Content about Pricing

WASHINGTON — Drivers can expect to see regular gasoline retail prices averaging $3.63 per gallon during the summer driving season, according to projections released Tuesday in the U.S. Energy Information Administration’s (EIA) April Short-Term Energy Outlook.

The projected monthly average price of regular retail gasoline will continue to fall through the April-September driving season, topping off at $3.69 per gallon in May to $3.57 per gallon in September.

The EIA also expects this projection to be reflected on upcoming yearly averages: $3.56 per gallon in 2013, $3.39 per gallon in 2014.

Meanwhile, the Brent crude oil spot price will average $108 per barrel in 2013, $101 per barrel in 2014, the EIA forecasts. This price rose to $119 per barrel in early February, up from last year’s $112 per-barrel average.

The projected discount of West Texas Intermediate (WTI) crude oil to Brent is forecast to average $14 per barrel in 2013, $9 per barrel in 2014. The EIA attributes this drop to planned new pipeline capacity lowering the cost of moving mid-continent crude oil to the Gulf Coast refining centers.

Natural gas working inventories ended March at an estimated 1.69 trillion cubic feet (Tcf), about 0.79 Tcf below last year’s level, and 0.41 Tcf below the five-year average (2008-2012).

EIA expects the Henry Hub natural gas spot price, which averaged $2.75 per million British thermal units (MMBtu) in 2012, will average $3.52 per MMBtu in 2013, $3.60 per MMBtu in 2014.

CHICAGO — How do you think your self-service laundry business compared to others in the industry last year? Did you have a good year or a bad year in 2012? How does your pricing compare to others?

American Coin-Op’s annual State of the Industry survey offers you the opportunity to compare your operation to others in the industry. It focuses on 2012/2013 business conditions, pricing, equipment, common problems, turns per day, and utilities cost.

In instances where respondents were asked about 2012 business results, they were given the opportunity to state their results were up, down or unchanged. This is a departure from surveys compiled in 2011 and earlier, when they were asked only if their business results were up or down. Keep this in mind as you are making comparisons to previous years’ polls.

The survey is an unscientific electronic poll of American Coin-Op readers who operate stores. Some percentages may not equal 100% due to rounding.

WASHER PRICES

American Coin-Op asked respondents about their current washer prices, and if they increased prices this year or planned on doing so by the end of the year.

More than 85% of respondents offer top loaders. The price range for a top-load wash is $1 to $4. The most expensive top-load wash was 50 cents more that last year’s top price.

Here are the most popular top-load prices, followed by the percentage of respondents using them:

1. $2 (30.9%)
2. $1.75 (16.5%)
3. $2.25 and $2.50 (14.4% - tie)

There really isn’t much change in top-loader prices from a year ago. The $2 price remains the most popular, followed by $1.75. The only difference reported in this equipment type is in third place, where $1.50 and $2.25 were tied in last year’s survey.

An extremely small share of operators continue to charge $3 or more for a top-load wash. This is the third straight year that there have been multiple prices topping $3 reported in the survey.

The most popular prices for some of the small front loaders are:

• 18 pounds: $2
• 20 pounds: $2.50
• 25 pounds: $3

The lowest price reported in the above grouping is $1.25 (18-pound washer) and the highest is $6 (25-pound washer). Overall, the most popular small-front-loader prices reported in this year’s survey are comparable to last year’s.

The price range for a 30-pound wash is $2 to $6.50. Here are the most popular 30-pound prices, along with the percentages of respondents using them:

1. $3.50 (25%)
2. $3 (19.1%)
3. $3.75 (11.8%)

There was a tie between $3.50 and $3.75 for the most popular price for a 35-pound wash. Next in order are $4.50 and $3. The price range for a 35-pound wash is $2 to $5.50.

The most popular price for a 40-pound wash is $4, but $4.50 and $4.25 aren’t far behind. The most popular 50-pound wash price is $5, followed by $5.50 and $6. There was a three-way tie for the most popular price for a 55-pound wash: $5, $5.50 and $7.

The most popular price for a 60-pound wash is $6, unchanged from last year’s survey. The price range for an 80-pound wash is $5.75 to $13.50, with $8 and $8.25 tying as the most popular price.

Other prices reported were $9.75 and $15.25 for a 90-washer, $9.50 for a 100-pound washer and $14.99 for 125 pounds.

The operators to our survey vary year to year, so prices tend to vary. But the survey consistently has shown that operators offer a wide variety of front loaders (prices for 15 different capacities were logged in this year’s survey) with a broad price range.

Roughly 44% of respondents have raised or plan to raise washer prices this year, and 26.9% are undecided. The remaining 29.4% have not raised prices nor intend to do so.

DRYER PRICES

Raising dryer prices is something that operators have tended to shy away from, choosing instead to focus on washer price hikes. But it’s worth noting that some operators indicated that they have shortened cycle times in the past year. While customers in those stores aren’t paying a higher price, they are getting less drying per cycle.

Here are the most popular dryer prices, followed by the percentage of respondents using them:

1. 25 cents/5 minutes (19.1%)
2. 25 cents/7 minutes (18.3%)
3. 25 cents/6 minutes (13.9%)
4. 25 cents/8 minutes and 25 cents/10 minutes (10.4% - tie)

The No. 3 price from last year’s survey has jumped to No. 1 in this year’s. Seven minutes of drying time returned to the No. 2 slot after being bumped to No. 4 last year, while eight minutes of drying time fell from No. 2 last year to No. 4 this year, where it shared the spot with 10 minutes of drying time.

The 25-for-10 price, which was once an industry staple, picked up a couple of percentage points on last year’s result but still remains well down the list.

Once again, there was a wide variety of dryer prices reported. The most expensive (and longest) cycle was $1.75 for 35 minutes.

Roughly 18% of respondents have raised or plan to raise dryer prices this year, and 20.2% are undecided. The remaining 62.2% have not raised prices nor intend to do so.

PAYMENT TECHNOLOGY

More than 83% of respondents operate coin-only stores, 7.6% operate card-only stores, and 9.2% have operations that offer both payment types.

ATTENDED OR UNATTENDED?

Nearly 48% of respondents say their stores are fully attended. Roughly 29% say their stores are partially attended, and the remaining 23.1% say their stores are unattended.

DROP-OFF SERVICE PRICING

Drop-off-service pricing ranges from 70 cents to $3 per pound. Here are the most popular drop-off-service prices (per pound), followed by the percentage of respondents using them:

1. $1 (36%)
2. $1.25 (16%)
3. $1.10 (9.3%)

The drop-off-service prices remain similar to 2012 prices, and there is a wide variety of prices charged for the service. There were 20 different prices charged per pound in the responses to our survey.

Two-thirds of the respondents offer drop-off service, which is identical to last year’s survey.

Check back on Wednesday for the conclusion: Equipment Purchasing Trends, Turns Per Day, Common Management Problems, and more

WASHINGTON — Falling crude oil prices will help continue to push the retail price of gasoline lower this year and next, according to this month’s Short-Term Energy Outlook from the U.S. Energy Information Administration (EIA).

EIA expects that falling crude prices will help national average regular gasoline retail prices fall from an average of $3.63 per gallon in 2012 to annual averages of $3.44 per gallon in 2013 and $3.34 per gallon in 2014.

Diesel fuel retail prices averaged $3.97 per gallon during 2012 and are forecast to fall to an average of $3.87 per gallon in 2013 and $3.78 per gallon in 2014.

Meanwhile, the cost of natural gas is expected to go up, EIA reports. Working inventories, which were at record-high levels in early November, ended 2012 at an estimated 3.5 trillion cubic feet (Tcf), slightly above the level at the same time the previous year.

EIA expects the Henry Hub natural gas spot price, which averaged $4 per million British thermal units (MMBtu) in 2011 and $2.75 per million MMBtu in 2012, to average $3.74 per MMBtu in 2013 and $3.90 per MMBtu in 2014.

CHICAGO — Self-service laundry sales were largely positive in November, with three regions reporting increases, according to the most recent AmericanCoinOp.com unscientific StatShot survey.

November sales in the West were up 7.2% from November 2011. “Had a competitor temporarily shut down for repairs for several weeks, so that had some positive impact on my sales,” reports one owner from the region.

The Northeast reported November sales increased 4.3% from the prior November, due in part to Hurricane Sandy and its impact on the region, according to some operators.

In the South, year-to-year sales increased 0.3% in November. One store owner reports that his/her water and sewer rates have increased.

The Midwest was the only region to see sales decline—4.0%—for November. “Costs are going up. I have run out of ideas how to be more energy-efficient. I’ll have to raise my prices,” reports a store owner there.

Respondents were also asked about November 2012 front-loader prices — their lowest prices, highest prices, and whether the prices had changed since the previous November. The lowest and highest prices varied quite a bit.

In the West, customers can get a front-load wash for as little as $1.50. The lowest-priced front-load washes range from $1.50 to $6. Half of respondents report their lowest front-load wash price is higher than a year earlier, and the other half say they are unchanged.

The price range for the most expensive front-load washes in the Western region is $4.75 to $15—the broadest range among any of the regions. Half of respondents report their highest front-load wash price is higher than a year ago, and the other half say they are unchanged.

In the Northeast, the most inexpensive front-load prices are $2 to $3.50. Just 30% of operators has raised their prices in the last year, while the remainder has kept the prices unchanged.

When it comes to the most expensive wash, Northeastern customers are paying $4 to $7.75. Forty percent of operators has raised this price compared to November 2011, while the remainder has stood pat.

Low-end front-load prices in the South range from $2 to $2.50. Three-quarters of respondents has kept the same low price since November 2011, and the remaining one-quarter has raised the price.

The price range for the most expensive front-load washes in the South is $3.50 to $8. The breakdown of where the prices are today compared to a year ago is identical to the low-end figures.

The most inexpensive front-load prices in the Midwest range from $1.75 to $2.50. Approximately 38% of operators raised prices in the last year, while the remainder has kept prices unchanged.

When it comes to the high side of front-load prices, Midwestern customers face a range of $4 to $8. Some 13% of respondents has increased prices, with the remainder keeping the status quo.

AmericanCoinOp.com’s StatShot includes information on sales, wages, costs or other financial data based on anonymous survey information provided by industry owners and operators.

Audience members are invited to participate in these unscientific surveys, which are conducted online via a partner website, on a regular basis. Self-service laundry operators are encouraged to participate, as a greater number of responses will help to better define industry trends.

CHICAGO — American Coin-Op covered a variety of topics this year. If you happened to miss a story along the way, then you might appreciate a brief recap. Here’s a quick look at some of the more informative articles presented this year.

BUILD NEW OR REHAB?

When considering opening a new coin laundry, do you build from the ground up or look at rehabilitating an existing store? Setting your laundry apart from the competition has to be at the heart of the decision-making process, says Scott Equipment’s Carl Graham.

When building new, you can start from the ground up to create a clean, modern infrastructure so it can handle the laundry equipment you plan to install, says National Laundry Equipment’s J.D. Dixon. And you can eliminate any concerns about infrastructure issues with new construction. Choosing to rehab a store means you're locked into that location, while building new gives the prospective owner the flexibility to select the best site for his/her business needs.

New construction provides the opportunity to design a store that is highly efficient and thus equipped to get customers in and out in the shortest time possible. But what works in one store may not work in another. For example, you might choose a color scheme for a Miami store that you wouldn't for a store in Lexington, Ky.

Building new also means a much more extensive project than a rehab, taking on greater financial risk, plus it's generally more expensive.

When choosing to rehab, consultant Robert Renteria favors repairing any machines that still have useful life, then looking to buy rebuilt or refurbished machines.

Buying and rehabbing an existing laundry can save the new owner some expenses, and may allow them to avoid bureaucracy such as impact fees and code restrictions. Another benefit for choosing to rehab an existing laundry is that it already has a customer base. With a new store, you must build that customer base from zero.

LAUNDRY FURNISHING OPTIONS EXPAND

The general structure of chairs and tables typically found in coin laundries today really hasn’t changed much in recent years, but the palette of colors and textures that are available has become quite expansive, according to some manufacturers of such furnishings.

CACO Mfg. has been making Sol-O-Matic© fiberglass seating and folding tables for coin laundries since 1960. CEO Randall Chaffee says his company can now create granite-type finishes commonly seen on countertops.

High Mark Mfg.’s high-pressure laminate furniture is available in more than 500 different colors, says President Peter Valconesi, whose company produces fiberglass and laminate furniture, both standard and custom in design.

RJ Papalini is celebrating its 50th year of manufacturing furniture for the industry. The customer is accustomed to seeing coin-ops utilize bright color schemes to attract customers, but President/CEO Richard Pennington says he’s seen that trend change in places “that are not quite as economically challenged.” Operators there are looking for softer colors, browns and earth tones.

Any time spent discussing coin laundry décor will be wasted if the furniture selected doesn’t stand up to the rigors of laundry life. Resist the temptation to purchase residential-grade chairs or tables from a retailer or home improvement store, because that’s just a short-term solution. “We see it all the time, but two or three years later, they come back to us because that stuff just doesn’t hold up,” Chaffee says.

CRITERIA FOR SETTING PRICE

Upon what criteria should a laundry owner base his or her wash and dry vend prices?

“It really comes down to two issues,” says Kevin Hietpas, vice president of sales and marketing for Dexter. “No. 1 is what’s happening to his costs. How have costs impacted the viability and profitability of his business? Owners should have a good sense of where their business is tracking from a performance standpoint. No. 2 is where is he competitively.”

A store owner needs to be aware of and factor in the competition’s prices when determining his or her own pricing, says Kent Walters, national sales manager for Maytag/Whirlpool Commercial Laundry. “The owner’s goal should be to produce the best experience for the customers, from ambiance to equipment to services—and the costs associated with washing and drying play a large part in this equation,” he says.

While customers may not react warmly to a price change, they will understand if you explain the reason behind the change, such as higher utility rates. Hietpas believes that customers are more sensitive to how long it takes and how much it costs to dry than to small changes in wash prices.

Vending technology has enabled owners to change prices on equipment easily—during slow hours or days, for example—but avoid changing prices too often, as the practice can turn off customers.

BECOMING A MULTI-STORE OWNER

When you’re thinking about opening a second store, it’s important to go back to the basics and look at everything from location to equipment and store naming, advises Pittsburgh Laundry Systems’ Sonny Rogalla.

Carve out an area of no more than an eight-mile radius from your original store and use that as your market. Having your stores in close proximity—no more than 45 minutes from each other—allows you to easily more between stores.

Make sure to continue cultivating your relationship with the distributor that assisted you in building your original store. Distributors typically have information on existing Laundromats coming up for sale and will approach you to judge your interest. And the distributor can easily identify whether a laundry is a potential good investment.

Whether rehabbing a store or building one from the ground up, rely on what you’ve learned from your first store. You already know what works—now it’s time to make it even better. Look at the machines your distributor offers; there are probably new advances since you last purchased equipment. It may also be time to look at investing in advanced controls if your previous store doesn’t have them; these controls can be a great resource for multi-store owners.

Financing through a laundry manufacturer is better than using a bank, Rogalla believes, because manufacturers understand the industry better and can tailor a financial solution to meet an owner’s needs.

ONE LITTLE IDEA AT A TIME

Little changes over time can make a difference for your business, advises columnist Howard Scott. Here are a number of little ideas he’s seen in different Laundromats, or been told about, or that just popped into his head:

• Hang a purple neon sign in your window
• Put a sandwich board sign on your front sidewalk
• Announce that you offer high-quality equipment
• Place a wooden bench out front
• Sell three sizes of laundry bags
• Offer a deal for wash-dry-fold service
• Hang a large clock in your store
• Give machines names, not numbers
• Sell a value card
• Paint a mural on your exterior side wall
• Set up a glass display of your merchandise for sale

TRACKING ENERGY EFFICIENCY

The specter of ever-rising utility costs should be enough to spur the average laundry owner to track this expense and explore ways to minimize it. Owners looking to determine their store’s level of energy efficiency need to compare the cost of utilities vs. revenue, says Maytag’s Walters.

If the store’s utilities cost is above the industry average of 20-25% of total revenue, the owner should look for ways to decrease this cost, starting with equipment. Look in the washer-extractor control software, Huebsch’s Gary Dixon advises. Are the water levels set where you wanted them? Is the water temperature different than where it was? Is the software notifying you of potential leaks?

Walters says the first place a store owner should investigate is the dryers. “Specifically, an owner needs to ensure all ventilation is free of lint, which can cut down on the amount of air getting to the dryer, as well as make-up air.”

Store owners who want to maximize equipment performance must regularly perform proactive and preventive maintenance tasks. “By following a recommended maintenance schedule, the laundry owner is ensuring that their equipment is operating at optimum efficiency,” Dixon says. “This translates to lower utility costs and keeps downtime to a minimum. The result is happier customers and more profit.”

EXTRA CREATIVITY, EXTRA PROFIT

Extra profit centers provide a variety of additional revenue opportunities, and some require little extra work from you and your employees, says Todd Santoro of Clean Wash Laundry Systems. Try partnering with a local dry cleaner. Establish a program where customers can drop off at your location for both services; work with the cleaner to determine the timeline and revenue split.

Pick-up service is another way to adapt wash-dry-fold to suit your business. Set a delivery radius around your store, up to 20 miles, and charge per pound to accommodate the increased costs. Pick-up is particularly important for growing your commercial laundry revenue to include clients such as spas, catering companies and salons.

Ancillary profit centers allow Laundromat owners to be creative with their offerings. An example is offering U-Haul trucks for rent. Store owners receive commission from the rentals, and attendants also set up reservations for other locations, which also nets owners a percentage of the rental.

There are many other services that a laundry can offer, but remember, consider your target demographic. Services that are quick and helpful will best serve them and you.

To read the original stories in their entirety, click the following:

Store Creation: Build New or Rehab? (Part 1)

Store Creation: Build New or Rehab? (Part 2)

Trends in Laundry Furnishings

Coin Laundry Pricing Strategies (Part 1)

Coin Laundry Pricing Strategies (Part 2)

Coin Laundry Pricing Strategies (Part 3)

Expanding Your Business: How to Become a Multi-Store Owner

Grow Your Laundry One Little Idea at a Time

Energy Efficiency: Battle Against Rising Costs Often Starts with Equipment (Part 1)

Energy Efficiency: Battle Against Rising Costs Often Starts with Equipment (Part 2)

Extra Creativity Can Lead to Extra Profit (Part 1)

Extra Creativity Can Lead to Extra Profit (Part 2)

CHICAGO — Whether you are buying your second store or selling your fourth store, it’s easy to understand why your stomach is churning. Costly buying/selling mistakes must be avoided. A little bit of tossing and turning is par for the course, but one of the best ways to ready yourself for a key transaction is to get some professional advice.

In lieu of some antacid, American Coin-Op offers a host of buying and selling tips courtesy of industry veterans.

KNOW THE BUYER

“Generally, I recommend buying a store rather than building one because the costs are more controllable,” says Don Cook, a Pellerin Milnor Corp. key account representative for vended laundries. “When buying a store, I want three years of owner tax returns and I need to know store volume, including the percentage volume from wash, dry and fold.”

If you build a store, it’s all about finding the ideal location with strong demographics, Cook says. He looks at the number of households in the sales area making less than $49,000 yearly and the percentage of renters in the area. In an urban environment, the sales area may be one mile or less; in a rural environment, the sales area could be two miles, he notes.

It’s also important to study both past and current demographics, he adds. “Four years of demographics would be good.”

Cook requires a minimum of 10 years on the lease, as well as owner financing, if possible. Cleanliness and lighting also catch his eye when evaluating a store. However, he wouldn’t necessarily shy away from a less-than-ideal store with good volume because the volume can rise with some store improvement, he explains.

Evaluating the owner’s asking price is difficult because each person has his/her reason for buying and varying profitability expectations. “Don’t forget to look at the store debt.” More importantly, Cook believes if a store isn’t profitable doing two to three turns a day, it’s a lost cause.

Laundry competition rates a 6 or 7 on a 1-to-10 scale, he says. Two old stores in your sales area may not be as important as one new laundry. “This issue goes back to demographics. The demographics let you know [how much money] can be generated in the area.”

It’s not really a buyer’s or seller’s market, he believes. “However, the return on investment seems a bit lower these days. A 20% return used to be the norm; today a 15-to-18% return is more normal.”

Cook strongly suggests getting a distributor’s help when selling a laundry. “A good number of distributors may have a buying/selling division within the company. A distributor may also have more in-depth experience than a consultant.”

Using a consultant for a second opinion may be helpful, but it’s not crucial, he states. Cook believes in distributors because they want to do future business with sellers. “A good distributor should also advise you when not to make a sale.”

He doesn’t necessarily rely on a particular pricing formula today, but here’s one he’s used in the past: gross yearly volume less depreciation (washer, dryers, heaters, etc.) value.

The biggest mistake a seller can make is not knowing enough about the buyer, he says. He finds plenty of buyers who aren’t serious. “I conduct investment seminars. If seven to 12 people show up, only one or two of them are serious buyers. Make sure the buyer has at least $50,000 to $75,000 in cash or (it’s) no deal.”

Knowing the buyer means gathering personal and financial information, he adds. “I want a business resume in order to get an idea of what the person is all about.” Cook admits that the buyer’s background could prevent him from making the sale. More specifically, he demands a credit report plus a financial statement.

ELIMINATE MISTAKES

All things being equal, a prospective owner should investigate buying a store rather than building one, says Dick Ruel, Maytag Commercial Laundry national sales manager. “The reasons are varied, but include an already established market, cash flow, and a distributor who understands the store’s and customer’s needs.”

Seek assistance when buying a Laundromat, he says. A broker and a knowledgeable distributor can be helpful, and the Coin Laundry Association (CLA) is also a valuable resource to consult when looking to enter the business, he adds.

Prior to buying a store, the owner needs to diligently research the current location, the demographics of the area, and any future changes to the immediate area, Ruel explains. “Reviewing the self-service laundry’s financials isn’t enough to paint the proper picture of the entire business. Potential owners should obtain a demographic study from the CLA, which can be done fairly inexpensively. Speaking with city planners and the chamber of commerce will provide the best look into the future landscape of the area.”

If you are going to build a store, understanding the demographics and being aware of future construction changes need to be taken into consideration, Ruel advises. “Also, cash flow is important to understand. The owner must make enough profit to keep operations functioning.”

Before buying a store, a business plan, including a pro forma, is required, Ruel advises. “A pro forma projects an owner’s income, expenses and net revenue based on the store area’s population and demographics. It also provides a break-even point based on estimated expenses and the projected number of turns per day.”

There are several mistakes a buyer can potentially make, according to Ruel. First, maintaining the previous owner’s operation is not enough to guarantee a successful and well-kept store, he notes. “The new owner also needs to do his/her due diligence and request an inspection to ensure that the store meets required standards and/or codes.

“In addition to maintenance and store operations, a new owner needs to confirm the financials are accurate. And when it comes to determining a fair price, the age of the commercial laundry equipment should not be overestimated.”

Check out the competition. Ruel urges prospective owners to visit the area’s laundries, talk with their customers and discover what they like and don’t like. “The only way to gain market share is to take it from another store. Therefore, new owners need to understand how to set their businesses apart from competitors in the area.”

A broker and the CLA are valuable resources to consult when selling a store, Ruel says. Selecting a real estate agent to help with the selling process also cuts down on the responsibilities of the seller. “The real estate agent will ensure the prospective buyer is pre-approved and that the finances are in order.”

The biggest mistake that sellers make, Ruel believes is having unrealistic expectations of what their store is worth.

CHICAGO — Phil Arvin and his two partners opened their first Maytag-equipped coin laundry in Memphis, Tenn., last March. The 5,000-square-foot attended store is equipped with new energy-efficient 60- and 80-pound washers that are much larger than those in competing stores and thus could command a higher vend price, Arvin says.

But the group followed the suggestions of distributor Justin Laundry and established prices that are comparable to the laundries nearby, Arvin says. “Even though we’re offering a much higher quality product, we didn’t want to be perceived as the higher priced place.”

This is just one example of how the market can influence a laundry’s pricing strategy. But other factors are at work, too, and there are some basic premises that the self-service laundry operator should keep in mind when establishing or changing vend prices.

Your Competitor Has Undercut You – Now What?

And whether it happens intentionally or not, there is likely to come a time when a competitor will undercut you in price. Then you have a decision to make.

“If an owner is convinced that for the type of wash and dry they’re offering, the atmosphere, the other services, that they’re charging fairly, they should probably make the decision to give it some time and see if customers recognize that value and come back,” says Kevin Hietpas, vice president of sales and marketing for Dexter. He suggests giving it a month before acting.

Like any battle, a price war requires a strategy, Gauthier says. Neutrality is one strategy that allows the store owner to focus on their strengths while letting the competitor take the financial hit. But, neutrality isn’t always an option.

“Strategies are best developed after understanding a competitor’s strengths and weaknesses,” says Gary Gauthier, national sales manager, vended laundries, Milnor Laundry Systems. “For instance: Is their equipment mix weak? Maybe offering—and promoting—the right size machines for your market is the key. In a margin-based industry like vended laundries, price decreases should only be considered as a last—and short-term—step.”

“A store owner needs to provide his customers with assurance that they are getting the best service, equipment and experience money can buy,” says Kent Walters, national sales manager for Maytag/Whirlpool Commercial Laundry. “If a competitor in the area is charging less for a similar service, the store owner needs to tout the reasons why his/her store is worth spending the extra money.”

In this type of situation, the opinion of a neutral third party is invaluable, he says.

“Ask someone to visit your store, talk to the customers and provide feedback. Why would a customer pay more for your coin store? What are the perks of your store vs. the competition? This information can help an owner accurately illustrate the experience customers receive at his/her store.”

Click here for Part 1.
Click here for Part 2.

CHICAGO — Phil Arvin and his two partners opened their first Maytag-equipped coin laundry in Memphis, Tenn., last March. The 5,000-square-foot attended store is equipped with new energy-efficient 60- and 80-pound washers that are much larger than those in competing stores and thus could command a higher vend price, Arvin says.

But the group followed the suggestions of distributor Justin Laundry and established prices that are comparable to the laundries nearby, Arvin says. “Even though we’re offering a much higher quality product, we didn’t want to be perceived as the higher priced place.”

This is just one example of how the market can influence a laundry’s pricing strategy. But other factors are at work, too, and there are some basic premises that the self-service laundry operator should keep in mind when establishing or changing vend prices.

Criteria for Setting Price?

Upon what criteria should a laundry owner base his or her wash and dry vend prices?

“It really comes down to two issues,” says Kevin Hietpas, vice president of sales and marketing for Dexter. “No. 1 is what’s happening to his costs. How have costs impacted the viability and profitability of his business? Owners should have a good sense of where their business is tracking from a performance standpoint.

“No. 2 is where is he competitively. None of us exist in a vacuum, so you want to understand, ‘I might want to get to a certain point, but as of right now the market won’t let me go there all at once.’ That’s a secondary concern, because I think if the owner is providing good value, it’ll be reflected in his costs. He’s not going overboard with what he’s charging, nor is he under pricing for his service.”

“We have a lot of ‘rules of thumb’ in this industry,” says Gary Gauthier, national sales manager, vended laundries, Milnor Laundry Systems. “When it comes to pricing, it’s typically recommended that gross monthly receipts from washer/dryer revenues should be at least four times the monthly rent and at least five times the monthly utility expenses.”

A store owner needs to be aware of and factor in the competition’s prices when determining his or her own washer and dryer pricing, says Kent Walters, national sales manager for Maytag/Whirlpool Commercial Laundry.

“The owner’s goal should be to produce the best experience for the customer from ambiance to equipment and services—and the costs associated with washing and drying play a large part in this equation,” Walters says.

How Do Your Front-Load Prices Compare?

American Coin-Op surveyed its e-mail subscribers about their November 2011 front-load vend prices — their lowest and highest, and whether the prices had changed since the previous November. Those polled were not asked to identify machine capacities.

Results from the anonymous, unscientific StatShot survey show the lowest and highest prices varied quite a bit among the four regions.

In the West, customers could get a front-load wash for as little as $1.50. The lowest-priced front-load washes ranged from $1.50 to $3.75. Nearly 88% of these prices were unchanged from November 2010. The remaining 12.5% of respondents had raised their lowest-price wash during the 12 months.

The price range for the most expensive front-load washes in the Western region was $2.75 to $7.89. Every respondent reported these prices were unchanged from a year earlier.

Low-end front-load prices in the South ranged from $1.75 to $4.25. Approximately 62% of respondents had kept the same low price since November 2010, and 31.6% had raised the price. Just 5.3% had lowered the price.

Southern customers faced the widest price range of all regions — $2 to $17.50. Nearly 58% of operators reported having raised their high-end price since November 2010, and the remainder were unchanged.

In the Northeast, the most inexpensive front-load prices were $1.50 to $5.50. Just 6.7% of operators had raised their prices in the previous 12 months, while the remainder had kept the prices unchanged.

When it came to the most expensive wash, Northeastern customers were paying $2.25 to $8 in November. Approximately 21% of respondents had raised this price compared to November 2010, while the remainder had stood pat.

The most inexpensive front-load prices in the Midwest ranged from $1 to $4.50. Just 5.9% of operators had raised their prices since November 2010, while another 5.9% had lowered them. The remainder had kept prices unchanged.

On the high side of front-load prices, Midwestern customers faced a range of $2.50 to $8.79 in November. Some 12% of respondents had increased prices, with the remainder keeping the status quo.

Tuesday: Should you announce a price change?

PEMBROKE, Mass. — At almost every Laundromat I stop at these days, I hear roughly the same thing: “These are tough times. The country has 12% unemployment. Business is lousy. It’s the economy.”

Well, it’s good that there’s so much agreement. Except for one small point: there are opportunities in tough times that good operators take advantage of to maximize their profits. Even with declining sales, a sharp businessman can creatively reduce expenses, tighten his nut, eliminate marginal sales, cut unprofitable sidelines, emphasize profitable aspects, and come out ahead.

The universal law of business is that inflow must be greater than outflow. So, when sales are down, a good manager cleverly manipulates the variables.

Here are just a few ideas for the expense side of the equation:

Request a rent cut

These are tough times, especially for landlords. Businesses are being shuttered every week. Nothing looks worse than an empty storefront. You are a good tenant, and you’ve been in the same spot for several years. Furthermore, you pay the rent on the first or second day every month. The landlord doesn’t have to worry about you. You’ve told him that when your lease expires in three years, you want to renew.

So, ask for a temporary reduction in rent, just until the lease is up. You could possibly negotiate a $200 lowering. Point out that there’s been construction in the street, and the neighborhood is changing, and you haven’t quite figured out how to win a sizable proportion of the newcomers. Note that new competition moved in several blocks away, but you’re confident they’ll be gone in two years. In short, you need a break now. As a good, reliable tenant, you deserve a break.

One store owner wrangled a $6,000 annual rent deduction by agreeing to do some landlord functions, such as plowing the parking lot when it snowed, cleaning the front, patching the roof and doing plumbing repairs. It helps that the owner’s brother does snowplowing as a sideline and that the owner is handy enough to do most of the chores himself.

Cut employee hours

Yes, this is a drastic move, but sometimes it is necessary. You have a target profit to make, and if you’re below target, then cut hours. Don’t wait until you’re at break-even, because you should never be at break-even. Reduce full-timers (40 hours) to 35 hours while maintaining full benefits, and cut part-time hours from 20 to 17. Giving the employees a few extra hours for themselves is not a terrible thing, particularly if you explain why it is necessary—so that your company can continue to operate.

To make the most of those reduced hours, eliminate one supplier pickup a week, close one hour earlier at night, have no store coverage during the slowest times of the day, and process commercial work using in-store staff rather than hiring someone to help. Whatever needs to be done needs to be done, for profit is king.

That doesn’t mean that you don’t take care of customers. Customers are the driving motor of profits. But, within that framework of obligation, you must always make money (profit), and you can be clever in achieving it, without alienating your customer base.

Demand better prices from vendors

Demand price reductions. Take advantage of deals. If you own the building, fight for a tax rebate, based on the fact that your property value has gone down $150,000. Petition the utilities to secure better pricing.

You say fighting the utilities is like stopping Niagara Falls, but how do you know if you don’t try? Go and speak to someone and plead your case. Make the case that if the utility can’t deliver favorable terms, it’s entirely possible that your business will close, and then the utility will be left with one fewer customer. Perhaps you could obtain more favorable rates by pre-paying.

Possibly the utility officer can point out some saving factor. Maybe there is an experimental delivery method that you would be willing to try out in exchange for lower utility costs.

As for vendors, the iron law of buying is that there is no bottom. Just when you think the lowest prices have been reached, the discount center comes along. Then Walmart comes into the marketplace, killing all existing prices. Then Costco, Sam’s Club, BJ’s, the bulk retailer, appears. Ask the vendor for a menu of prices that is 5% lower. Failing that, insist that at least one product have “super” pricing. Negotiate a 2% discount for prompt payment, and take advantage. As an incentive, talk up your loyal patronage, and how his dealing you a better hand will strengthen the relationship. Ten years from now, the vendor will have recovered multifold.

Draw less money yourself

This shows that you are willing to put company profit above personal welfare. It will go a long way toward convincing employees to take lower paychecks. But it also forces you to be disciplined. I hope your lifestyle allows you to cut back, namely that you aren’t living on every cent that comes in the door and then some.

Reduce your newspaper subscription from seven days to four days (just Thursday to Sunday). Cut back your cable TV subscription. Cut the grass yourself rather than hire a service.

Make your child work in the summer and contribute $5,000 each year to help pay for college, plus get a work-study job during the school year to fund spending.

Encourage your spouse to get a part-time job (even at McDonald’s—something is better than nothing). Have your elderly mother move into the spare bedroom and take a piece of her Social Security.

Sell the Lexus and buy a second-hand Volkswagen (you don’t need to impress anyone). Cut out eating in expensive restaurants. Alter your health insurance to include a $2,500 deductible and stay healthy. Drop that gym membership and exercise at home.

Do most of these things, and you’ve reduced your nut by $25,000 a year. A pay reduction is a snap. Such modifications show your workers that you are willing to share in the pain. This goes a long way when asking them to accept reduced hours.

Tough times require toughness. Start today to dig in and bulldog your way to profits.

ARMONK, N.Y. — My previous articles showed that from 1997 to 2010, the average washer vend prices stayed ahead of inflation, but fell behind the cost of natural gas.

Our overhead costs should be used to set our base vend price, but any adjustments to vend price should be made with utility costs in mind.