Best Bang for your Buck

You have some extra money that you want to invest into your Laundromat.  You have so many options to modernize the laundry store and so many ideas on your “wish-list”.  But you only have a finite amount of cash to invest into the store; so how do you choose?  Which Laundromat improvements will give you the best “Bang for your Buck”?

As an owner with 37 years of experience in the laundry industry, the owner of 4 laundromats and operating a distributorship with over 50 years in business, I have counseled many customers on what improvements will give them the best “return on their investment”.  Many times customers have a good idea as to what their store needs are, but there are other times when customers ask for my opinion on improving their laundromats, thus leaving me to suggest what would be the best income booster for their store.  Since I own several laundromats myself, I often think about what improvements I need to perform in my own stores.  Whenever we look into investing money back into our laundromats, we always have the nagging question; “What will be the best Return on Investment (ROI)”?  Over the years I have also started to ask another important question such as, “What is my return on Customer Satisfaction (RCS)?”  These are 2 different questions based on the economic return and customer satisfaction of the proposed investment. 

Return on Investment (ROI)

The ROI is strictly based on the economic return on an investment.  For example, if I invest $150,000 for new commercial washers in my laundromat:

• What will be my monetary return on my investment? 
• What type of savings will I get by investing in new washers? 
• What might my water & sewer cost savings be per year? 
• How much could I expect to lower my gas consumption when investing in high-speed washer-extractors? 
• What does my cash flow and ROI look like if I borrow money to replace the washers? 
• Should I increase my vend prices with new washers and get a larger return on my investment?

All of these are very important questions and are driven solely by numbers and the expected savings.  Luckily your laundry equipment distributor (Such as HK) can walk you through a pretty accurate analysis of your expected ROI on replacement equipment.

But what about the intangibles that make a laundromat more enjoyable for the customers?  Everyone loves something new, like new washers. 

• How does installing a complete store of new washers affect how customers feel about your store?
• How about new seating units or free internet service for your customers?  
• Do those improvements have any tangible benefit for your laundromat? 

I think we would all agree that anything we can do to improve our customer’s laundry experience would be a good thing.   Anything we can do to make washing clothes less of a chore or a burden would be a huge benefit.  But how much of a benefit do we as small business owners receive from providing a more enjoyable washing environment?  These intangible amenities do not have a numeric ROI, but they are very important components of the modern laundromat and that these improvements benefit our customers.  But how to we measure that improvement or that benefit?  

So how do we start to identify & quantify customer benefits?  If we are trying to make our laundromat the nicest, cleanest, easiest, most pleasant place for our customers to do their laundry chore then our “Objective” is really customer comfort & customer satisfaction.  If we can use customer satisfaction as our goal then we can rate or at least estimate our Return on our Customer Satisfaction (RCS).  

Determining the RCS of an amenity will not be the same from person to person.  For example, if you as a customer do not own a cell phone or a tablet, then free internet is not an important offering to you.  But for someone who has an expensive data plan, free Wi-Fi is a terrific benefit.  So what we have to do is look at all of our customers and rank the benefit and also the percentage of the users.  A small benefit used by everyone may have the same weight as a huge benefit used by only a few customers.  This is much more subjective and less accurate than the traditional numbers of the ROI, but RCS is just, if not more, important. 

Laundromat improvements ranked from the customer’s perspective:

1.  Cosmetic Changes – These would include items such as new flooring, ceiling, and wall treatments (paint, tile, wall paper, RFP, paneling, wainscoting).  Dressing up the walls of the laundromat is a very simple way of changing the appearance for the better.  Some other Laundromat improvements would be new lighting for example.  The lighter the floor color, the better the lighting and “feel for the store”.  Remember to NEVER skimp on lighting fixtures.  If you cannot afford LED then go with the T8 fluorescent lighting fixtures.  No one ever complained about too much light.  All of these are cosmetic changes that dress-up the interior of the laundromat.  The cosmetic changes have a low to medium cost associated with them but they have a high RCS.

2.  Furniture Changes – This could include new folding tables, seating units, interior signage, exterior signage, and laundry carts with hanging racks or even vending machines for detergent, soda or snacks.  All of these are furniture and fixtures that directly interact with your customers.  They are different from the cosmetic changes which are specific to the appearance of the laundromat.  This can also include TV’s or some form of entertainment for your customers.  These are all very noticeable changes to the laundromat that interact directly with your customers.  The furniture changes will have a low cost and a medium level of RCS.  Laundromat customer will notice and appreciate the improvement in your store.

3.  New Commercial Washers – New washers are an immediate improvement to your laundromat.  Upgrading to new washers will also allow you to change the number and the sizes of your washer mix.  New commercial washers will allow you to add more of your most popular machines.  Washers will also have the advantage of offering you savings of almost 50% of your water & sewer costs depending on the model & type of your existing equipment.  If you are replacing all of your old electromechanical washers that have 5 water changes to the newer energy efficient 3 water change washers you could save between 40-50% of your water & sewer costs.   New high-extract washers could also help to save you between 20-30% on your current dryer gas consumption.  The high extraction force means less water in the clothes which means less gas needed to evaporate the water from them.  You also get the customer benefit of the WOW effect when the clothes come out of the washer “almost dry”.  Replacing the older and less efficient washers with new energy efficient models can offer a strong ROI and high RCS benefit.

4.  New Tumble Dryers – New modern commercial dryers are more efficient than your old dryers and therefore can help save on your gas consumption.  There are now larger stack dryers with 45-50lbs of capacity. Stack dryers which allow you to get more drying capacity for your laundromat in a smaller foot-print.  New dryers will relieve any “dryer bottle-neck” you have in your laundromat.  Since new dryers are new, everyone likes “new” stuff.  When purchasing new dryers just beware that there may need to be some infrastructure changes to handle the increased gas required, change in venting and the need for increased make-up air.  New dryers have a moderate ROI and a moderate RCS.

5.  Free Internet – Free Internet is the entertainment in your store without the noise & political problems associated with TV’s.  There are so many free hot spots across the country where most everyone can get internet access.  Make you laundromat the oasis.  Free Internet has a high RCS.

6.  Laundry Card System – There are moderate advantages for a store to be converted to a card operated system from a customer’s perspective.  The ability to eliminate quarters and use currency or Credit/Debit Cards is a great advantage to a segment of the population.  Generations Y & Z seem not to carry cash and use plastic for just about every transaction.  Other customer advantages are the ability to track transactions and the possibility of offering instant refunds makes a card system advantageous. Admitted most of the advantages of the card system benefit the laundromat management of operations, but depending upon your market segment card systems can have a moderate ROI (depending upon how you value the cost of your time) and a moderate RCS.

7.  Hot Water Heating System – This is strictly a “back of house” item and generally will not draw in any new customers.  In the laundromat business we are selling hot water.  If we do not have any hot water to sell then we are reneging on our implied promise to clean clothes.  No hot water is a huge negative unless you try to spin the “green” aspect of your decision.  Frankly, I have never seen this succeed and the only stores that consistently have no hot water are in my opinion on life support anyway.  Go with an energy saving model and tout the “green” (environmental friendly) aspect of your store and save the dollars with your high efficient heater.  A new water heater has ROI but limited RCS.

8.  Solar – See above for water heaters.  The only difference is that you might be able to get a little more traction on being “Green”.  This is an expensive back of store investment and has some ROI and little or none RCS.

Below is a chart showing the RCS (return on customer satisfaction), relative costs of the Laundromat improvement and ROI (return on investment). 

By reviewing this chart, you can get an idea of the Laundromat improvements that will yield a high customer service benefit and ones that have a low or no customer benefit.  If we were to rank these improvements just on customer satisfaction then the list would have the Internet as #1 and Solar as the least customer benefit.  If we rank them on a monetary value (ROI) then we would have New Washers as #1 and Cosmetic changes as the least value.

But if we assign a simple numeric ranking to high, med, low & none (3 to 0) now we can combine the RCS and ROI to provide a better “Bang for our Buck” (BFTB) ranking.  If we now look at our BFTB we have washer replacement as #1 followed by dryers as #2 and then the 3 intangibles being Internet, Furniture, & Cosmetic changes.  Then we are followed by a card system, water heater and lastly by solar.          

By using this method or a similar matrix you can determine what will give your laundromat the best possible return on your investment.  In 2017, water & sewer utilities have become the highest costing utility in many of our laundromats.  We are in a very unique period in time where if you still are operating fixed timer washers, the possible return on replacing these machines could be huge both in true ROI but also in a high level of customer satisfaction.  This is a true win-win scenario.  You the laundry store owner gets the ability to easily raise your vend prices, you save substantially on your water & sewer bill, you get brand new machines with a brand new parts & labor warranty, you get a 10 year warranty on the seals & bearings, you get a depreciation tax right-off and your customers get new washers.  This really is a win-win. 

This is just one example, and washers may not always be the top ranking.  If you already operate micro-processor controlled washers and/or your water, sewer or gas rates are dirty cheap then the ROI would not nearly be as great.   New commercial washers would possibly drop in overall ranking from #1 down past several other improvements.  The good news is that even from one model to the next (roughly every 10 years) the washers have noticeable efficiency increases with the newer models, so replacing your washers would be expensive, but not a dud without any return. 

Remember that your laundry equipment distributor should act as your mentor and business partner.  A distributor with over 10 years of experience in the business should have the expertise to assist, guide and give you answers to important questions.  Only with the best information can you be expected to make the most intelligent and educated decision possible.  The wisest and most savvy (and successful!) investors will take full advantage of their distributor’s knowledge and relationship.