Cleaning Up: Developers Tapping Coin Laundries for Shopping Center Projects
As vacant space grows, shopping center owners are looking for new uses to drive traffic and increase sales.
Randall Shearin

Laundries are becoming a popular option in centers that have a dense population of lower to middle income residents nearby.

While the economy and retail sector seem at times to be spinning out of control, one business keeps spinning along, unaffected by the global recession. Vended laundries continue to post solid returns — the kind of returns that make them extremely attractive to developers and owners of shopping center properties. That’s made Dan Bowe, national sales manager of IPSO, a manufacturer of laundry equipment and developer of vended laundries, an extremely popular person of late.

“We are definitely seeing increased interest over the past year from developers of shopping centers and strip malls,” Bowe says. “Noteworthy, is that more than half the developers who approach IPSO with available space to lease to investors, actually end up developing the stores themselves. I think that says quite a bit about vended laundries as business.”

Good Investment

Rob Bodner, president of Park Ridge, New Jersey-based EFR Inc., a laundry equipment distributor active in building and opening new stores, notes the variety of investors showing interest in his services.

“The volatility of the stock market and real estate has made safe investing significantly more complicated,” says Bodner. “High caliber investors are now very interested in our business and the 25 to 35 percent ROI that comes with it on average.”

Newer laundries are larger than old prototypes, and new equipment contains easy-to-use features.

Bodner says while the ROI of vended laundries is attractive to new investors, the stability of the market reinforces the idea for many newcomers.

“How many businesses can you get into that have virtually a 100 percent success rate?” says Bodner. “After 5 years, coin laundries have almost a 100-percent rate of success — that’s pretty compelling in any environment, but particularly in our current economic situation.”

According to Coin Laundry Association figures, vended laundries are a roughly $5 billion-a-year business in North America and growing. And while small mom-and-pop operations may have been prevalent in years past, today’s vended laundry is far more high-tech and can be run from afar.

“Obviously, the ROI vended laundries can deliver is great, but it’s the ease of operation that’s opened the door to the next generation of owners,” Bowe says, adding that for two-thirds of new investors, the store is not their primary means of income.

Today’s advanced control systems, card payment options and networking capabilities enable owners to manage their business from off-site, including checking in or changing vend prices from their office, home or anywhere with an Internet connection.

Getting Started

Required starting capital will vary by the size of the store, but for an average project, coin laundry investors will possess roughly $150,000 in up-front capital. The general rule is a 30 percent equity position in the entire project, including build-out, equipment and installation.

The average store will need about 3,500 square feet of space, though some laundries may go as low as 2,200 square feet or as high as 7,000 or above.

“I caution investors against building too small,” says Bodner. “We design a store to fit what the demographics and market will support. Building too small serves as a signal for other investors to come in when your store is unable to handle peak periods of business quickly and efficiently. Simply speaking, with the right demographics a good larger store will outperform a good smaller store.” An additional benefit for the landlord is that a large coin laundromat becomes a destination point for consumers. Adjacent businesses, which can typically include restaurants, beauty related or other businesses that appeal to women with families, benefit greatly as their best customer is the laundry’s as well.

The Basics

Strong return on investment numbers are attracting many new investors to laundries.

As with many businesses, the biggest variable in the success of vended laundries is location.

“At IPSO we spend a great deal of time analyzing the demographics of the area to ensure success,” Bowe says. Along with that comes careful analysis of competitors in the area.

So what makes a great location? Oncho Kerian, owner of Automated Laundry Systems in Burbank, California, says many of the basics mirror what shopping center developers are looking for.

“The starting point for any good store is a location in a densely populated area with lower to middle income residents,” says Kerian. “You also want to see a high percentage of rental units.”

Good ingress/egress, high traffic counts, good visibility, ample parking and locations with solid anchors such as grocery stores or retail centers also are key ingredients in the recipe for success.

Likewise, shopping center developers appreciate what successful vended laundries add to their projects and other businesses.

“These are big, bright and modern businesses,” says Kerian. “They offer a variety of amenities and are family friendly, which makes them a perfect fit in most retail centers.”

Looking At The Long-Term

A number of factors have made vended laundries desirable renters for owners and developers of shopping centers. Long-term leases are a major part of that.

“Investors are looking for a minimum of a 10-year lease with at least two 5-year options,” says Bowe. “Certainly, those longer terms have made this business attractive property owners.”

Coin laundries are complementary to retail developments. First, they do much of their business on the weekend. Second, the average coin laundry customer is a 37-year-old female with children. Because the laundry chore involves waiting for cycles to be completed, other adjacent business tend to benefit from customers seeking to fill that time by multitasking with additional shopping, etc.

Why Is Laundry Growing?

Bowe says that while the coin laundry concept is a mature business concept, it should see growth for many years to come due to increasing numbers of renters.

“A renter population that’s expected to keep growing well past the year 2020 is a great sign for our industry,” says Bowe. “Because many rental developments either don’t have an on-site laundry or have small, inefficient laundry rooms, renters seek out vended laundries.”

The time savings coin laundries offer increases their popularity among customers. Our society moves at an ever-increasing pace and people are placing a premium on their free time. Fast food franchises, quick oil change garages and drive-through coffee shops are just a few of the businesses catering to our desire to complete tasks faster.

“Coin laundries apply that same concept with large capacity laundry equipment,” says Kerian. “Something that could take a household half a day to complete, can now be accomplished in just 1 hour. And if your laundry offers wash-dry-and-fold service, convenience is taken to the next level as customers drop off dirty laundry and pick up clean folded laundry later in the day, for a premium rate, of course.”

This time savings as well as wash-dry-and-fold service has enabled vended laundries to tap to in a customer base outside just renter populations. Those with laundry equipment at home are utilizing coin laundries to save time or just wash bulky items such as quilts more effectively.

“When we look at the popularity of coin laundries, I think it’s important to not overlook the efficiency of these cutting edge machines,” says Bowe. “The average family washes eight loads of laundry per week. If they’re doing that in a topload washer at home, they could be using between 40 and 50 gallons of water per load.” A vended laundry will cut those figures down dramatically, Bowe cites, adding that faster drying times also help laundries present a far more environmentally friendly option.

“As society attains a higher level of environmental awareness, I think you’ll see vended laundries rise further in their popularity,” says Bowe.

A New Idea

While individual investors make up the majority of store owners, others experienced in the industry are helping newcomers benefit from the business without having to commit to actually running a store day-to-day. Bob Schwartz, owner of Virginia-based SuperSuds Management, is harnessing his more than 10 years of industry experience to generate returns for equity investors.

“Our expertise is in finding locations, building the state-of-the-art stores and bringing professional management to them,” says Schwartz, whose company already owns and operates 20 SuperSuds stores in Virginia, Pennsylvania, Maryland and West Virginia. He added that it’s a natural extension to work with investors in his already proven arrangement.

“It’s really no different than the hotel business or real estate partnerships that people have been doing for 50 years,” says Schwartz.

Under this plan, investors contribute capital investment (often matched by SuperSuds). SuperSuds then finds a location, develops the store or stores and manages them. Investors benefit from an average 15 to 25 percent annual rate of return on investment. The advent of card payment systems and their audit capabilities ensure accountability of store collections and peace of mind that all profits are distributed fairly.

Schwartz said the timing is right for these partnerships, as in the current real estate market landlords are selective to ensure the viability of those leasing their property.

“Landlords want to know who’s operating the business and what they’re going to be bringing to the table,” he says, adding that SuperSuds’ track record of success is an important part of lease negotiations.

Timing, he believes, also is right as other investment opportunities appear significantly more risky in our economic downturn. There’s building interest in Schwartz’s idea from investors, who see the same benefits that lured him out of a Wall Street job and into the coin laundry business in 1996.

“The returns are very good, it’s a cash business, no receivables — it’s just a good business,” he says. Newly developed technology such as card systems and Internet-based surveillance also help make multiple store operations more feasible to operate. Bowe takes things a step further in explaining why investors as well as shopping center developers have taken to the coin laundry concept.

“When times are tough, I can choose not to dine out or shop,” he says, “but clean clothes are a necessity. There are very few businesses out there that are as recession-proof as ours. I think that’s why you’re seeing interest in our business from developers and other investors.”

©2009 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.