The Smart Approach to Change in the Laundromat Industry
The Smart Approach to Change in the Laundromat Industry
Like most other business sectors, North America's $5 billion+ laundromat industry is facing significant change and upheaval. Critical decisions you make in the coming months could have long-term financial consequences for individual businesses.
As usual, a key part of that decision-making process is driven by changing technologies and consumer preferences.
A prime example would be the growth in popularity and usage of card-operated payment systems.
There are a couple of different models including the straight use of traditional debit or credit cards or pre-loaded loyalty or debit cards.
Customers are attracted to the convenience. Experience also suggests users may be inclined to spend more than cash customers. And they are certainly more flexible than cash in a laundromat scenario because of the ability to charge incremental fees that are not denominated by individual coin values.
Card usage digital data can also enable you to track customers and machine productivity and offer a rewards program, as well as feeding directly into your accounting system.
However, card adoption is not evenly spread across socio-economic groups. Lower-income consumers, who may figure significantly among your customer base, are much more likely to use and prefer cash.
In fact, according to Time magazine, as many as one third of all Americans are "underbanked" -- that's to say, they don’t utilize the full range of banking services, if they even have an account at all.
Of course, that doesn't stop them buying a prepaid debit card yet that's an extra step you'd want to be wary of forcing on your customers.
Furthermore, a card-only business becomes dependent on the underlying technology, with the risk that a system failure could seriously disrupt your business.
One possible solution is a sort of hybrid model, with machines that accept both payment systems. It might cost more to set up but it is by far the most flexible route. A lower-cost-alternative might be to continue with coins but install an ATM and change machines.
The hybrid approach keeps your future options open. Looking to the not-too-distant horizon, I see increasing demand for availability of smartphone payment systems -- and who knows what next?
(Here's a useful article that provides further insight into this issue: http://tinyurl.com/coin-v-card)
Technology is also playing a key role in another critical financial decision faced both by laundromat start-ups and established businesses: purchase and replacement of machines.
Washers and dryers are far more sophisticated than they were even 5 years ago. Today's machines are often more efficient, more water-conservation-directed, and more likely to be multi-tasking.
In the longer term, we'll likely see more complex machines capable of washing, drying and folding. And there's certainly more demand for that type of service, even when it's performed manually, today at the laundromat.
According to the Coin Laundry Association, almost half of all store owners say wash-dry-fold customers have increased in the past year.
It can be a tough call if or when you make your investment. You can't wait for the latest technology because there will always be something new around the corner.
But there are some important steps you can take to ensure prudence in your investment decisions. For example:
- Your Return on Investment (ROI) calculation is the most important consideration. Do this before anything else.
- Profile your customers. This doesn’t have to be a complex or even a formal exercise. Your location, informal chats with customers and your powers of observation should tell you the level of machine sophistication they expect.
- Explore the technology and the options. Don't make decisions based on limited research. Track down and speak to other users about what works best for them.
- In particular, investigate ease of use and reliability of the technology. See if manufacturers or suppliers are prepared to let you trial-use new models.
- Consider the suitability of your location and any physical limitation of your building that might affect the type of machines you buy.
- Review the competition. Is it possible/likely that customers might be attracted to a competitor with more advanced laundry technology or a wider variety of services?
While we're talking about financial decisions, there's one element that you should absolutely not overlook: adequate protection for your investment -- not just the machines but every aspect of your business.
Speaking from experience -- Brooks Waterburn insures more than 1,000 laundromats cost-to-coast -- I can tell you that 75 percent of laundromats we encounter are missing obvious coverages.
In some cases, this can be serious enough to put an owner out of business if they experience an uninsured event.
Yes, you'll have your machines insured, but what about:
- Your building and the cost of constructing it or fitting it out.
- Contents insurance for all your furniture, computers and fittings.
- Liability protection for lawsuits and claims filed against your business.
- Non-owned auto coverage in case an employee has an accident while using their vehicle for your business.
- Workers' Comp.
Those are just a few examples. You might want or need extra protection through an "umbrella" policy that kicks in after your main business liability limits are exceeded. Or you might wish to insure key members of your team or to protect your business against unforeseen disruption -- a flood for instance.
Making an insurance decision and speaking to the right expert who understands your needs is every bit as important as any other financial decision you make for your business, So, make sure you get it right.
The Brooks Waterburn agency are Laundromat insurance experts. We protect over 1,000 locations nationwide and would be glad to help you make sure your investment is completely protected. Give us a call at 888-997-9801 or click here to learn more. If you would like to receive a free white paper at no obligation to you, click here.