Karl Hinrichs has been in the commercial laundry business since 1980 and is the president of HK Laundry Equipment, Inc. Since 1967, HK Laundry Equipment, Inc. has been serving New York and Connecticut with laundry equipment, service and repair and training and support. HK Laundry Equipment, Inc. is a distributor of CCI’s FasCard and LaundryCard systems.
How did you get involved in the commercial laundry industry?
In 1967, my father and neighbor formed a partnership equipping stores with washers. When I was 13 years old, I would bring my toolbox up there, and by the time I was 16 years old, I was out fixing the machines. In 1980, I was working as a chemist and my father made me an offer I couldn’t refuse. I went to work with him and I have not looked back. I’ve now been in the business for 36 years.
What are the challenges that laundromats are facing today?
The biggest challenge is maintaining profitability with the increase in water and sewer rates. Water and sewer costs have become a very expensive utility expense for laundromats. Many water supply and sewer improvements have caused huge capital costs that local towns and counties have passed along to water consumers. Laundromats are one of the biggest consumers of water and are at the mercy of local water municipalities and their water rates. To maintain profitability, laundromats need to keep an extra eye on their expenses and increase vend prices accordingly.
What major trends are you noticing in the laundromat industry today?
More and more people are going to a cashless society. This month I saw a study come out that said over 50% of transactions are now electronic. The time spent in coin laundromats emptying quarters out of the machines, counting them, and filling bill changers two to three times per week is very non-productive. Until you go to an alternative payment system, you are going to max out at 12-16 stores, because after that you are running around processing quarters all day long.
What trends do you see for the future?
Laundry card systems are the way of the future. The biggest evolutionary jump is eliminating the quarter. There is a high initial entry price, however, laundromats save money and time in the long run and the operator doesn’t need to physically run the store. With card operated laundromats, there is no limit to the number of laundromats you can operate and you can spend your time focusing on managing your business rather than processing quarters.
What are your thoughts about laundromats using incremental vend pricing with card systems in order to be able to raise a vend price by a few pennies instead of a quarter?
I like it. I’ve done it with pennies but I actually prefer nickel incremental pricing. Incremental vend pricing is a huge advantage of implementing LaundryCard over FasCard, because you are able to increase your pricing by an amount less than a quarter. When your water rates go up, you can take advantage of incremental vend pricing by increasing the cost of your washers to help you absorb the increase in utility expenses.
What’s the best way today for a laundromat to increase the value of their laundromat business?
Investing in a card laundromat system. You know exactly up front what the revenue is for the store and operating that card store is much easier. With coin operated stores, you have to be there at least 2-3x per week. With a card store, all you need is a trusted individual to collect the paper receipts because you know your true business numbers and exactly how much is in there. When you’re buying a business, it’s based on profitability. You can increase the value of a laundromat by increasing the multiple at which the store is valued. If your store has laundry equipment with a card system, then you are increasing the multiple because the store is worth more. The more automated and hands free you can make your laundromat, the higher the multiplier of the profit and the higher the value of the store. A card laundromat is an investor rich system whereas a coin laundromat is an owner operated system.
What advice would you give a new store owner just getting into the laundry business?
I would suggest doing as much research as possible. A laundromat business is capital intensive and you really want to make sure you have the best distributor, equipment and location. You want to partner with a distributor who has been around at least 10-15 years, knows the area, and knows about running a laundromat.
All coin laundromat owners have to deal with the rising costs of utilities. Things like periodic water rate increases and surging electricity bills are making it more expensive to own a laundromat—not to mention fixed cost like rent, regular machine maintenance and repairs. For coin laundromat owners, steady cash flow and liquidity are crucial. Profits need to keep pace with rising costs for the business to grow and thrive. And for coin laundries, sometimes the only way to offset expenses without going into the red and also making a profit is to raise vend prices on machines.
But raising coin-operated laundry machine prices can be clunky and conspicuous: many coin-only laundromats can only increase vend prices by the quarter. This can be a rather delicate matter for a business owner: Raise your vend prices too high and you’ll lose precious customer lifetime value and loyalty. On the other hand, if you keep the same prices for too long, you miss out on potential revenue—or worse yet—don’t hit your breakeven point.
From a financial perspective, increasing vend prices—whether due to a cumulative uptick in variable costs (water, electricity or gas) or lowering prices in order to compete with more established coin laundromats in the neighborhood—25¢ cents may not make much sense for you as a store owner either.
Furthermore, If you try to increase your washing machine cycles by $.50 overnight, you may end up losing some of the loyalty you’ve slowly built up and valuable customers in the process. You may find that a vend price increase of $.09 may be closer to what customers are willing to pay for, and also more in line with healthy revenue growth. Penny incremental pricing also allows you to stair-step or stagger pricing so you can split up increases over time.
Penny incremental pricing has a powerful effect on your bottom line. You can actually see how LaundryCard would benefit your laundromat with our online Profit Calculator.