January 31, 2019
Written by Bob Nieman, CLA Member
Are You Still Single?
Industry Experts and Veteran Laundry Operators Discuss the Continued Growth of the Multi-Store Ownership Model
Michael Addison purchased his first laundromat in New York in 2016 – and he has opened a new location every year since.
In southern California, owner Art Jaeger entered the vended laundry industry by building two stores simultaneously.
And, in Houston, multi-store operator Rob Maes worked out a deal for his second laundry while still negotiating the lease terms of his first store.
While not commonplace, these instances probably aren’t as unusual as they may first appear. And, according to industry experts, the number of multi-laundry owners in the U.S. continues to climb each year.
Although the majority of laundry owners are still single-store operators, could there come a day when the single-store model becomes the exception, rather the rule?
“I don’t feel that the single-store owner is becoming the exception,” said Marc Katzman of Metropolitan Laundry Machinery Sales in Jamaica, N.Y. “However, there is an increase in multi-store ownership. We’re seeing more and more owners of larger stores expanding into additional locations.”
“There are definitely more multi-store owners today than there were in the past,” agreed Bryan Maxwell of Western State Design in Hayward, Calif. “And I feel the number of multi-store owners is growing for many reasons: (1) this is a great industry that can be very profitable and literally change the lives of people and their families, (2) we are attracting more sophisticated investors that see the advantages of our industry, and (3) new technology is providing owners with the freedom to remotely manage their laundries and solve customer problems without leaving their couch or their kid’s soccer game.”
“The single-store owner stopped being ‘the rule’ some time ago,” stated Brian Grell of Eastern Funding in New York City. “Although it’s not yet the exception, the vibrancy of the laundry industry and the top operators who have figured how to replicate great stores have made the single-store owner a shrinking set. The fact is, once a new investor to the industry realizes that delivering a great customer experience and taking advantage of the new machines can deliver bigger profits, they simply want to take it to the next level.”
Russ Arbuckle of Wholesale Commercial Laundry Equipment SE in Southside, Ala., suggested that the predominant type of laundry investor has changed over the years, which partially explains the trend toward more multi-store operators.
“Many new investors coming into the industry are former corporate executives and highly business-savvy individuals who are looking to match or exceed their former incomes, without the daily stress of corporate life,” Arbuckle explained. “Most of these businesspeople are looking at the ability to greatly increase their income by running multiple stores, while a significant number of today’s single-store owners operate them as ‘mom-and-pop’ type operations.”
“In our area, we’re seeing a steady balance of both single-store and multi-store ownership,” said Alex Kane of Equipment Marketers in Cherry Hill, N.J. “We find that, in many cases, plans for multi-store ownership begin before owners open their first store. Once the business opens its doors, many owners grasp the benefits of multi-store ownership and start thinking about how and where they can open their next laundry. Some owners follow through and open additional locations and some do not – but the desire to open another store is almost always there.”
Despite the multi-store trend, Karl Hinrichs of HK Laundry in Armonk, N.Y., is quick to point out that single-store owners still account for the vast majority of the vended laundry industry.
“Before a multi-store owner can become a multi-store owner, he or she has to start with a single store,” Hinrichs said. “The path to multi-store ownership starts with a single store, where owners learn the business. As they gain experience and if laundromats fit into their lifestyle, then they will start to look around for a second laundry.”
From his experience, Hinrichs said it typically takes about two or three years for a single-store operator to become a multi-store owner. That time period, he noted, is required to get comfortable with the business and also to become profitable and develop a positive cash flow.
Technology: Changing the Game
Clearly, the development of industry technology has been a tremendous game-changer for the vended laundry industry. Although owners of unattended stores have always benefitted from automatic door locks and having their lights on timers, today entire stores are now being networked, and the adoption of card systems has reduced the physical limitations of operating multiple stores.
“With coin-operated laundries, there was a physical and time limitation on how many stores you could possibly operate,” Hinrichs explained. “Even with a full-time service technician, coin-operated stores have to be collected at least twice a week, and the changers filled and maintained. In a majority of cases, the owner performs these tasks, because money is money and it can quickly disappear if not properly monitored.
“In my experience, 16 to 20 laundromats is the maximum number of coin-operated laundries that can be collected and managed by one person. In one specific case, the owner had a modified van with a coin counter, and that owner would count and create bags of quarters for the changers, while a separate driver chauffeured him around to his laundromats. Collecting, counting and filling changers is what this multi-store owner did every four days.”
An owner’s physical presence at his or her laundry location is definitely one of the main obstacles technology has helped solve.
“Monitoring systems allow the owner to get a quick snapshot of what machines are working and which size and type of machines are making the most money,” Kane said. “Then, if the owner wants to, he or she can dive deeper into the system for more detailed information. Alternative payment systems like card systems and credit card acceptance have reduced the need for frequent collections. And camera systems allow the owner to see that the location is clean and safe for customers.”
In addition to card systems and hybrid card acceptance, the newest technologies feature app-based payment systems and manufacturer-installed wireless network boards, Katzman noted, which give store owners the ability to remotely monitor their stores, see performance data, start machines remotely, view error logs, adjust water levels and vend prices, receive service alerts by text and email, and more. These technologies, combined with digital surveillance camera systems, provide store owners with powerful information at their fingertips.
Also, the ability to use technology to run storewide specials in multiple locations has enabled stronger marketing and promotional efforts, which in the past were deemed too difficult and not cost-effective.
“Technology has been the rocket fuel boosting multi-store operations,” Grell suggested.
The Retool Trend and Other Factors
Beyond technology, the industry’s store retooling trend in recent years also has encouraged many laundry owners to grow their portfolios.
“Seeing an old, rundown store in a market often times encourages competition,” explained Ted Ristaino of Yankee Equipment Systems, based in Barrington, N.H. “However, these days, it often encourages current owners to try to buy these sites – if the demographics are good – because they see the potential of retooling. Adding to the attraction is the fact that these locations are already built out, so the turnaround time is much faster than with a new location.”
Certainly, in areas where it’s been challenging to find additional locations that are suitable for a vended laundry, a proven option has been to purchase existing stores in need of a fresh look and an equipment retool, according to Katzman. “The utilities and mechanicals are already present, and the time it takes to complete the project is considerably less than starting from scratch,” he said.
There are investors out there looking for old stores in need of retooling, noted multi-store owner Sam Szteinbaum. “Once these types of investors get a store and learn the business, they are more willing to do additional ones,” he said. “That’s been our case – where we better understand what’s needed to do it right, and have the capital to retool an older store to make it best in class.”
“It’s simple,” said Grell, who has become a vocal proponent of laundromat retools, thanks to the popular “ZombieMat” seminars he has presented across the country. “A multi-store owner is typically an astute investor. We have seen that retooling with the latest advanced equipment, along with other improvements, can significantly increase a store’s valuation. An operator who has become well-versed in the effects of retooling will retool multiple stores and sell some for higher multiples than they purchased them for.
“Again, the advances in new machines being connected and more efficient, as well as requiring less maintenance, have made it possible for an owner to efficiently manage them across multiple locations. When operators see the efficiency they gain in terms of their time and ease of operation with a retooled store, it often opens them up to acquiring and retooling more ‘ZombieMats.’”
Another factor likely playing into the steady growth of multi-store ownership is the fact that such operators can benefit from virtually every aspect of the business, according to Kane.
“With several stores, the owner can have a larger inventory of equipment parts available for repairs,” he said. “And learning simple repairs and maintenance on equipment allows the owner to keep the machines running at all times. Marketing expertise can be applied across multiple stores – learning what works or what doesn’t work can be applied to all locations once it is proven. Learning how to care for your customers can be refined and documented to apply to all locations. And, if a card system is used, the owner can buy cards in bulk and allow the customer the flexibility to use their same card at multiple locations.”
Multi-store owners have always enjoyed the benefit of economies of scale. No doubt, there are big benefits for establishing systems to operate laundromats. These systems of operations include how to deal with employees, hiring and firing, expectations, setting work standards, handling and processing money, record keeping, and customer relations.
“Once you gain the knowledge of equipment repair, it is immediately applicable to more stores, and more washers and dryers,” Hinrichs noted. “It’s even better if it the stores have the same brand of machines. In such cases, going from a single store to multiple laundromats came be rather easy and easily scalable.”
To Ristaino, there are three key factors leading owners down the multi-store path:
Money: “For the last several years, ROI on vended laundries has increased. Lower gas costs have coupled with low water consumption, thanks to high-extract washers, which have greatly enhanced the bottom line of many stores in the industry. In addition, progressive owners who have reequipped during this period have raised vend prices. So, the combination of higher prices and lower variable costs result in a higher ROI. This dynamic has encouraged experienced operators to look for other opportunities in the industry.
“Some owners look to control the market in a certain geographic area. Others are looking beyond their immediate market to capitalize on what they see as underserved markets, maybe one or two hours away.”
Financing: “Financing is still abundantly available for qualified buyers at rates that, although rising, remain attractive. Also, many finance companies offer some type of acquisition financing, which eases the purchasing process.”
Time: “The laundry industry is graying, in some respects. As long-term industry veterans consider how to cash out, younger store owners are looking to expand their operations. There are some synergies in the industry’s demographics. Also, with a strong economy, many have the philosophy of ‘If not now, when?’”
When One Store is Enough
Of course, single-store owners remain a significant part of the self-service laundry industry, Ristaino noted. Although multi-store operators are a growing segment of the business, there are still many more successful single-store owners, operating both attended and unattended stores.
“There is a trend toward multi-store ownership and a regional consolidation to an extent,” said Sergey Paramonov, who owns three laundries in northern California. “But smaller, single laundries can continue to be profitable. They may not support the owner 100 percent, but they can provide a good supplemental income. Almost every laundry continues to be profitable, and it’s just a matter of the total amount of income it generates.”
“Some single-store owners have full-time jobs outside of the laundry industry and don’t have the time to devote to a multi-store operation,” Ristaino offered. “In some cases, a larger, single store can produce enough income to meet the financial needs of the owner and his or her family. We also have several single-store operators who run stores in shopping centers that they own, thus minimizing management time.”
“There will always be single-store owners,” Maxwell added. “While some owners are looking to replace their 9-5 income, others simply are looking for supplemental income. The single-store model is great for someone who enjoys his or her current vocation, or is retired and doesn’t want to live on a fixed retirement income. For the most part, the time requirement for the owner is flexible, and the added income allows these owners to achieve their financial goals.”
Building a Laundry Chain
“In short, yes, the single-store model does work,” Grell admitted. “But the very ambitious owners who understand how to efficiently run their laundries will grow beyond the single-store enterprise.”
This month, we’ve asked a few of those more “ambitious” owners to share their multi-store stories:
Simi Valley Laundry Center
Beverly Hills, Calif.
Number of Laundries: I currently have four laundries, plus my laundry delivery operation, which is treated as a separate business. The fourth store was opened in April 2018.Why Multi-Store Ownership? I did substantial research before entering the industry – this included working with distributors, visiting existing stores and stores for sale, reading many publications and books, joining the Coin Laundry Association, talking with industry veterans, and attending the Clean Show. A major part of my due diligence was developing pro forma financial statements and cash flows. From these analyses, I determined that, to meet my financial objectives, multi-store ownership would be necessary.From the beginning, operating in a non-coin environment was crucial to me. I wouldn’t be able to accomplish all of my objectives if I had to deal with coin revenue. I’ve also always had full-store surveillance cameras that could be remotely accessed – and the remote access that was available by running a card-operated store. Additionally, I installed automated door locks and burglar alarms that set automatically.The Multi-Store Trend: I think more investors are now looking at store ownership as a full-time occupation and are willing to devote their entire time to it. The downsizing of corporations and the increase in entrepreneurial spirit also has furthered the idea of “owning your own business.” Larger stores, which have become “show pieces,” also have helped everyone’s perception of what owning a laundromat can be and have made entry more comfortable for many former corporate executives.Challenges: There are very few scaling benefits attributable to owning multiple stores. Other than purchasing supplies and making consolidated deposits, there are almost no workload benefits achieved by multi-store ownership. If it takes you 14 hours a week to operate a single store, it will take you double that for two, and so on. At the point where you’re earning enough revenue from the stores, you can hire managers, repair people and other service personnel to somewhat ease your time burden.
The Single-Store Model: Personally, I find it hard to see why owners would want to own only a single store, especially if they enjoy the business and it has been fruitful to them.
Of course, it completely depends on an individual’s own preferences, plans and location. For instance, in a rural or sparsely populated area, one store may be all that’s needed and all that really makes sense. Or perhaps an owner maintains other streams of income, with a laundromat being just part of an overall portfolio.
Fountain Square Laundry
New Windsor, N.Y.
Number of Laundries: I currently own three laundromats.Why Multi-Store Ownership? I was working when I purchased my first location. I wanted to have more free time for my children and family, and the best alternative was to find another laundry location to supplement my income. Because I operated a single laundry for about a year before opening the next one, I was able to develop a template, which I applied to that second store. You can apply similar management skills across all locations.Technology: Technology has been my saving grace. I have a card system at all of the locations, so I’m able to monitor all of the stores remotely, as well as assist customers remotely. Plus, I don’t have to tie up too much money in the change machines. Due to today’s technology, operating multiple locations has been a whole lot easier.The Multi-Store Trend: In addition to multiple streams of income, management is almost easier, because I can apply the same concepts across the board. Also, since the machines are all about the same, fixing equipment and resolving minor issues has been easier. I perform the same preventive maintenance at all of my locations and implement the same cleaning schedules. I’m just replicating procedures.
The Single-Store Model: Single-store ownership may be decreasing due to the fact that the experience an owner gains in operating an initial laundry is easily transferable to the next location. Also, with today’s remote-monitoring technology, owners don’t need to be physically present at all of their locations all the time.
The single-store model definitely works, if the location is large enough and can generate enough income, most likely including wash-dry-fold and possibly drop-off drycleaning.
Number of Laundries: We have six locations in the San Francisco Bay area. We purchased our first location in July 2003.Why Multi-Store Ownership? We purchased our first laundry after I got laid off from work. My wife and I realized that working for someone else was too risky. We bought our first store to be our safety net. However, once it was paid off, my wife was able to quit her job, as the income from the laundromat replaced her salary. Then it dawned on us that this would be our vehicle to becoming entrepreneurs.In 2006, we purchased two more stores, and by the end of 2008, I was able to exit corporate America for good. Since then, our income has continued to grow as we have added more stores.Deciding on a single store versus multiple laundries depends on multiple factors – geographic location, available time to run a business, amount of capital available, industry knowledge, required net income and so on. For example, in some areas of the country, mega-stores that are more than 5,000 square feet are either uncommon or impractical. In such cases, to meet your required income level, you are forced to own multiple locations. Likewise, if your available investment capital when just starting out is small, it would be hard to build or buy a giant store. So, you start out small with your first store, learn the ropes and expand from there. On the other hand, if you are a wealthy entrepreneur and you have a lot of business experience and are in a major metro, one enormous store might fit your needs.With a single store, you tend to have to do everything yourself. If the income is small, it doesn’t make sense to hire people to help. However, with more locations and increased income, you can streamline the process of hiring and shift staffing needs to other locations when the need arises. You can also afford to hire more help, such as maintenance workers and supervisors.
In our case, we’re still expanding while we can. Since we have staffing and can always hire more to support the expansion, we are currently aiming for 10 by the end of 2019.
Technology: I came from the world of high tech, working as an engineer in Silicon Valley. For me, the more tech the better when it comes to laundry equipment. When we first started out, we had to count each machine’s revenue by hand on the kitchen counter – fun for a while, but not effective use of our time. Today, we can pull combined revenue reports for all of the stores online instantly, schedule price adjustments and specials into the future, and even start and stop equipment from my phone. The system sends me alerts when machines break down, are getting full or need maintenance. This allows me, with the right staff in place, to literally manage my businesses from anywhere, even a cruise ship in the middle of the ocean.
The Multi-Store Trend: I believe that the migration toward multi-store ownership has a lot to do with the sophistication of today’s owners. In the past, many owners ran mom-and-pop operations, where the owners would literally work in the business as their full-time jobs. This is very hard to scale and traps the owner into a job. Today’s entrepreneurs are more interested in “time freedom.” By developing systems to allow them to do more in less time, they have more balance in their lives and are not slaves to their businesses.
Challenges: One of the biggest challenges is staffing, especially when the unemployment rate is as low as it is now. Finding and keeping good employees is key and takes a good team. Distance is also a challenge, especially if you want, as an owner, to still perform the collections. Control is also a huge challenge. Control is a trap, which traps you into having a job. Because to have control, you must exercise that control, which takes time and energy. At some point, you have to make the decision of how much control you want to keep over the operations of your business. To be a big business, you must give up control, which is extremely hard for some to accept. I struggle with this one a lot, which is why I only have six stores instead of 60.
The Single-Store Model: One of the beautiful things about this business is that it doesn’t take that much business skill to own and run a successful laundromat. So, many people who are new to business ownership, with limited skills, can own a business that will meet their needs. Additionally, this industry attracts many investors who want to diversify their business portfolios, but are not interested in creating a multi-store chain.
There are many reasons why someone would only want a single store. Sometimes, one is all you need or all you want to handle. What is great about this business is that, if your needs or desires change, you can always add more.
Number of Laundries: We have three laundries, and we’re building the fourth, which will be open soon.Why Multi-Store Ownership? We opened two at the same time. I wish I could brag and tell you that I was some master negotiator and had some great scheme, but I didn’t.When negotiating the lease for the first location, I simply asked the landlord if he had any other potential locations – and, as a matter of fact, he had one opening up in the next two months. It was an even better location than the first one, so I really lucked into it. And, because it was the same landlord, I was able to use the same lease, which saved on administrative and legal costs.Most people in this business didn’t wake up and say, “I want to own 10 laundries.” Most owners have various objectives – financial, personal and so on. These goals will dictate how many stores they own.I’m 56. I was 45 when I got into the business, and I wanted to have a certain amount of money for retirement. I had financial goals. For me to achieve those goals, it was clear that I wasn’t going to be able to do it with one store.
However, every time I go on vacation, I always visit the laundries in the towns we’re staying in – because my dream is to retire with just one store, located wherever I eventually choose to retire. In that case, one store will make sense, because I just need one to keep me busy. My goals will have changed at that point.
Technology: I’ve been in the business for 10 years, and it has changed tremendously over that time, especially with alternative payment methods and cloud-based computing. The cloud was more of a concept when I started. Today, it’s a great vehicle for small-business owners to manage multiple locations.
For me, it all has to be cloud-based, whether it’s the accounting software, the POS system, my thermostats, my vehicles and so on.
The Multi-Store Trend: The type of owner has changed over time. People getting into the business today are more entrepreneurially savvy, so they’re more inclined, once they’ve learned how to operate one or two stores, to leverage that knowledge and open future locations.
Laundry owners now are no longer purely location-based. In the past, if you had a really good location, you only needed one good laundry to be successful. It was a “build it and they will come” type of mentality. That’s changed. Due to technology, like Google Maps, a customer might drive an extra mile or two to use a better laundry.
To me, owning multiple laundries is actually less risky than owning one. You’re able to diversify your risk over multiple locations. It’s like the stock market – most people don’t buy just one stock, they buy a portfolio of stocks to diversify their risk.
If you have a one-mile radius “pie,” and you own that one-mile area, you’re doing all right. But, as soon as a second competitor moves in, you’ve lost half of that potential market. With multiple locations, even if that happens to one of your locations, you still have another two or three other laundries to help supplement your income.
The Single-Store Model: I would argue that – between technology and all of the people now getting into the business – it’s going to become more of a challenge to run just one location-based business and be successful.
If you’re going to diversify your risk, then you’re probably going to have to have more than one location. After all, if you build a really good laundry in a great location, you’re likely going to end up with two or three competitors in no time. Everyone is going to see how successful your business is, and they’re going to encroach on you.
To me, unless you’re in a rural market with no competition, the location-based model is a fallacy. Going forward, the business is going to become less of a location-based business, and to diversify your risk, you’re going to have to own multiple locations to be successful.
Number of Laundries: I currently own five stores in the Delaware Valley area, between Pennsylvania and New Jersey. They are within a half-hour travel time of one another. They range in size from 2,000 to 6,000 square feet.Why Multi-Store Ownership? I entered the industry in 1989 with my first store, while running a mid-sized construction company. We built stores for other owners, and I tried my hand at it. I enjoyed the lack of pressure it offered, when compared to the construction trades. Four years later, I built my second store.I was attracted to multi-store ownership due to the economies of scale. Having several stores enables you to purchase some supplies and services at better rates.Early on, we added stores to build a brand and to expand our market share. Today, while that’s still true, we also look to protect our territory from “illogical invasion” by the misguided or overzealous. Acquiring several laundries in a local trading area can help to mitigate this issue.Technology: With the availability of cameras, card systems and point of sale hardware, it’s much easier to manage several stores. Technology has shortened the distance between stores, and offers access to see what’s happening at your stores in real time. This has saved a lot of time and a lot of fuel.
Small items like an internet timeclock will enable you to see your employees arrive and leave. A picture capture can prevent others from clocking in or out on their co-workers’ behalf. And an email or SMS notification will assure you that your store is being attended.
Although all of these technological wonders are quite helpful, the best fertilizer is still the farmer’s footsteps.
Single-Store Model vs. Multi-Store Operation? Whether you remain with a single store or migrate to several depends upon a number of factors. If you decide that this is a retirement occupation to “keep you busy,” one location will be a good fit. The same is true if you have a primary job, and you plan to supplement your income with your laundromat revenue. However, if you’ve left a high-flying Wall Street position and this is a new “career,” you may be a bit more aggressive in your ownership intentions.
If there is a tipping point, it revolves around how well your first store operates in your absence. If you are the day-to-day manager, it will be difficult to leave and manage another store. If you have difficulties handing over the store’s “steering wheel,” you likely will find yourself in a single-seater coupe, not a motor pool. You need to have Store No. 1 running smoothly before you can go searching for a second one.
Also, standardization is a key, if you’re considering a multi-store operation. Visits to McDonald’s in Rome, N.Y., or Rome, Italy, will each feature the fries on the left when you enter – I would guess that’s not by chance.
As for the trend toward multiple-store ownership, it’s a phenomenon that is a few years behind many business models, as often the laundry industry finds itself. Hardware stores became Home Depot, small-town pharmacies became CVS, and the corner store evolved into Publix. The American consumer wants it all – at their speed and at their convenience. The business that does it best is the industry leader.
The small bookstore still exists in the shadow of Amazon, as does the 12-washer laundromat – both at a compromised bottom line. The trend toward multiple stores, all branded the same and run efficiently, is the successful model. However, the single store, if operated well, will continue to exist, regardless of its multi-store neighbor.
Our industry is resistant to many market pressures with which other businesses need to be concerned. Mortgage rates and the Dow are minor distractions for a well-run laundry. An added insulation to business fluctuations may be multiple-store ownership, if you have the interest and ability to relinquish a little control.