CHICAGO — In the annals of history, three words have been ingrained in the memory of all business owners: location, location, location. Self-service laundry owners are no exception.
I’m sure there are plenty of horror stories about store locations that just didn’t pan out, be it for a poor analysis of demographics, underestimating competition, or myriad other reasons.
What are the key factors when searching for a good location? Can the demographic data fool you? Is there such a thing as an automatic deal-breaker? How has the economy affected the search for a new location?
These are just some of the questions we posed to distributors from across the country.
WATCH OUT FOR NEIGHBORS
When evaluating a new location, study demographics, look for nearby competition, and seek a happy landlord, says Mitch Sumners, Pride Laundry Systems, Los Angeles. “You want a landlord who is happy to have you as a tenant, because that means a good lease.”
A good number of Hispanics near your location can benefit your business, Sumners says. “The number of Hispanics may even be underreported because some people are not legal. But the demographics can do a good job of revealing the actual numbers, because the government allots money for emergency services.”
If you’re worried about being fooled by any part of the selection process, go back to basics. “Location is more than something on a piece of paper. Take a closer look at the highway speeds and if the highway is divided. Is it safe to pull into your laundry?
The surrounding tenants can be an underrated factor in your search for a new location, he says. “A bar next door is not good because your business serves a lot of women. If a drunk wanders into your store, you suffer.”
A “poor” neighbor can also be a deal-breaker for Sumners, especially if the neighbor is a pornography business. He also warns investors to watch out for nearby businesses that are parking “pigs” (require many parking spots).
At times, Sumners has wondered why no laundries exist in certain areas. “Is there something I’m missing? I recheck my numbers, and nine out of 10 times, another store will be under construction within a mile, and people know about it.
“Distributors need to advertise, from day one, that a new store is going up. Put up a sign. Nothing is worse than two stores going up two blocks apart.”
The economy has changed business, he says. “People in Southern California have stopped building new stores. There is a smaller customer base. Some people have moved because of the economy, so there is less need. If the laundry need is filled, you have to rethink any new construction.”
Sumners is a strong believer in purchasing existing stores. “Since the landlord already knows about the business, you can perfect the lease, and shoot for a minimum of 10 years, 15-20 if possible. The lease is the ongoing life of the business.”
Looking ahead, he thinks new stores will make a comeback, led by new technology. “When new technology occurs, more and more customers will return, and the investors will return.”
IMPACT FEES A KILLER
“Demographics justify a location,” says Landis Rogers, Americus Equipment, Covington, Ga. More specifically, Rogers looks at the traffic count and accessibility. “I’ve seen locations with great traffic counts that lacked accessibility, and the stores struggled.
“Another thing is that your market is within a three-mile radius. You can own a market for the first half-mile, and after a mile, split business with a competitor. The numbers diminish from there.”
Impact fees can be a deal-breaker, he notes. “There are a couple of counties around Atlanta that [have an impact fee] of at least $1,500 per machine.”
Rogers takes a personal approach when making a location decision. “A lot of things can fool you. If you want to be totally truthful, look at a location and go by your gut feeling. All the traffic counts and demographics are nice, but if it feels good, put it in. I know this sounds simplistic.”
Beware of people using rent-to-own laundry equipment. “Your location may look good, but if some of the renters have just enough money for [rent-to-own equipment], and there are apartment hookups, this can be crucial. This negates good demographics. Some think rent-to-own equipment is better than being a Laundromat customer, but they don’t do the math. People pay ridiculous prices for this equipment.”
If there are no laundries in the area you are investigating, things may have changed, he says. “You could be on the outskirts of explosive growth, but it still pays to recheck the deal. Look for impact fees. That keeps stores out. Check to see if the rents are too high, or were too high.”
Don’t forget to estimate your overhead, he urges. “Some people are unrealistic because a laundry is only worth so much, even if there are a million people nearby and you’re the only store. Machines can only do so many turns a day!”
When evaluating an existing store, look at the business records and compare them to the utility bills, he says. “This is not an exact science. I once studied a store in great detail, and concluded that it did $10,000 a month. After the store was bought, it did $12,000-$12,500 a month. We figured one of the owners was skimming on the other.”
Take a close look at the equipment. “Focusing on the annual sales is good, but the equipment can alter the numbers.”
Rogers says now is not a great time to build a new store in the Atlanta metro area. The Hispanic population has dropped, and the laundry market has been saturated, with some exceptions, he says.
Click here to read Part 1 of this story.