEMOGRAPHICS & GEOGRAPHICAL AREA COMPETITION—QUANTITY & QUALITY MARKETING STRATEGY— PRICING, ETC. MARKET SHARE ANALYSIS ADVERTISING & PROMOTIONAL PROGRAM IV.

FINANCIAL DATA LIST OF CAPITAL EQUIPMENT & COST CONSTRUCTION DETAILS & COST REVENUE FORECAST AND JUSTIFICATION DESCRIPTION OF ALL EXPENSES OPERATING PLAN FORECAST CASH FLOW PROJECTION BREAK EVEN ANALYSIS ANALYSIS OF THE INVESTMENT -

1

-

330

Getting Financed

V.

LOAN REQUIREMENTS

AMOUNT TERM INTEREST RATE COLLATERAL TO PLEDGE LIFE INSURANCE POLICIES VI.

SUPPORTING DOCUMENTS (LISTED BY CHAPTER)

MARKET DEMOGRAPHICS PRICING ANALYSIS

MARKET REVENUE FORECAST BASED ON HOUSEHOLD INCOME COIN LAUNDRY LOCATION ANALYSIS SURVEY PROSPECTIVE CUSTOMER DATA SHEET (ONE EXAMPLE) ESTIMATED REVENUE FROM DATA SHEETS ESTIMATED REVENUE FROM SURVEY OF COMPETITIVE LAUNDRIES OPTIMUM DRYER LOAD SIZES ANALYSIS OF PROSPECTIVE CUSTOMER DATA SHEETS MACHINERY MIX CALCULATIONS COPY OF THE LEASE COPIES OF THE EQUIPMENT BIDS COPIES OF THE CONSTRUCTION BIDS PRELIMINARY DRAWINGS & LAYOUT UTILITY USAGE CHART WASHER OPERATING COSTS-SEWER & WATER WASHER OPERATING COSTS-HOT WATER WASHER OPERATING COSTS-ELECTRICITY DRYER OPERATING COSTS-NATURAL GAS DRYER OPERATING COSTS-ELECTRICITY UTILITIES-VARIABLE EXPENSE (COST PER TURN) ELECTRICAL-FIXED EXPENSE CALCULATION UTILITIES-MONTHLY FIXED EXPENSE SUMMARY ESTIMATED HEATING & COOLING COSTS PRICE & REVENUE ANALYSIS CHART PROJECTED REVENUE GROWTH PERSONAL RESUME PERSONAL CREDIT REPORT PERSONAL TAX RETURNS

331

CHAPTER 4 CHAPTER 4 CHAPTER 4 CHAPTER 4 CHAPTER 7 CHAPTER 7 CHAPTER 7 CHAPTER 8 CHAPTER 8 CHAPTER 8 CHAPTER 12 CHAPTER 13 CHAPTER 14 CHAPTER 14 CHAPTER 15 CHAPTER 15 CHAPTER 15 CHAPTER 15 CHAPTER 15 CHAPTER 15 CHAPTER 15 CHAPTER 15 CHAPTER 15 CHAPTER 15 CHAPTER 15 CHAPTER 15

FIGURE FIGURE FIGURE FIGURE FIGURE FIGURE FIGURE FIGURE FIGURE FIGURE

4-1

4-2

4-3 4-6 7-1

7-2

7-3 8-3 8-6 8-7

FIGURE 15-1 FIGURE 15-3 FIGURE 15-4 FIGURE 15-5 FIGURE 15-6 FIGURE 15-7 FIGURE 15-8 FIGURE 15-9 FIGURE 15-10 FIGURE 15-11 FIGURE 15-12 FIGURE 15-13

Coin Laundries

— Road to Financial Independence

"Never do something you do not approve of in order more quickly accomplish something you do approve

of, for there are

to

no safe

shortcuts in piloting a business."

—John Pierpont Morgan

332

18 SECURITY

SOARING PROPERTY CRIME has focused the attention of small business on security. will experience

The retail

it

in

No

business

some form

is

or another during

to crime. its

Almost

all

operations.

basic problems are robbery, theft and vandalism. In addition,

firms face schemes invented by con

change

immune

artists bilk

money from busy

circulated. Foreign coin

men to swindle profits. Quick-

clerks,

and counterfeit

bills are

and slugs are put into the vast numbers of vend-

ing machines throughout the country.

Problems are not always caused by nameless, faceless criminals, but also by insiders. One retailer installed computerized automatic change-making equipment after customers complained about being shortchanged. This led over 80 percent of the cash register clerks to quit,

ing

and

profits increased considerably.

The employees had been do-

more than just shortchanging customers.

333

Coin Laundries

— Road to Financial Independence

EMPLOYEE THEFT you may become the victim of an employee. If this sounds too cynical, attend seminars on small business for a quick dose of reality. Employee theft is a very serious problem! In If

fact,

you

it is

are an employer,

one of the leading causes of bankruptcy for small businesses.

What makes to detect

problem so complex

this

and even harder

is

that

employee

theft is difficult

to prove.

Whether it's to pay for illegal drugs, gambling, booze, or whatever, every employee who steals rationalizes the theft. It's the Robin Hood syndrome taking from the rich (you) and giving it to the poor (themselves). They are "not getting their fair share." Numerous laws protect employees, but little consideration is given to the employer. Only a small percentage of employee thefts actually result in a conviction. Even if there is a conviction, the employer sel-

—

dom

recovers.

employee theft for fear of legal retaliation by the employee. If an employer sues an employee for damages and loses, the thief often sues the employer and wins. ProsecuEmployers often

fail to

report

—

tion is not

son there

worth the employer's

is

so

Employee

By

the time

it

ally trust their

much employee

and thieves know

it.

It's

one

rea-

theft.

goes undiscovered for long periods of time.

theft often

is

risk,

detected,

it's

usually out of control. Employers gener-

employees. Being loyal to an employee, however, doesn't

guarantee loyalty in return.

One business owner, for example, made several legal mistakes when was afraid to terminate her fearing legal retaliation. Theft by that employee became so out-of-control that the owner would have been financially ahead by paying the employee $2,000 per month to stay away! It's important to understand the impact that employee theft can have on your business. Many people would consider the theft of a few dealing with a troublesome employee, and

cases of pop, candy or laundry detergent insignificant. Unfortunately, so do

many

judges.

The

your gross revenue, but cash withdrawal. before

it

It

dollar value might be less than it

1

percent of

could easily be 20 percent of your monthly

doesn't take

much

has a chance to succeed.

334

of this to destroy a

new

business

Security

Screen Job Applicants

The

best

way

ployees in the

And

to prevent

first

employee

it

even more

good em-

place. Unfortunately, that's easier said than done.

the vast (and increasing)

makes

theft is to hire only

difficult.

number of laws

To underline

protecting employees

this point,

look in the Yellow

Pages under Attorneys-Employment and count the number of attorneys

employer

that represent the

—not

Are there any?

the employee.

If so,

what percentage? There are some steps you can take to increase the odds of hiring

good employees. The

first

step

is

to provide the prospective

employee

with a detailed application for employment form. The "canned" forms available at your local office supply house

may

not provide you with

you need. Don't copy an application used by another business. Laws change fast and it could be outdated. the information that

Have a competent attorney draft a pre-employment application form specifically for

laws.

Where

your business

legal,

—one

that

conforms

to the latest labor

have your attorney draw up a release form(s) for the

applicant to sign, giving you permission to further investigate, such as:

•

Release to contact references and leads resulting from references

•

Release to contact previous employers and leads resulting from these contacts

•

Release for drug and substance testing

•

Release for psychological testing

•

Release for criminal background check

•

Release for consumer report and credit history

Release form(s) should be as strong as legally possible. Where gal,

an applicant's signature on a release should mean that he/she waives

the right to any legal action against the

vide information. tion

le-

companies or people who pro-

(Many companies simply refuse

to give out

informa-

on previous employees without a signature.)

The Immigration and Naturalization Service (under the U.S. Department of Justice) requires that every employee meet federal legal requirements to work in the United States. The Service provides the

335

Coin Laundries

Employment Eligibility

— Road to Financial Independence

Verification

form

both the employer and the applicant. certification?

to

be

filled

And who

The employer of course! At

least

it

is

out and signed by

responsible for this

provides an excuse to

ask for and verify the applicant's identification. In the past, tion of

some employers required

employment. Recent federal

illegal in the private sector.

(probably your

life

federal, state

may chose

son you

know

and

made

this practice

local

governments

your business and your money

savings) in the business.

not legal right) to

detector tests as a condi-

legislation has

this tool. Remember that it's

can use

(if

Only

lie

You have every moral

everything there

is

to

know about

right

the per-

as custodian. That includes character, reputation,

bank information, public record information,

life style, credit status,

and criminal conduct.

Pre-Employment Interview Develop a

list

of pre-employment interview questions and have

your attorney go over them. Legality often depends not on what you ask, but

how you

ask.

Be

thorough.

employment history carefully. Verify dates of employment with previous employers. If there are discrepancies, ask why in the interview. Thoroughly check out the Prior to the interview, study the

applicant's answers, reasons, or excuses. If there are long periods of

unemployment, question them. Look for potential trouble before hiring the employee.

Don't rely on an applicant's resume as a basis for the interview.

Resumes

up an applicant's strengths while eliminating serve as a check to see if the information it has

typically point

weaknesses. Let

it

matches the information tion

that

you obtain from the employment applica-

and the interview.

Leave

it

to the Experts

For those who dislike the process of interviewing, investigating, and hiring employees, there are some

you are looking for a part-time or temporary employee, you may want to contact a company

that specializes in

alternatives. If

temporary help. Look under Employment Con-

336

Security

tractors-Temporary Help in the Yellow Pages. They supply the em-

ployee and process the payroll for you.

There are companies

who

lease employees.

They handle

the re-

cruiting, screening, payroll, benefits plan, safety training, insurance

and claims management. The upside

is

that

you have more time

to

manage your business. The downside is that your labor costs are higher. To investigate employee leasing, look under Employment Service-Employee Leasing in the Yellow Pages.

Employers who are

skillful in recruiting

and interviewing, but who

dislike the investigative process, should look

ployment Screening and Investigators

under the headings Em-

in the Yellow Pages.

Fees can

run from $45 for a simple investigation up to several hundred dollars for a

more complex one. The

Upon

applicant to sign.

its

investigator provides a waiver for the

return, the investigation is started.

If you find yourself reluctant to shell out

tigate a prospective

more than

employee, remember that a

skillful thief

can

steal

one day. Given the opportunity, how much could

that in

thief steal in a

$300 to thoroughly inves-

month? An

investigation

is

definitely

worth the

that

cost!

Employee Contract

own

For your

protection, as well as that of your employee,

you

employment and all verbal agreements carefully worded in a written employment contract. Make sure the employee reads the contract. For added protection, after you both have signed it, read the contract to the employee again. Always provide the employee with a signed copy. The contents of the contract are up to you and your attorney. At the should have

all

very

should contain a detailed description of the following:

least,

it

the terms of

be performed by the employee

•

Type and quality of work

•

Hours of employment

•

Wages

•

Expected dress code (uniforms,

•

Treatment of and interaction with customers

•

Job benefits (personal and/or sick time, insurance, retirement,

for

to

employment

337

etc.)

etc.)

Coin Laundries

Where employee

employment

legal, the

warning and release that

— Road to Financial Independence

to

contract should contain a privacy

be signed by the employee. This notifies the

you are using security equipment, such

as surveillance

cameras, recorders, sensors, detectors, alarms, and that you will be monitoring telephone calls.

Ask your

attorney

if it is legal in

your

state to include a "right to

terminate without notice" clause in the contract. This gives both you

and your employee the right

to terminate

employment without giving

prior notice or providing a reason for the termination.

Hold All Keys Most coin operated machines have and coin boxes. Each has

its

own

lock.

separate access to the controls

Laundry owners usually pro-

vide employees with keys to the access doors, but not to the coin boxes.

By having machine

access to the controls, employees can manually operate a

if it fails to start

when

Wrong! Employees have been access panels of washers and dryers, start the ma-

Separate locks prevent

known

to

open the

the customer inserts coins.

theft, right?

chines for customers, and keep the money. This type of theft

is

almost

impossible to detect on coin-activated machines unless they are

equipped with a cycle counter.

There are also cases keys to

steal

in

which employees have used access panel

products from vending machines. Others have sold prod-

—

by placing signs on the machines stating, "Out of Order See Attendant." Enterprising attendants have even fashioned cardboard diversion slides to bypass the coin boxes in order to open the access

ucts

panels and collect the coins.

Reduce your chances of being victimized. Don 't give access panel keys to your attendants. Instead, tell them to have the customer fill out a refund slip if a machine malfunctions. Then mail the refund directly to the customer, which also reduces cheating. Keep track of the refunds and learn which customers are repeatedly filing claims. Then put a stop to

it.

The recent use of computerized equipment in laundries has reduced employee theft considerably. Machine cycles and revenue are moni-

338

— Security

tored and recorded as well as access panel and coin vault entry.

mean you can't be "ripped someone will find it.

this

off'?

NO!

Does

There's always a way, and

Schedule Frequent and Unexpected Visits

Your best defense against visit

theft is vigilance.

your laundry. Frequent and unexpected

Vary the times that you visits

can go a long

way

towards preventing your employees from selling services and keeping the

money. Check the written

formed on each

visit.

sales tickets against the services per-

Check them again when you

total the receipts at

the end of the day.

Unexpected out

work

that

visits

keep employees

alert.

During each

visit,

point

needs to be done and follow up on progress during your

Your laundry will be cleaner and better attended. You can prevent a lot of problems by properly managing your employ-

next surprise

visit.

Busy employees don't have time

ees.

to get into mischief.

Run Frequent Audits Audits are an often-neglected management tool. Audit everything

money, operating and

office supplies, tools, equipment,

and product

inventory. Besides being a deterrent to theft, audits prevent waste

and

control expenses.

Control Your Inventory

Keep

inventories of office supplies, operating supplies, and prod-

ucts in a locked room. Don't give the key to your employees. You stock

the vending machines. You dispense supplies as they are needed.

laundry owners feel that this it's

Some

much control is a nuisance, but most agree

effective in reducing theft.

Summary employee theft, but you can slow it down with good management. Don't give keys to your employees. Screen all job applicants carefully. Visit your laundry frequently and unexpectedly.

You

Run

can't prevent

periodic audits on money, supplies, tools, and inventory. Maintain

339

Coin Laundries

— Road to Financial Independence Do

tight inventory control.

losses to a

and

these things, and you will hold your

minimum.

AND VANDALISM

ROBBERY, THEFT, Crime

all

no longer a

is

theft to every

Drugs have brought robbery

community. Almost every

some form of criminal

retailer

has experienced

Even alarm companies have been broCareful planning and good management can

activity.

ken into and burglarized. help reduce the

"city problem."

number of incidents

Maintain Good Volume The best deterrent to robbery,

your self-service laundry.

in

theft

and vandalism

is

a crowd. Self-

service laundries with lots of customers experience fewer incidents

than stores with low business volume.

problems ing time.

late at night

You

when customer traffic

are

more

is light.

likely to

have

Set an early clos-

A few extra dollars from late night business may not be worth

the added risk of staying

open

late.

Avoid Patterns

You

when you handle

are at risk

regular basis.

large

amounts of money on a

A robber doesn't have to be a mental giant to realize that

you haul your money from the laundry

—

bank periodically. It's easy to conceal $1,200 in large bills, but how do you hide 4,800 quarters? Anyone but a weight lifter will show the telltale red face and a canted gait when leaving the coin laundry with a heavy bag of coins. to the

Vary your collection time and the time that you take the money out of your store. Count possible.

Be

money

alert for

away from

whenever anyone observing or following you. Avoid bank in private,

the store,

deposit boxes, which are especially dangerous.

To discourage burglars, some laundry owners remove all money from the laundry daily and leave the empty cash boxes in plain sight

when the laundry

may encourage the

is

may discourage burglars, it also who know that money is taken to the store in

closed.

robbers

morning and from the

While

this

store at night

340

—every

day.

Security

Maintain Good

Visibility

Visibility is a

will

good deterrent

have fewer problems

lighted.

if

to robbery, theft,

your store has

lots

and vandalism. You

of windows and

is

well

Locate your coin/bill changer or card dispensers in a high vis-

ibility area.

Make

sure the police or the security patrol can see

it

from

outside the store.

Purchase Good Locks

Good not.

locks are important, whether the coin laundry

is

attended or

A skillful thief can pick dozens of tube locks and steal your money

while doing his

Some

own laundry.

travel the States in

Thieves have become very sophisticated.

motor homes containing computerized lock

information and state-of-the-art key-making equipment.

Choose locks carefully. Many people have keys that fit standard locks on coin-operated equipment, including former or current employees of equipment manufacturers and distributors, lock manufacturers and

distributors, locksmiths, route operators, service

companies,

etc.

FRAUD Fraud has been rapidly increasing perpetrators never

come

catch, rarely prosecuted,

violent crime, isn't it?

in contact

in the

United States. Small time

with the victim. They are hard to

and seldom punished. After

The overcrowded justice system

to deal with the problem. That's

why

the

problem

is

all, it's

a non-

lacks the time

getting worse.

Slugs and Foreign Coin Slugs and foreign coin have always been a problem for owners of coin laundries. Manufacturers of coin receptors and coin laundry equip-

ment

Nothing your

working

are

is

risk.

to

develop

new

products to eliminate this problem.

guaranteed to be 100 percent effective, but you can reduce

Purchase good receptors that can be adjusted to reject a high

percentage of slugs and foreign coin.

The advent of card-activated equipment has helped somewhat to reduce this problem. Card dispensers accept $1- to $20-bills, which are easier to verify. They also provide computer printouts of all activity.

341

Coin Laundries

— Road to Financial Independence

Check Forgery

—

Checks are a prime target for forgers particularly payroll checks. Blank payroll checks are often stolen, filled in, and then cashed. Payroll checks can be reproduced by computer and then printed on a highquality laser printer. Thieves steel checks from mailboxes, chemically alter them, and cash them often for larger amounts.

—

Employees have been known to forge their own payroll checks. Some bank employees and employees (or owners) of check cashing services have become forgers or accomplices. Every business is vulnerable to this type of criminal activity.

Although you cannot eliminate the tect yourself against

they were cash.

risk completely,

you can pro-

check forgery by treating your payroll checks as

Lock them up and make

sure that only

if

you have access

to them.

Purchase special check forms that are president or

difficult to alter.

manager can advise you. While

Your bank

may

special checks

cost

more, long-term savings could be far greater.

There

one sure way of defeating check forgers. Deposit payroll

is

checks directly into your employees' accounts.

SECURITY SYSTEMS Because of big increases is

one of the

fastest

almost daily, and

in criminal activity, the security industry

growing industries today. Changes are taking place

new equipment

is

continually appearing. Take the

time to become familiar with this equipment before deciding on a security plan. It's

beyond

the scope of this

book

to provide information

security technique or device available since security

ing field and lists

some of

new technology

is

is

on every

a rapidly chang-

being added every day. This chapter

the basic security measures.

It's

up

to

you

to

do the

in-

depth research to determine your particular needs.

Mirror Windows In the past few years, retail stores have started using mirror windows to reduce theft. Since most people recognize them for what they

342

Security

are, these

windows can be an inexpensive

deterrent to robbery, theft,

and vandalism. Without breaking the mirror, potential troublemakers cannot be sure

if

a person

is

watching or

if

a camera

is

monitoring their

moves. The mirror can be wired into an alarm system by attaching a glass-breakage module.

Because some municipalities have laws

that

surveillance, investigate before installing mirror

govern

this

type of

windows.

Alarm Systems With like

rising crime rates, burglar alarm

companies have sprung up

weeds. Although not foolproof, an alarm system can reduce your

vulnerability to burglary, theft, and vandalism.

These systems range

from a cost of a few hundred to several thousand dollars. Compare different systems before making a choice, including checking a Con-

sumer Reports magazine that evaluates alarm systems. Silent alarms, sometimes called "call-in alarms," are helpful in apprehending criminals by notifying the police when a break-in is taking place. To prevent false alarms and accompanying fines, many are pro-

grammed police.

One

to call a central control

monitoring system instead of the

The business owner then decides whether to involve

the police.

highly-effective alarm system records the voices of the perpetra-

tors for later

use in court.

Noise alarms are designed

to scare off robbers

when

they try to

gain entry. They are effective, but they tend to aggravate neighboring businesses or residents. gal in

some

Check

local ordinances.

These alarms are

ille-

areas, particularly those areas that contain hospitals or care

centers.

Panic alarms are designed to report an immediate life-threatening

you are ever robbed or attacked by an out-of-control laundry customer, you'll wish you had them in place. Locate these alarms situation. If

in strategic areas of the laundry

—near

the cash register, bill changer,

card dispenser, or safe. They can even be carried on your person.

Most the alarm

silent is

alarms are connected to a dedicated telephone

programmed

to dial

line,

and

one or more numbers. Some alarms

operate by radio frequency. This prevents a thief from disabling the

alarm by cutting the telephone

line.

343

Coin Laundries

Some

— Road to Financial Independence

alarms are activated

when

a contact point

is

on a door or window. Others are activated by sensors

broken, such as

that

monitor en-

vironmental or physical changes. The following are examples:

•

Impact or vibration sensors drilling or

•

•

sawing

Ultrasonic sensors dible)

—monitor breakage, hammering,

—monitor changes

in

high-frequency (inau-

sound waves

Microwave sensors

—uses

radio frequency generators and re-

ceivers •

Infra-red sensors

—

activated

by a combination of heat and mo-

tion •

Proximity sensors

—

by disturbances

in the surround-

by pressure, such

as foot pressure

activated

ing electrostatic field •

Pressure sensors

—

activated

on a floor mat Surveillance

Cameras and Recorders

Surveillance cameras are available in various sizes, from the visible

ones you see monitoring hallways

in

motor inns and public build-

ings to tiny cameras that can be hidden in the face of a clock, a portrait,

or a light fixture. While exposed cameras deter criminals, hidden cameras help identify

and catch them.

While exposed cameras help

to deter criminals, they are a

target for vandals, robbers or thieves,

cameras have

little

prime

who may be masked. Hidden

deterrence value, but their recordings are

more likely

to identify criminals, particularly if the criminal "cased" the laundry

beforehand and failed to spot the cameras.

Cameras may be connected to a closed circuit television monitor, a

may be on-premise or remote. Recorders time-lapse, or activated by human motion. Systems

recorder, or both. Monitoring

may be real-time, may be wired or wireless. There

are even fake systems available, in-

smoked ceiling domes (without surveillance cameras) and accompanying warning signs and decals. There are dozens of systems cluding

and combinations on the market.

344

Security

Before you shop for an alarm system or surveillance system, make a

list

of potential security problems. Self-service laundries are subject

to the following

problems:

Robbery Burglary

Vandalism Theft of supplies Theft of inventory Injuries-real or fake Slip-n-fall

con

artists

Shortchanging customers

Unreported sales of services

money from of money from

Theft of

coin boxes

Theft

the cash register

Theft of equipment tools furnishings,

etc.

Unreported ("back door") sales of inventory Theft of customers' clothes or other possessions Theft of owner's or other employees' personal items

The

security industry

is

are familiar with the latest lot

technical and highly complex. Unless

you

equipment and systems, plan on spending a

of time comparing alarm systems and surveillance equipment.

Your rity

local police department can help

you determine what secu-

measures are best for your laundry. Before buying a system, ask

the distributor for the

names of current

users.

Get

their input before

deciding.

Serious security measures in highly troubled locations are best to the experts.

A list of security consultants can be found in the

left

Yellow

Pages under the heading (surprise) Security Consultants. Also look up Security Equipment, Systems list

&

Monitoring

in the Yellow

Pages for a

of companies that provide the latest in high-tech security equip-

ment. You can also browse the Internet.

345

Coin Laundries

It's

— Road to Financial Independence

much money for a system. There is a lot of particularly when the pricing includes installation.

easy to pay too

"fat" in the pricing,

Be sure to dicker hard before signing a purchase agreement. And, check local codes before placing an order.

346

again,

19 ADVERTISING

AND PROMOTION

MILLIONS

OF ADVERTISING

dollars are wasted every year.

Entrepreneurs, constantly plagued by high-pressure salespeople

program as the best, spend too much money for too little return. Don't rely on advertising media salespeople for the answers. In most cases, they have their own interests at heart. Analyze and compare each advertising program before spending your money. You must be able to answer these questions if you want touting their advertising

results:

•

Who

•

What

•

How

•

What is the cost per thousand prospects that receive my message?

are

my prospective customers?

advertising

media reaches them?

often will they be exposed to

Use your market survey to the third question will

the fourth question

is

to

answer the

my

first

message?

two questions. Answers

come from your best judgment. The answer to

a matter of simple arithmetic.

347

Coin Laundries

If your

tions,

— Road to Financial Independence

market survey doesn't provide answers

to the first

two ques-

conduct a survey that does. Otherwise you will spend advertis-

ing dollars based on conjecture instead of facts.

Look at this comparison of two different advertising programs you might

use: First

Class

Mailing

Radio

5,000

$350

Total Cost

Homes Reached

•

•

To A

Select List Of

10 Spots

Total

that

•

20,000

•

200

•

Names

$2,400

•

5,000

Estimated Number Of Homes Reached In The Practical Marketing

Area Of

The Laundry Estimated Number Of Prospects Exposed To The Message Cost Per

1

market. Estimate the

•

20

,000 Prospects

Radio covers a large

•

•

•

area, but

•

3,000

$17,500

most

•

•

listeners will

number of households

5,000

in

$800

be outside your

your market that will

receive your message by checking the library for market statistics on local radio stations.

Just because a radio listening.

Radio

listeners

is

turned on doesn't

mean

that a prospect is

can be teens or even pre-teens, certainly not

self-service laundry prospects. Others in the

home may be

talking

the telephone, sleeping, or doing something else while the radio

and won't hear your message. You're interested

in the

is

on

on

number of pros-

pects that will actually receive your message.

Your

local "rock" station

might reach 20,000 households between

6 and 7 p.m., but only 200 of those might be in your market.

What

if

the listeners in 120 of these households are children? If prospective

348

Advertising and Promotion

customers were otherwise occupied and failed to hear your message in another 60 households, only 20 prospects would be reached.

On

40 percent of the

the other hand, if even

throw away your letter without opening pects for the direct mail

program

is

it,

direct mail prospects

your cost per thousand pros-

just $800.

Compare

this to

$17,500

for radio advertising.

The objective of advertising is not to "tickle" prospects, but to make them customers. Your radio message may reach 20 prospects, but how many of these will become customers? You will soon learn to gauge this by watching for new faces and an increase in sales after running an advertising program.

The bottom get a

new

line is

how many

you

advertising dollars

will

customer. If 10 percent of radio-listening prospects

pay to

become

customers, radio spots would produce two customers at a cost of $175 each.

The

on the other hand, would produce 300

direct mail program,

customers

at a cost

of $8 each.

The previous example should not influence your dia decisions. Every market plete analysis.

not

mean

that

is

different,

Because a program works

you

will get the

same

merequire a com-

advertising

and each will (or doesn't) in

one

area,

does

results in another.

TELEVISION, RADIO, NEWSPAPER ADVERTISING The market

for a self-service coin laundry

graphical area. This

is

is

usually a small geo-

particularly true of metropolitan areas. In heavily

populated areas, television, radio, and major newspapers are usually too expensive, unless you

own

a chain of self-service laundries over

which you can spread advertising

One way

to

reduce the cost of television, radio, and newspaper

to

form an association with other

self-service laundry

to share in advertising expenses. This is

done by tagging the

advertising

owners

dollars.

names and

is

locations of several different laundries at the end of each ad

and dividing the cost among the participants.

Radio advertising can be very effective are only a

few

stations

in rural

markets where there

and the costs are more reasonable.

the format of a particular station

is

Many

times

directed toward local listeners or a

349

Coin Laundries

particular ethnic group.

— Road to Financial Independence These

stations often feature local

news and

current events, job offers, and items for resale.

Use

the "rifle" approach rather than the "shotgun" approach in ad-

vertising, particularly if

your laundry

is

located in a metropolitan area.

In other words, concentrate your effort within your market. Don't blan-

ket the entire city with television or

newspaper

ads,

hoping

to reach

other prospects.

DIRECT MAIL ADVERTISING Direct mail and door hangers are two examples of the "rifle" approach.

Door hangers

are plastic bags that contain advertising

from

hang the bags on doors and you

several merchants. Delivery people

only pay for your advertising message to go to the areas you designate.

—

Companies who perform this service can be found under Advertising Direct Mail in the Yellow Pages. Direct mail allows you to provide more detail than you can afford in television, radio and newspaper advertising. By providing a list of your equipment and its sizes, your message will appeal to users who occasionally wash sleeping bags, comforters, bedspreads and rugs. For

maximum

impact, include a picture of your laundry,

montage of photographs. Other things you may want •

Customer amenities

•

Services

•

Store hours

•

Friendly attendants

•

Fast dryers

Never mention a

to

emphasize

town" If

will save

even

better, a

are:

feature of your laundry without listing the related

benefits. Explain to the prospective in

or,

customers

how

the "fastest dryers

them time and money.

your laundry

is

located in an ethnic neighborhood and your at-

tendants are bilingual, say so. If you offer special services to a specific

350

Advertising and Promotion

Do

ethnic group, say so.

And remember,

age.

everything possible to depict a friendly im-

every mailing should offer some kind of a deal

with a time limit to provide a sense of urgency.

For those

who want

help, there are

Pages under Advertising-Direct Mail

Many

provide a

and mailing,

to

The United

full service,

your

list

companies

listed in the Yellow

that provide direct mail services.

including copywriting, printing, sorting

or theirs.

States Postal Service offers seminars for direct mail-

ers. Libraries are

another good source of information on

how

to de-

velop successful direct mail programs. There are dozens of books on

how

to write

copy for newspaper

ads, direct mail

and news releases.

SPECIALTY NEWSPAPERS Local newspaper weekly inserts (sometimes are relatively inexpensive

from

local merchants,

and can be

effective.

known as

"shoppers")

They contain bargains

and they are widely read.

If a

majority of your

customers belong to a single ethnic group, check for newspapers that serve them.

Another effective (and inexpensive) means of carrying your message are "coupon shoppers." These are

strictly advertising papers, nor-

mally published monthly. They contain coupons that are clipped by the reader and presented to the merchant for savings on a product or service.

ON-SITE PROMOTION Retailers spend thousands of dollars to advertise "once-in-a-life-

time" sales on television, in newspapers, and on the radio. rival,

customers are often disappointed.

the big deal?

No

It's

signs, displays, banners

the

same old

Upon

store!

ar-

What's

—nothing! Their excitement

and anticipation evaporate.

On

every promotion, create a carnival atmosphere in and around

your laundry. Get an ample supply of helium balloons and hang them everywhere. Display flags, pennants and banners inside. permits, hang

them outside

as well.

Use mobile animated

351

If the lease

electric signs

Coin Laundries

— Road to Financial Independence

where allowed. For greater

attention, rent a large balloon

and

fly

it

over your laundry.

There are many vendors of promotional materials the Yellow Pages under Advertising. facturers often

Equipment

to

be found

distributors

have promotional aids for sale or rent

—

in

and manu-

or sometimes

for free.

SIGNS

AND DISPLAYS

Scheduled promotions are not the only means of promoting your laundry. its

A large, well-lit exterior sign will advertise your laundry and

services to passersby 24 hours a day, 365 days a year. Attractive

window

signs and displays are also effective.

they can be easily seen by prospective customers store.

Don't forget to use

mote your

attractive indoor signs

Make

sure

who walk by your

and displays

to pro-

services.

YELLOW PAGES Yellow Pages advertising carries your message to prospective cus-

tomers

who move

into

your market. Be sure

you

particularly effective in markets that attract a

offer.

This advertising

large

number of tourists who

is

to list all the services

are usually unfamiliar with the area.

size of the ad is not nearly as important as

its

The

layout and content.

INTERNET The

Internet

is

the

most rapidly expanding, comprehensive, and

diverse form of communication in engine(s), the city

web pages

human history. Given the right search

of every level of federal,

governments are available

to you.

Web

state,

county and

pages for organizations,

both private and non-profit, as well as for companies of every size are

352

Advertising and Promotion

available with a

web

few strokes on the keyboard. Even individuals have

pages.

Can

found on the Internet? Absolutely!

self-service laundries be

Should your laundry have a web page? Maybe. Remember, most of your customers are located within a mile of your laundry. The cus-

tomer base

is

certainly not worldwide, and, in

citywide. For a

web page to be

most

cases, not

a successful form of promotion,

it

even

must

number of "hits" from actual prospects for your laundry. This means it must be "key-word" accessible by several powerful search engines and also linked to a number of related sites. Should you decide on a web page, it should describe your equip-

receive a massive

ment, services and amenities half the picture. For efits that

the features of your laundry. That's only

maximum

impact, finish

it

by

listing all the

ben-

each feature provides.

For example, ers,

—

explain

if your

laundry features two 80-pound-capacity wash-

how a customer can save time and money using these high-

speed, large-capacity washers and dryers:

•

Wash and dry

four average-size sleeping bags for $3 each. (Lo-

cal dry cleaners charge a •

Wash and dry

minimum

of $15 each.)

ten standard-size washer loads of

for $12. (The

minimum

cost

is

$20

in

work

clothes

an average apartment

house laundry.) •

Launder here

in

Visit us early

an hour what

—then spend

it

takes a day to launder at home.

the rest of the day doing things

you

really enjoy.

If

you decide

to

develop a

graphics for eye appeal. tures of the inside

Have

web

site,

be sure

to include plenty

of

a professional photographer take pic-

and outside of your laundry, and include these as

well. Offer tips, such as

on

stain removal,

and wash/dry instructions

for various types of fabric or garments.

Unless you are exceptionally talented is

best left to professionals.

Your

in this area,

web

local library can help

site

design

you locate de-

sign services or check the Yellow Pages under Advertising-Electronic

353

Coin Laundries

&

and Internet Products the Internet for

— Road to Financial Independence Services.

web page

A web page

will not

And, of course, don't forget

to surf

designers.

pay off for you unless the demographics are

favorable. If your laundry appeals to a sophisticated class of customer

or you are trying to reach the tourist trade, you

use of a

web

site for

promotion.

If

may want to explore the

your customers are primarily farm

laborers or industrial workers, there are probably better uses for your

promotional dollars.

FREE ADVERTISING—THE NEWS RELEASE News

releases are your

your laundry.

news

It's

of telling everyone what's going on

at

not unusual for a newspaper article, or even a short

release, to generate

paid advertising. This

more

way

is

20 times more revenue for a business than

news

so because people generally find

credible than advertising. (The old saying, "If

it's

stories

free, 'tain't

worth nuthin," doesn't apply here.) Since newspaper articles cover only current events, develop your

media

list

before you begin writing your news release. Librarians can

provide directories that

list

names, addresses, contacts and telephone

numbers of television, radio and source of information

is

the

print

media

in

your

area.

An excellent

Gale Directory of Publications and Broad-

cast Media.

Before mailing your news release,

on your media

list

and

call

each of the organizations

verify:

•

The complete address of the organization

•

The right contact person(s)

•

The

in the organization for

correct spelling of each

Verify your media

list

your news release

name

periodically since organizational structures are

constantly changing.

News

releases can be several pages in length but one-page

releases have the greatest chance of being printed.

the following page proved to be very effective.

354

The news

news

release on

Advertising and Promotion

MOUNTAIN PUBLISHING Phone: (503)628-3995 (800) 879-8719 Fax: (503)628-0203

P.O. Box 1747

16175 S.W. Holly Hillsboro,

Hill

Oregon,

Road

USA 97123

NEWS RELEASE Contact: J. K. Basco

1-800-879-8719

Coin Laundries — Road to Financial Independence

Does the day of corporate takeovers, giant retail chains, and multi-store franchises forecast the end of the small independent

entrepreneur?

Not according to entrepreneur-consultant-author

Emerson G. Higdon. cial Independence

,

Coin Laundries — Road to Finan-

In his book,

Higdon tells how a new twist on an old business

is making big profits for owners.

The advantages of a recession-proof cash business with lim-

ited competition and unlimited opportunities are attracting investors of all ages -- from college students to retirees who want to

Many owners are managing profitable

supplement their incomes.

coin laundries while maintaining full time jobs. Coin Laundries — Road to Financial Independence is a 290-page guide to starting and operating profitable self-service laundries. The soft cover edition (ISBN 0-9623173-8-1)

is available for

$29.95 plus $3.00 shipping and handling direct from Mountain Publishing,

P.

toll-free:

O.

Box 1747, Hillsboro, Oregon 97123.

To order,

call

1-800-879-8719. -30-

The format of a news

release should adhere to specific guidelines:

•

Use company

•

Type "news release"

•

Provide a contact and telephone number

stationery at the

beginning

355

Coin Laundries

— Road to Financial Independence page down

•

Begin the main

•

Use wide margins

•

Use double spaced

• •

Number the pages End with "-30-" (the newspaper termination

•

Include photo

if

The information

in

general public, or

it's

article one-third

lines

sign)

applicable

your news release must be of

not likely to get published. Keep

interest to the it

short and to

the point. Lengthy, rambling tomes will probably be tossed into the

wastebasket.

Get the

editor's attention

by

starting off with a catchy headline.

most important information first. Be sure it answers the questions: Who? What? When? Where? and Why? Almost anything can be the subject of a news release: the grand

Began your news

release with the

opening, remodeling, an event. the

You

are

more

likely to get published if

news release ties in issues with broad public

interest,

such as schools,

money

savings, chari-

unusual services, ecology, recycling, time and ties,

help for the disadvantaged, and so on.

"Giving back to society" seems to be the leading issue today and

companies get millions of dollars charities tions,

the

in free advertising

by tying

in

with

and charity events. These relationships often involve dona-

sponsorships and professional assistance. Your

same on a smaller

scale

by the periodic

uniforms, donations of abandoned clothes,

company can do

free laundering of school

etc.

Develop a habit of sending out frequent news releases. Professional editing, either

by a friendly newspaper editor or journalism professor

or graduate student, will increase your chances for publication.

A DEVIOUS PROMOTION Some

clever laundry owners have recorded license plate numbers

on automobiles parked in front of their competitor's coin laundries. Names and addresses are then obtained from the state records division,

356

Advertising and Promotion

and postcards containing free wash coupons (or tickets) are mailed out.

Be on the alert for competitors who may try to use this tactic Counteraction should be swift, effective, and

against you.

legal. If a cordial

meet-

some other same to your

ing with your competitor fails to produce positive results,

course of action competitor, but

may be called for. You can always do the that may not solve the problem.

Consider hiring a 275-pound weight defense. Position

him on

at

him hand out

your laundry. This should result

the nonsense and return to

Do

trained in self-

the public sidewalk in front of your

competitor's laundry, and have

use

lifter that is

more

in

free

wash coupons

for

an agreement to discontinue

ethical promotions.

not take any retaliatory action that

is

not legal. Check with

your attorney.

No

matter which media

is

selected to convey your message, effec-

tive advertising for a coin laundry must:

•

Be

•

Offer a "Deal"

•

Have

properly timed

continuity

PROPER TIMING Before you can fully understand the importance of timing, you must first

ers.

understand your customers.

We are a nation of spenders

—not

sav-

Many of your customers spend money before they receive it. Some

spend

bank account. Instead, their weekly paychecks buy several money orders to pay bills, and the balance is gone within hours! it

so fast that they don't even have a

There ties,

is

a lot of competition for these dollars from landlords,

utili-

other coin laundries and retailers, selling food, clothing, automo-

biles, recreation, etc.

You

either get there first or lose the business.

Your customer will launder clothes at the home of a friend or parent, or even in the bathtub when short of cash.

357

Coin Laundries

— Road to Financial Independence

Schedule your advertising around paydays or the dates of welfare

and social security payments. Paid holidays offer a chance

to increase

your business because clothes are usually laundered before and holiday.

Sometimes a holiday

will coincide with a particularly large

pay period (such as month's end), and business There is always heavy

will

boom.

around paid holidays, tend-

retail advertising

ing to create a lot of retail activity in the market and increased tition for the dollar.

compe-

Get your message out before the dollars are gone!

The one exception is the period around Christmas and New people spend their

after a

money on

gifts

Year's

when

and the coin laundry business

is

generally slow.

Everyone buys groceries, and many people shop the grocery For best

results,

ads.

run your newspaper ads or inserts on the same day the

newspaper runs these

ads.

OFFER A DEAL The most

effective type of advertising

is

"promotional." This type

of advertising promises the customer some kind of deal, providing an

new coin laundry. Convey a Here are some typical promotions:

incentive to break a habit and try a

of urgency with a time limit.

•

Free wash or dry

•

Reduced

•

Free or reduced prices on services

•

Discounts on soap or soft drinks

•

Coupons

Reduced

sense

prices for washing and drying

for free merchandise at other retail stores

prices or free merchandise doesn't have to be the lure.

Hire entertainment for your promotional events, such as bands, clowns, magicians, pony rides and carnival rides. If you can't afford

it,

get

other merchants in the center to contribute.

Watch out to avoid a promotion with too much appeal. One laundry owner hired a belly dancer and promoted Thursday nights as "men's

358

Advertising and Promotion

Masses of people from all over town jammed the parking lot and coin laundry and disrupted the entire shopping center. The promotion was promptly canceled. Did someone say that coin laundries were dull? Promotional ideas are limited only by the imagination! night."

CONTINUITY ADVERTISING For

maximum

effect,

run promotions on a continuous basis. This the very least, every other month.

can be bimonthly, monthly,

or, at

Advertising lore has

takes an average of three exposures to an

advertising

that

it

message before communication

between messages lars are

it

is

too long,

momentum

is

achieved. If the delay

is lost

and advertising dol-

wasted.

Another reason for continuity of advertising customer base. Coin laundry customers tend

to

is

to maintain

your

be highly mobile, and a

coin laundry can lose 25 percent of its customers in a year. If you don't

volume to decline. Make your advertising unique by developing a catchy phrase, saying or jingle. Use it in every advertisement you run for as long as you advertise regularly, expect your

run advertising.

It

make jokes about laundry.

And,

doesn't matter whether customers say it.

first

is

that

it

sing

it

or

helps them recognize your

after all, that's the reason to advertise.

STARTING YOUR The

The point

it,

NEW LAUNDRY

few months of a new business absolutely are

cannot afford to experiment

now because

critical.

You

mistakes can bring disaster.

Carefully plan your advertising program well in advance of your opening date. Place orders for any advertising materials you

make If

may need, and

sure they are delivered long before that time.

you

are running television, radio, newspaper, or direct mail ad-

vertising, schedule

the last minute, or

your ads it

far in advance.

Don't leave everything for

won't get done. The minute your coin laundry

opens, you are going to be very busy.

359

Coin Laundries

— Road to Financial Independence

YOUR BEST BET The following are the steps of a tried and gram for opening a new self-service laundry:

true promotional pro-

Conduct a market survey, and compile a large list of prospective customer names and addresses the more the better. Mail, arrange for delivery, or personally deliver free wash cou-

1.

—

2.

pons (or cards)

to

your list of prospective customers.

least three times during the first

60 days of business.

3.

Run

4.

Create a carnival atmosphere in and around your coin laundry.

wash and/or dry program until volume is established. Advertise this program in your prospective customer mailing and by ample use of window signs and banners. a discounted

Use

flags, banners, signs,

After your coin laundry

is

and helium-filled balloons.

is

new promotional proof running your own busi-

established, try

grams. Part of the enjoyment and challenge ness

Do this at

the great satisfaction in seeing your ideas result in increased profits.

After running a promotion, evaluate

•

How much did my volume

•

What What

•

did

it

cost

me

increase?

to get this increase?

the long-term effect

is

As you can

it:

(momentum) of the promotion?

when developing a longand promotional program. You cannot implement all

see, there is a lot to consider

term advertising

you have an unlimited supply of money. advertising budget and stay within it. A long-

the ideas suggested here unless

Develop a

realistic

term budget of 3- to 5 -percent of gross revenue should not hurt the

bottom

line. If

your laundry

is

new or you have just purchased an exist-

ing one, plan for a higher percentage in the beginning.

As your

business grows, don't forget what

made you

successful.

Repeat the basics, and you will triumph over your competitors cially those

who do

not advertise.

360

—espe-

20 MAINTAINING AND REPAIRING

YOUR EQUIPMENT

YOUR COIN LAUNDRY equipment nance. Even

will

need regular mainte-

new equipment can malfunction and need

repair.

Don't be concerned. With proper instruction you can learn to maintain

and repair your equipment without too much

A factory service instructor once said

it

than to instruct an experienced know-it-all.

difficulty.

was

easier to train a novice

He proved

his point at the

end of a two-week service seminar when a 22-year-old home economist solved tough hands-on repair problems while an experienced appliance serviceman failed.

ATTEND SERVICE SEMINARS Hiring a service firm to maintain and repair your equipment

only expensive, but facturers

it's

usually unnecessary.

is

not

Most equipment manu-

and many distributors conduct periodic service seminars

the factory or other locations throughout the country that last a

days.

361

at

few

Coin Laundries

— Road to Financial Independence

The Coin Laundry Association

also holds periodic laundry service

seminars in regional locations. Contact them for seminar information at:

Coin Laundry Association 1315 Butterfield Road, Suite 212

Downers Grove, IL 60515-5602 Telephone: 630-963-5547 Service seminars are sometimes free, but most are not. The cost

any)

is

small

(if

when compared to hiring outside help to repair your equip-

ment. Get a schedule of service seminars from each manufacturer and distributor

and attend as many as possible. You'll be glad you

did.

ORGANIZE YOUR SERVICE INFORMATION It

helps to have the following information available for every piece

of equipment you own.

When organized properly, this information pro-

vides quick answers to most repair problems:

•

Installation instructions

•

Maintenance manual

•

Parts

•

Wiring diagram

•

Maintenance calendar

manual

Plot the maintenance requirements for your equipment on a calendar,

and review

it

weekly. Proper maintenance extends the

equipment and prevents many costly It's

most

effective to organize

life

of your

repairs.

equipment maintenance records and

schedules on a computer. Several programs exist that are specifically

designed for self-service laundries. a recommendation.

An

Ask your equipment distributor for

alternative is to

custom

an inexpensive off-the-shelf data base program.

362

tailor a

program from

Maintaining and Repairing Your Equipment

THE QUICK-REFERENCE ADDRESS BOOK Another valuable aid that contains the

a quick-reference

is

computer address book

names, addresses, and telephone numbers of equip-

ment manufacturers and distributors, their service technicians, parts distributors, and the nearest emergency technical help. Make sure you have the names of personnel on the parts order desks and their telephone numbers, if different from the corporate head-

When

quarters. fact

company

a

is

located in another time zone, note this

and the business hours beside the address.

You can save money by calling toll-free numbers. Dial 1-800-5551212 to find out if a company has one. For a nominal charge you can order a toll-free directory from American Telephone and Telegraph

Company

(call

1-800-422-8793).

Internet users can use a search engine to find these directories of toll-free

numbers:

AnyWho (AT&T)

Toll Free Internet Directory

InfoSpace Directory of Toll Free Numbers Internet 800/888 Directory

REPAIR PARTS Keep on hand any parts with a high failure rate. Local parts suppliers never seem to carry a sufficient inventory, and a machine could sit idle for weeks while you wait for a critical part to arrive. (When it finally comes guess what? They shipped the wrong one!) Much "down time" can be eliminated if you hop on it before it

—

hops on you. Maintain a ment.

It's

fifty dollars for

of parts sources for each piece of equip-

minimum order charges and volume disminimum charge means you could be charged

worthwhile to

counts as a fifty-dollar

list list

a two-dollar item!

List the approximate shipment lead-time

from each source and the

charge for priority shipments. Include names, telephone numbers, and rates of shipping

companies offering overnight

363

delivery.

Coin Laundries

In service seminars,

— Road to Financial Independence you

will learn

which

parts are critical or have

you to establish guidelines for your parts learn what special tools you will need for main-

a high failure rate, enabling inventory.

You will

also

tenance and repairs.

There

is

simply no substitute for being well prepared. With a

little

forethought, most problems can be solved in a short time, with a mini-

mum of trouble. PARTS WARRANTIES you need a new part durname and number along with the

Repair parts usually carry a warranty. ing the repair of a machine, record

its

If

following information to the maintenance/repair record for that machine. If the part fails later,

you can quickly determine

warranty without wasting time searching

•

Source

•

Invoice

•

Invoice date

•

Shipping date

•

Date received

•

Date installed

•

Warranty expiration date

if it's

under

files:

number

EQUIPMENT MAINTENANCE Failure to perform routine maintenance procedures

laundries will reduce your bottom line. turns (loss of revenue) during

You

will lose

common to all

washer and dryer

peak hours, and your energy costs

will

increase dramatically.

The proper engineering and installation of laundry systems and equipment was covered in preceding chapters. You should know that no amount of maintenance can correct faulty engineering and/or poor installation.

364

Maintaining and Repairing Your Equipment

All maintenance procedures discussed in this chapter assume that

your equipment tions

and

that all

is

properly installed per the manufacturers' instruc-

plumbing,

electrical,

and duct systems

in the

laundry

are properly engineered.

Washer Maintenance

On some those days,

days, every washer in a laundry runs continuously.

it's critical

that

each and every washer complete

its

On

wash

cycle as fast as possible. If the washers take longer to cycle because of restrictions in the

fill

and/or drain systems, cycles are

lost.

This costs

you revenue.

To avoid the above scenario, regularly perform the following maintenance procedures on every washer in your laundry: •

Remove the water inlet valves. Disassemble and thoroughly inspect each for dirt or mineral scale build-up. Thoroughly clean all

•

parts before assembly.

Remove, fill

inspect and thoroughly clean the screens in the water

hoses and/or water inlet valves. Replace screens that are

damaged •

Inspect

all

or

show

washer

a mineral scale build-up. fill

hoses. Replace any that are

damaged

or

kinked. •

Inspect, clean or replace water filters (if used) in the water sup-

ply system. •

Inspect the drain valves on

all

washers to see

operate freely. Disassemble and clean •

moving parts

when needed.

Visually inspect the washer drain hoses and/or drainpipe for restrictions.

•

if all

Clean

all lint

Replace any hoses that show damage or kinking. traps or screens in the drain

system (where used),

particularly those in floor sinks.

The frequency of

these maintenance procedures depends on the

you may only need to do of trash and minerals, monthly

quality of your water. If you have clean water,

them biannually.

may

If

your water

is full

not be often enough.

365

Coin Laundries

— Road to Financial Independence

(One laundry owner buys water from a municipal water department that supplies it directly from a large reservoir. For approximately three weeks during the spring of every year, he finds it necessary to flush minute crawdad shell bits from his water supply filter on a daily basis.

How

did the water department answer his complaint? "It's po-

table water that meets all federal standards.")

Dryer Maintenance All dryers work by combining heat with

airflow.

tioning burners and inadequate airflow cause

use more energy.

When

them

Improperly functo run longer

and

slowdown in Loss of washer turns means

dryers slow down, they force a

washer cycles during peak wash periods. lost revenue.

A quarter-inch lint buildup in a 4-inch dryer exhaust-duct or a halfinch buildup in an 8-inch dryer exhaust-duct reduces the area of

flow by 12 percent. surface.

It is

further reduced

Loss of airflow causes

lint

by

friction

and moisture

to

air-

from the rough

remain

in the dryer,

resulting in rusting, fire hazard, longer drying time, overheating and

clothes damage, and the failure of motors, bearings and other parts.

The following inspection and maintenance procedures

mon

are

com-

for every dryer:

1.

Clean dryer

lint filters daily.

eral times during 2.

Cleaning

may be

necessary sev-

days of heavy use.

Clean the entire length of each dryer exhaust duct, including the exhaust air paths inside the dryer. rior

Remove any hard

inte-

accumulation on the long-radius sweeps of 30-, 45-, or 90-

degree elbows. 3.

Inspect

all

dryer exhaust ducts for rust, denting, or other dam-

age. Repair or replace as necessary.

Make

sure

all

joints are

secure and tight. 4.

Vacuum and inspect the interior and exterior of all dryers. Make sure that burners, motors, belts, gas valves, electrical parts,

and gas pipe are free of dirt and corrosion. Oil the motor, drum, and pulley bearings as required.

366

Maintaining and Repairing Your Equipment

5.

Clean and inspect

all

place or repair any 6.

dryer- air intake-screens and ducts. Re-

damaged

ones.

With the dryer on, inspect the burner for proper combustion per specifications in the maintenance manual. The flame should be blue, steady, and of specified length.

A yellow or unsteady

flame requires adjustment by a qualified technician. 7.

Inspect gas pipe joints for corrosion, and check for gas leaks

with a leak detector. (Combustible gas detectors are inexpensive. 8.

Be

Include one in your tool inventory.)

sure the ignitors are clean and operate properly

when

the

dryers are started.

Duct cleaning can be strenuous work. You may want to pany

to clean

tilating

hire a

com-

your dryer exhaust ducts on a scheduled basis. (See Ven-

Systems-Cleaning

in the Yellow Pages.)

How often you perform each maintenance dryer, the installation,

its

location,

step will

and time of

depend on the

year. Initially, dryers

should be inspected monthly. Eventually, experience will determine the frequency of each maintenance procedure.

Water Heater Maintenance The water heating system dry

—and often

the

is

the

most neglected.

can happen frequently

if

most

system

critical

Its failure will

the water heating system

in the laun-

shut you down. This

is

old or poorly main-

tained.

Water

the

is

enemy of the water

heater.

It

carries

junk (minerals),

which forms a corrosive scale in the pipes, in the heat exchanger, and on the walls of the hot water storage tank. The hotter the water, the faster the scaling. heater.

And

The heavier

the scale, the less efficient the water

the less efficient the heater, the higher the cost per gallon

of hot water. Regularly scheduled maintenance saves on tends the

life

of the water heating system. The

list

utility costs

and ex-

of maintenance pro-

cedures on the following page should be performed on them regularly.

367

Coin Laundries

1

.

Descale the water heater and storage tank per the instructions water heater maintenance manual.

in the 2.

— Road to Financial Independence

Check

the relief valve(s).

Open

the valve(s)

and flush several

gallons of hot water to the drain. 3.

Open

the drain valve at the bottom of the hot water storage

tank and flush until the water runs clear. 4.

Remove

the anode rod(s) and relief valve(s) and inspect for

Clean or replace any

scale.

broken or severely cor-

that are

roded. 5.

Inspect the water heater exhaust duct(s) for corrosion or loose

Replace damaged ducts and make sure

joints.

all

joints are se-

cure. 6.

Inspect the intake duct screens and

remove any accumulation

of dirt and debris. 7.

The burner(s) should be

A corroded burner should be replaced by a

qualified technician

who should also advise you as to the cause

if

of the corrosion. Inspect the burner for proper combustion per the specifications in the

9.

and corrosion. Clean the

necessary.

burner

8.

free of dirt

maintenance manual. Adjustments,

made by a qualified technician. Make sure the ignitor is clean and

if

needed, should be

operating properly on each

heater. 10. Inspect the water-recirculating

ing correctly. Oil the 11.

Check

pump

pump motor

if

to

make

sure

it is

operat-

required.

the entire system for water and gas leaks.

The frequency of steps 1^ depends on the hardness and chemical balance of the water. Most municipal water companies supply good quality water. Problems can occur, however, with some untreated well water.

Hard water

(pH

more frequent maintenance. Acidic water cause corrosion, and a severe acid condition will

will require

less than 7) will

cause severe corrosion. Treating the water for sive, but so is the resulting

damage.

368

this

condition

is

expen-

Maintaining and Repairing Your Equipment

Have your water tested by

a qualified water-testing laboratory, and

discuss the test results with the water heater manufacturer. Based on this information, the

manufacturer can advise you

how

frequently to

perform steps 1-4. Steps 5-11 should be performed every other month.

The maintenance procedures and schedules

in this

chapter are listed

only as a guide and are not meant to replace your equipment mainte-

a conflict between any of the maintenance procedures described here and the factory maintenance manual FOL-

nance manuals. If there

LOW THE MANUAL.

is

—

To do otherwise

may

void the warranty and/or

damage your equipment. The thought of having to repair coin laundry machinery

scares

inexperienced laundry owners, and they have reason to worry don't prepare for the task. in this chapter,

By

they

following the simple guidelines outlined

you should be

your equipment. You

if

most

may even

fully qualified to maintain

find

369

it

enjoyable.

and repair

Coin Laundries

— Road to Financial Independence

"Too many people are thinking of security instead of opportunity. They seem more afraid of life than death." James F. Byrnes

—

"Man's security comes from within himself, and the security of

all

men

founded upon the security of the individual."

—Manly

370

Hall

is

21 ACCOUNTING

THE ADVANTAGES ONE OFcompared

of owning a self-service laundry

to other businesses, the

that

is

accounting can be rela-

tively simple. This is especially true if the laundry is unattended.

Some

coin laundry accounting systems consist of reams of ledger paper maintained by overzealous accountants. Others contain only a few figures

penciled on notebook paper. The best system

lies

somewhere

in be-

tween these extremes.

Too much

detail is a

waste of time and money.

you cannot exercise good management control inadequate.

An

effective accounting

if

On

the other hand,

your bookkeeping

system for a self-service laundry

must do the following: •

Conform

•

Provide a clear picture of the business's financial condition

•

Contain sufficient detail for effective management planning

•

Yield the information necessary to prepare the tax returns

to the

laws of federal,

371

is

state,

and local governments

Coin Laundries

If

your laundry

year's records

is

— Road to Financial Independence

unattended, you should be able to keep an entire

on a few sheets of paper.

month should be needed

to

No more

than two hours each

develop your monthly Profit Analysis.

takes longer than this, your system

is

If

it

too complicated.

For an attended laundry, add these additional forms and procedures:

•

Calendar

•

Payroll Record

•

Cash Tally

THE CALENDAR

A calendar may sound like a simple item, but try operating without The

one!

best one has large squares for recording information next to

each date. Businesses with one or more employees must keep track of vari-

ous tax and information

filing deadlines.

Write these dates on your

calendar:

•

Employee paydays

•

Quarterly payroll taxes

•

Annual payroll taxes

•

Federal annual reports

•

State annual reports

Don't forget

income to

pay

to include the dates of

tax filing deadlines.

sales taxes. If

your

Some

state is

your

own

quarterly estimated

states require self-service laundries

one of them, add these dates

to

your

calendar as well. If you are required to pay property taxes, those due dates must be entered, too.

THE PAYROLL RECORD As an employer, you must withhold taxes from your employees' wages and make quarterly payments to the federal and state govern-

372

—

Accounting

ments. In addition to

most local governments require tax payRecord all your payroll tax information in the

this,

ments based on payroll. Payroll Record.

Most

office supply stores sell Payroll

in wire binders.

meets federal,

Records

in single sheets or

Before purchasing your Payroll Record, make sure

state,

it

and local requirements. Most are easy to under-

stand and simple to maintain. After a while, you won't need

more than

20 minutes for each payday. Contact the Social Security Administration, the Internal Revenue Service, and your state and local taxing authorities to get a package of

known

"The Employer's Tax Packinformation thoroughly before you set up your ac-

tax instructions, rules, and forms

age." Study this

as

counting system.

Some

businesses pay their employees every week. Others pay ev-

ery other week, bimonthly, or once a month.

A

bimonthly payroll

duces the amount of time you spend on record keeping and acceptable to your help.

is

re-

generally

A monthly payroll is usually not popular with

employees.

Consider paying your employees on the 15th and the the month. This simplifies your bookkeeping. If

last

day of

you pay weekly

(or

every other week), you must carry part of your payroll expenses over to the following

month. This

is

time consuming because

it

takes a lot

of extra calculations.

THE PAYROLL SERVICE An

alternative to

managing your own payroll

is

to

have

it

done by

—

company that can perform all or any combination of your payroll requirements. You provide the hours and employee changes, and they do the rest. Here are some of the services they offer: a payroll service

Payroll

—Preparation and delivery of payroll checks

tion for signature

and distribution.

Many

to

your loca-

services will mail the

checks for you, laser signed with your signature. As an added security measure,

some companies make direct deposits of net pay

employee bank accounts.

373

to

— Coin Laundries

Filings state

— Road to Financial Independence

— Preparation and

and

filings

of quarterly and year-end federal,

local payroll tax returns with required deposits.

payroll service companies are equipped to file and for

companies required

make

to use the Electronic Federal

Many

deposits

Tax Payment

System (EFTPS). Reports

—Preparation and

terly reports,

year-end reports, and miscellaneous payroll account-

ing reports to

Support

distribution of payroll records, quar-

you or your accountant by mail,

—Larger

fax, or internet.

payroll service companies offer these additional

services:

•

Employee

•

Payroll and employee benefits seminars

•

Employee management seminars

•

Management of escrow accounts

•

Employee manuals

•

Management manuals

•

One-on-one assistance by telephone or email

hiring and screening

for payroll

and employee benefits

THE CASH TALLY SHEET Few

self-service laundry

employees are trained

in sophisticated

accounting procedures. Most are unfamiliar with cash register balancing systems, and

some cannot balance

their

own checkbook

record

provided they even have one.

The Cash Tally Sheet (Figure 21- 1), a daily record of the hours that each employee worked in a given period, was developed to overcome this problem. Employees fill it out at the beginning and end of each shift. You total the hours and record them in the Payroll Record at the end of each pay period.

The Cash Tally Sheet balances

the

money

beginning and end of each employee's work

374

in the

cash register

shift. If errors

are

at the

made

Accounting

CASH TALLY SHEET Name

Time

Date

Billo-

DIMS.

DlMS.

_

Ones

X

1

Ones

X

Twos

X

IL

9

_ —

Twos

X

Fives

X

o

=

Fives

X

n u

— —

Tens

X

on

—

Tens

X

1 I

a>

wennes

1

-

0

—

O

—

n u

— —

on

—

1 I

Twenties

X

Fifties

X

50

=

Fifties

X

50

=

Hundreds

X

100

=

Hundreds

X

100

=

.01

=

i

X

Pennies

X

.01

=

Pennies

X

l>IIUr\lfc;o

K

X

.\JD

nc

_ —

n ic a c INIOMfcJo

M

X

Dimes

X

.10

=

Dimes

X

.10

=

Quarters

X

.25

= -

1

1

r* If