This article was written by Bob Nieman for Planet Laundry Magazine and is republished here with their permission.
Recapping the Issues That Defined the Year – And Looking Ahead to 2016
In odd-numbered years, typically nothing that occurs in the self-service laundry industry can steal the spotlight from the Clean Show. And 2015 – with the industry’s trade show and convention returning to Atlanta this past spring after a nearly 30-year absence – was no exception.
However, Clean 2015 wasn’t the only event to grab headlines this year, as the laundry industry and today’s store operators continue to grow and evolve in an effort to meet the needs of a shifting marketplace and changing customer base.
“As always, it’s been a busy year for the Coin Laundry Association and the self-service laundry industry,” said CLA President and CEO Brian Wallace. “If I had to boil it down to a few highlights, I would include the repeal of the sales tax in Iowa, the launch of LaundryCares’ ‘Wash Time is Talk Time’ initiative and, of course, Clean 2015 in Atlanta.”
Apparently, the industry’s biennial trade show was on the highlight reels of more than a few industry insiders.
“Expectations for the 2015 Clean Show were totally and completely shattered,” noted Kathryn Rowen, North American sales manager for Huebsch. “It was so much more well- attended than we had anticipated, and those who attended were engaged and eager to learn. It was inspiring to witness such interest and dedication in attendees to improve their laundry businesses.”
“I’ve attended Clean since 1987, and I don’t remember a show with so many attendees who were seriously looking to add, expand or build new stores,” said Russ Arbuckle of Wholesale Commercial Laundry Equipment SE, based in Southside, Ala. “The overall buzz was excellent.”
Joel Jorgensen, vice president of sales and customer services for Continental Girbau, concurred that this past spring’s trade show in Atlanta was “the best Clean Show in years, maybe ever,” adding that it also mirrored “a bustling year in the vended segment in general.”
“We’ve enjoyed significant activity in replacement equipment, as well as full store refits of existing laundries and the development of new laundries,” Jorgensen continued. “It was a year like none other in memory as far as equipment sales volume and store business success.”
Due to the healthy economy, banks loosened their previously strict borrowing requirements; as a result, potential owners found it easier to borrow money and, in turn, open new stores, according to Chris Brick, regional sales manager for Maytag Commercial Laundry.
“Stores were remodeled and upgraded to save on utilities and increase capacity,” observed Ted Ristaino of Yankee Equipment, located in Barrington, N.H. “These actions were accompanied by increased vend prices. In addition, cost control of utilities, which was aided by lower LP gas prices and water-efficient washers, continued to be well managed by involved owners.”
“Finally, the big-box stores that were built in the late ’90s are beginning to retool at a greater frequency, as the push to modernize and become more efficient is necessary,” added Brian Grell of Eastern Funding.
For John Olsen, vice president of vended products for Laundrylux, the highlights of the 2015 business year included bigger stores being built and operated at peak performance, along with the “customer experience” rising to the top of many owners’ priority lists. Olsen pointed to such store amenities as free WiFi and text messaging systems as prime examples of this enhanced customer-driven laundry model.
Clearly, the legislative highlight of the year came when Iowa Gov. Terry Branstad signed a bill – sponsored by the Iowa Self- Service Laundry Association – that repealed the sales tax on self-service laundries in that state.
Before the passage of this bill, Iowa laundry owners had been paying nearly 9 percent of their gross sales each year to satisfy this tax. The governor’s signature capped off one of the largest legislative wins for the industry in years.
The tax bill passed in the Iowa Senate 50-0, after sailing through the House of Representatives by a wide 76-14 margin.
“The whole process was a bit of a blur, and it took a ton of work from many more than just me,” noted ISSLA President Daryl Johnson. “We had some amazing owners spending a ton of time at the Capitol and digging deep to fund the fight.”
“The volunteers at the ISSLA really achieved the impossible by repealing the sales tax on self-service laundries,” Wallace said. “I’m still shocked that this group was able to band together and make this legislative achievement happen.”
From a pure advocacy standpoint, the recent partnership between the CLA, Too Small to Fail and the Clinton Global Initiative stands as one of the industry’s brightest moments of the year.
The CLA’s LaundryCares Foundation was instrumental in launching this first national effort to provide early learning resources within self-service laundries – thus, aiming to reach parents in low-income communities nationwide. The program – dubbed “Wash Time is Talk Time” – kicked off this fall with free laundry events at Advantage Laundry and A1 Laundry in Oakland, and included resources for young children and families to engage in early learning and development activities.
Moving forward, the CLA will deploy educational resources to 5,000 laundries in underserved communities across the U.S. What’s more, the initial events in Oakland will be followed by more than 50 free laundry events nationwide, hosted by the Laundry Project, through 2016.
Facing Our Challenges
Of course, every year offers its own business challenges. And, when looking back on 2015, three of the biggest hurdles and looming obstacles to industry growth were a continued steady increase in water and sewer rates, a nationwide push to raise the minimum wage, and the constant lurking threat to the self-service laundry sales tax exemption.
“The rising cost of water and sewer fees are an ongoing challenge that shows no sign of abating,” Ristaino said. “In addition, the scarcity of water in the West continues to be a challenge.”
“Sewer costs are a real problem in most of our larger cities,” echoed Mo-Kan CLA President Bob Meuschke. “Because of the aging infrastructure and the cities’ lack of planning for replacements, the rates have increased severely for the last three years, and the municipalities claim those costs will need to go even higher.”
In fact, water and sewer costs will soon be the most costly utility for a majority of all laundry owners, according to Karl Hinrichs of HK Laundry Equipment in Armonk, N.Y.
“The foresighted owners with profitable stores will lead the rapid conversion from their old – still good – time-controlled washers to the new modern digitally controlled washers,” Hinrichs predicted. “This will be a win-win for the industry and the environment.”
As far as the drought conditions that have pervaded much of the West and Southwest, northern California laundry owner Ron Kelley admitted that water has been the hot topic among his peers this past year. However, his business, thus far, has been spared.
“Fortunately, for those of us in Santa Clara County, depending on the water provider, rate increases were either very small or non-existent, and no mandatory rationing occurred,” Kelley reported. “Other areas did see price increases, but those can be viewed as the perfect opportunity to increase vend prices and weed out competition that’s charging bargain basement prices.”
In addition, the “Fight for $15” campaign, which was spearheaded by fast-food employees and other lower paid service workers, trained the national media spotlight on efforts to raise the minimum wage.
“The biggest challenge this year was the continued push for a significantly higher minimum wage,” said Illinois Coin Laundry Association President Paul Hansen. “In Chicago, we were just handed a 20 percent increase in wages, bringing the hourly amount to $10 from $8.25. In the next few years, the wage will continue to rise until it reaches $13 an hour.”
“The city of Minneapolis has raised its minimum wage and plans to be very aggressive on increases, with a plan to have a minimum wage of $12 in a few years,” Johnson added. “This has caused us to rethink our staffing, and to look to automate a large portion of our customer service and attendant services.”
Despite the historic tax victory for the laundry industry in Iowa, store owners across the country need to remain vigilant against future sales tax threats, Delaware Valley Coin Laundry Association President Brian Holland explained.
“In our area, deteriorating infrastructures, a failing school system and skyrocketing budgets have created greater pressures to generate additional state revenues,” Holland stated. “These pressures have forced many state governments to reconsider the tax-exempt status for many services, including laundry and drycleaning. This is exactly the case in Pennsylvania, where newly elected Governor Tom Wolf has communicated his intent to eliminate tax exemptions in many areas.
“Unfortunately, our current list of tax exemptions is a hodge-podge collection of unrelated interests – some worthy and some not so much,” he continued. “Eliminating exemptions for laundry is at best short-sighted, punitive for those who can afford it least, intrinsically problematic and completely irrational.
“The proposed laundry tax in Pennsylvania could ultimately cost individual store owners nearly 7 percent of their gross revenue. In my opinion, this is the single greatest threat we face in the near term. Arguably, it could have an even greater overall economic impact than a minimum wage increase. Further, it is a virtual certainty that lost exemptions in Pennsylvania will lead to similar legislation in neighboring states. This issue looms large and potentially threatens our entire industry, not just owners in Pennsylvania.”
Although laundry owners welcomed a re-energized economy in 2015, this too presented its own set of challenges.
“As the economy has improved, landlords are demanding higher rents again and being more stringent on their negotiations,” said Jeff Harvey, brand manager for Speed
Queen Financial Services. “From a lender’s perspective, this can put constraints on the amount that can be financed. It’s important to get your lender involved early in the process, as there are usually lender documents that also need to be signed by the landlord, and the best time to do this is when you have leverage with the landlord before you sign the lease.”
Massachusetts laundry owner Jim Whitmore added that the healthier economy in the Northeast has caused the pool of available quality employees to dwindle, making it tougher than ever to fill openings for attendant positions.
Also this year, the card payment industry began the enormous conversion to EMV/pin-and-chip card technology, which eventually will place the burden on retailers who accept credit and debit cards to offer updated readers. This likely will be more of an industry challenge heading into 2016.
“The new regulations that went into effect in October are very complicated and require us to offer a new card reader on our systems,” said Charlie Pasquale, who is the founder and CEO of BCC Payments, LLC.
Among some of the other hurdles many owners faced this year were rising impact fees, increasingly arduous government and municipal regulations, higher buildout costs in several markets, and the pressure of ensuring adherence to the Affordable Care Act.
Trending in 2015
Trending stronger than ever this year was the move toward alternative payment systems, which just continues to accelerate. This trend was boosted further by Clean 2015, where a vast array of solutions was on display for store operators.
“It’s clear to me that laundry owners want to offer payment options beyond quarters, and this trend will continue,” Wallace said.
“Even though payment systems have been around for a while, the past few years have seen vend price increases to cover rising business expenses and, therefore, the quarter payment system has outlived its effectiveness,” explained Ohio Coin Laundry Association President Duane King. “As a result, owners are converting to various systems, such as quarter and dollar coins, dollar coins only, hybrid card and coin systems, credit card acceptance, or a combination of systems.”
Pasquale added that today’s payment systems are “not just about accepting credit cards anymore – they’re about the extra features, like drop-off management, remote management, loyalty programs and, of course, mobile payments.”
Jorgensen noted the continuation of two additional, well established industry trends in 2015 – the installation of larger equipment and the movement toward a full-service business model.
“Turn ratios continue to grow for machines of 40-pound capacity and greater,” he said. “Additionally, other laundry services, including wash-dry-fold and commercial business, continue to grow; utilizing capacities of laundries beyond self-service volume is on the rise. We sold a lot of ironers to laundries for commercial work this year.”
On the marketing side of the business, many laundry owners reported that the trend continues to move toward social media such as Facebook, Google Business, Twitter, Yelp and so on.
“I can’t imagine anyone still using the Yellow Pages for advertising, and newspapers have a very limited return on investment,” King explained. “With social media, you can do a lot of self-promotion for free, or you can spend a little to promote your sites; however, the basic need for any online presence is to let potential new customers know where you are located, what services you provide and your hours of operation. In addition, one of the most important aspects of social media are online reviews. Even if you don’t claim any of your store’s online pages, your business will still receive good and bad reviews online. So, you need to claim those pages and respond to your reviews to protect your laundry’s brand image.”
With another growing trend, Western State Design’s Bryan Maxwell has observed more and more laundry owners gravitating toward remote management as the preferred method of operating their laundry businesses.
“Many of my store owners have full-time jobs, and their laundromats are investments,” Maxwell said. “With the economy growing again, their full-time jobs demand more of their time, and their growing laundry businesses also demand more of their time. Carving out time for their professions, their laundries and their lives can be a real challenge.”
Today’s remote management programs and networks track revenues, store volume and so on. But, more importantly, according to Maxwell, they allow owners to solve problems instantly while at their 9-to-5 jobs or watching their kids’ soccer matches – and that ability to solve problems without going in to the store dramatically improves the quality of their lives.
Of course, this trend also includes the increased use of dollar coin and credit card acceptors – because less quarters mean less collection time at the laundry. In addition, Maxwell suggested that equipment replacement is growing in many markets due to this remote management trend.
“Busy store owners can’t afford to have old equipment break down,” he said. “It’s not just because of the cost of repairs and lost revenue but because equipment that breaks down demands more of the owner’s time, time they don’t have. New equipment is more dependable, generates more revenue and improves the quality of life of the owner.”
Perhaps one of the biggest new trends of the year, according to Kelley, was the explosion of on-demand pickup and delivery services for residential wash-dry-fold customers.
“We now have several companies offering this service in the Bay Area,” he noted. “Another related trend would be the success of those using individual lockers for the pickup and delivery process – with lockers placed in apartments, condos and even employee break rooms at many companies. Both types of services utilize phone apps, and text customers with regard to pickups and deliveries.”
“More companies are getting into the ‘Uber’ model or appdriven wash-dry-fold space, which will expand a store’s potential market by attracting customers who don’t typically use a selfservice laundry, even for drop-off laundry,” Ristaino agreed.
No doubt, energy efficiency also remains firmly entrenched as one of the main goals for today’s savvy, profitable operators; this includes everything from high G-force washers to costeffective lighting options.
“The trend toward energy efficiency and ‘green’ operations took another great step forward, as utilities sponsored LED lighting refits, with even the small municipalities jumping on board,” Whitmore said. “I see the steady march toward highefficiency facilities accelerating – motivated by the water shortages, global warming awareness and the need to compete.”
Lastly, industry consolidation also was prevalent in 2015 with major manufacturers inking two blockbuster deals – Alliance Laundry Systems buying Primus, and Whirlpool acquiring American Dryer Corp.
“Both the purchase of Primus and the subsequent purchase of ADC were unexpected,” Arbuckle admitted. “But, then again, the one constant in this industry seems to be change.”
2016: Embracing Change
So, what’s ahead for next year and beyond?
At the CLA, one of next year’s highlights undoubtedly will be the association’s Excellence in Laundry Conference, which is scheduled for May 18-19 at the Ojai Valley Inn & Spa in Ojai, Calif. This will be the third such event, which is meant to appeal to the very best operators, bringing them together for an opportunity for education and networking. Essentially, it enables the best of the best to spend time with the best of the best in the industry.
From a governance standpoint, long-time store owner and PlanetLaundry columnist Jeff Gardner will serve as the 2016 Chairman of the CLA Board of Directors. Anyone who has ever read Jeff’s “The Laundry Doctor” column knows that he’s got great ideas and a passion for the laundry business. As a result, his term as chairman clearly will be a productive one for the association and the industry.
At the laundry operator level, more than likely, the number of multi-store owners within the industry will continue to grow, according to Wallace.
“As we transition to the new year, I believe the ‘consolidation from within’ among self-service laundry operations will continue to grow,” he stated. “While we don’t see large chains or franchises entering the market, there is a clear increase in the number of operators with multi-store operations – the majority of which fall between the two- to five-store range. Next year, I expect the number of small, owner-operator chains to increase – punctuated by the remodeling of rundown, existing laundromats placed in good locations.”
Furthermore, Jorgensen predicted that the vended laundry industry will continue to evolve and become much more than just “self-service.”
“Today’s laundries offer services such as drycleaning, commercial work, wash-dry-fold, and pickup and delivery,” he explained. “These services weren’t present just five to seven years ago, but are now in high demand. Laundries will continue to become multi-faceted with new cash flow streams filling
capacity to offset larger fixed costs and investment.”
“I love this industry and the bright future it holds,” Holland added. “I believe that technology and the changing face of our customer are catalyzing growth, as well as an exponential increase in opportunity. These are exciting times for those who embrace change.
“The ‘Next America’ is coming fast, and it’s driving both change and opportunity,” he continued. “The new broader base of customers includes classic ethnic diversity, as well generational diversity and wide swings of difference in socioeconomic status. The deep, urban inner city is teeming with busy, multi-tasking people, with non-traditional work schedules, who need services around the clock. As more people habitually multi-task, time becomes the new Holy Grail, and simple things like free WiFi and after-hours services become distinct competitive advantages.
“In my opinion, 2016 will bring tremendous opportunity our industry, especially for those who are quick and willing to meet the needs of a rapidly changing customer base and the emerging markets they create.”