CLA Connect Open Forum

Coming Competition for WDF in Laundromats?

  • 1.  Coming Competition for WDF in Laundromats?

    Posted 05-14-2019 22:21
    Has anyone else heard about the new pickup and delivery service using home workers with a washer and dryer to do WDF (Fluff and Fold) in their homes, with pickup and delivery by Lyft, Uber or another ride service?

    This follows the Uber model of no equipment investment, minimum management and the development of application software. Mothers with small children and others that want a home business would provide an abundant labor pool while existing ride services, and self-driving automobiles in the future, could make this a winner for WDF services not bound by Laundromat locations.

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    Larry Larsen
    Laundromat123.com
    Anaheim, CA
    Distributor - Insurance - Consulting
    Cell: (714) 390-9969
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  • 2.  RE: Coming Competition for WDF in Laundromats?

    Posted 05-14-2019 23:00
    Yes, I've heard of it. No it'll never ever work! It's borderline laughable. Just another example of a bunch of tech guys(or gals) being convinced that they're smarter than all of us... Only to eventually find out they just lit millions and millions of someone's dollars on fire 🔥. Can you say Washio??? Cleanly??? Fill in the blank...

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    Dave Menz
    Queen City Laundry Chain
    https://www.queencitylaundry.com
    Laundry Magician Pickup & Delivery
    https://www.laundrymagician.com
    Cincinnati, OH
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  • 3.  RE: Coming Competition for WDF in Laundromats?

    Posted 05-15-2019 00:23
    I had someone, not long ago try to compete with us on WDF they ran adds in our area. Their house was about a block from our mat. They did not last. They were not consistent with service.
    As of right now I am not to concerned about it.

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    Deward Stout
    Hurricane Laundromat & Storage
    Hurricane UT
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  • 4.  RE: Coming Competition for WDF in Laundromats?

    Posted 05-15-2019 07:03
    I had heard that Lyft-Uber type services were expanding into delivery of pretty much everything in the future.  I expect the home LMat scenario might work in some small markets, but these pick up and delivery services may become more advantageous to current larger operators with needs for certain delivery areas....in numerous business formats.

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    LES MONTHEI
    MT VIEW LAUNDROMAT
    LAKEHEAD CA
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  • 5.  RE: Coming Competition for WDF in Laundromats?

    Posted 05-15-2019 09:38
    I sketched this out on the back of an envelope when deciding to do pickup and delivery (decided against).

    My family uses a lot of ride share, so I have a pretty good idea of costs and (you can argue with me, this rough math) I came up with the ride share being about a buck a minute/buck a mile.  Shorter runs have a minimum (what used to be called "flag drop" for taxis) so shorter runs actually cost more per mile/minute.

    From my math, there is NO WAY you can make money by paying a third-party delivery service which (ostensibly) is priced to earn a profit on a non-route optimized one-off deliveries--and remember you have to pay to return the order too, it's two-way.  At least at todays sub-$2.00/lb WDF prices you can't do it.

    If you broke out the delivery completely separately, then billed $1.50/lb you could make a positive gross margin, but your customer would be paying $30 + $15.00 for a 20 lb bag of laundry, closing in on $45.

    Makes more sense if your order is 60 lbs, then you have $90 to work with, take out the $15 delivery and you might still have a positive gross margin.  But then you've overwhelmed your single-mom and her one washer and dryer so your production will grind to a halt.

    The only way to make money with pickup and delivery is to 1) scale.  You have to be big, with a very efficient production process.  Your routes have to be efficient since a truck and driver are going to eat you alive in costs.  In this day and age of Fight for Fifteen, you also need a whole lot of cheap labor willing to do repetitive tasks efficiently for hours at a time and good luck with that.  2) you have to charge a painful premium, which looks to me to be well over $2.00/lb, or outside of the current competitive pricing.

    I mean, I could be wrong, but I don't think I am.  I know a couple guys on here are very successful at it, but they did 1) above, "scale".  I bet they lost their shirt until their investment paid off.

    For some simple margin lessons:  let's say you charge $6.00 for a 40 lb front loader and $.25 for 15 minutes of drying.  I would wager that your gross income on this one vend would be $6.50.   I am guessing your variable costs (water, electricity) are about 10% of your vend price.  This gives you a strong gross margin of $5.85 on $6.5 vended.  Then you pay out your labor, your rent, your repair costs, property taxes, credit card fees if you take them, labor for cleaning..by the time you're done, you probably have a net profit of around maybe a buck.  Probably not a lot more, or competition would pop up taking away your unusually high profits.

    Now let's do that for pickup and delivery:  you charge $1.50/lb and have a 30 lb order.  You bring in $45. pickup and delivery costs are going to be $15, all-in, then you're going to have to process.  Call your production efficiency 30/lb/hr folding, so you have an hour of labor just for folding, another fifteen for separating and washing.​  What are you paying your people?  Let's call it $15/hr all-in with taxes and workman's comp and sick day coverage and whatnot.  Your $30 margin just went down to $20.00

    Now, you've just paid a transaction fee for the credit card charge, plus 3%, so $1.65.  If you use a software vendor (you do) they charge 2% or so, so $.90

    Actual soap, plus the water/electricity used is going to be $2.00 or so, maybe a little less.

    total gross margin, $15.35.  Sounds ok,

    Now you have to pay for your Google/other advertising, your software license fee, search engine optimization, someone (contracted or you) to answer the phone for customer service issues..call it $5.00 if you amortized out the customer acquisition costs (you're fighting competitors for the same customers, I bet each new customer costs you $40 or $50).

    We're now down to $10.35 net profit.  Sounds pretty good, but are we depreciating our truck?  Do we have to pay overtime?  Are our drivers flakes?   Does our production line work efficiently and we're getting 30 lb/hour out of our workforce, or are they standing around waiting for the dryers to finish?

    If you are not right on top of this, like a restaurant owner on top of his food, utility and labor costs, your $10.35 is a profit on paper only, "one-offs" are going to suck that down to zero or negative.

    Pickup and delivery is a TOTALLY different business than vended laundry.

    Because you're good at vended laundry is meaningless when you suddenly have to juggle route optimization, Google adwords optimization (your competitors are clicking on your $4.00/per ads BTW), labor optimization (have to hire/fire/manage every second) and process optimization.

    It's a great way to use your capital equipment more fully than waiting for walk-ins, but you've introduced huge labor costs and challenges into the mix and minimum wage labor is harder to manage than a Speed Queen front loader bolted to the floor.

    I'd love to hear from guys making a bundle at this proving my analysis wrong.  Every way I look at it, you have to build a big, efficient operation before it makes any profit.  If it's not big, nor efficient, it will hemorrhage money.  If anyone has a different experience, speak up.




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    Luigi
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  • 6.  RE: Coming Competition for WDF in Laundromats?

    Posted 05-15-2019 11:05
    One of the few good things about NYC is that they will not tolerate home based laundry services.
    ALL laundry services must be licensed and regulated by the dept of consumer affairs. They do not take kindly to unlicensed fly by night operators.
    I've run into this problem a few times and all I had to do was to make some phone calls.

    This problem goes one step further in areas that have big apartment houses.....Sometimes a resident in the building will offer to do laundry for other residents.

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    Paulie B
    Multiple Mat Owner since 1976
    New York City, NY
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  • 7.  RE: Coming Competition for WDF in Laundromats?

    Posted 05-15-2019 12:29
    Luigi,

       That might be the most comprehensive post regarding pickup and delivery that I've seen. You definitely did your homework, good for you!! You are exactly correct, it's virtually impossible to compete in this arena if you don't:  1. ) Own a mat or similiar production facility with lots of storage and production area(a small or medium sized mat with no storage or production area is a big mistake that you'll learn very quickly IF you grow. 2.) Aren't incredibly detail oriented and very passionate about your business(like a bulldog day and night) 3.) Don't have an entrepreneurial mindset and spirit 4.) Aren't willing to build a true business with proper systems in place 5.) Aren't interested in scaling it to something significant within your local territory 6.) Understand that you cannot outsource any aspect of the business. 7.) Aren't partnered with a software company that is FULLY invested in your success. I literally wear out our software partners and they ALWAYS answer the bell. If they didn't, if be in trouble. Our industry has seen more and more software products for delivery launch every year lately. Most are good but the one you use better be great!! They also better be as passionate as you are!

    In a detail oriented and labor intensive business outsourcing just doesn't work. You MUST control the supply chain from beginning to end. You cannot do it alone though, you MUST build a team of rock stars and you must be very efficient. These are all things we've learned in our first 3 years in the delivery business. But, IF you can and do all of these things you will be amazed at the opportunity! We are completely exploding in Cincinnati/Northern Kentucky because we've figured all of this out. I laugh every time I see a new competitor launch in my area.(have another one launching now and they are already in trouble they just don't realize it. Not one competitor has made it yet(except us of course). I dont mean this in an arrogant way, but buckle up because it's a heck of a ride. Lastly yes, you better have deep pockets and have a stomach to absorb losses for a few years because you hit the nail on the head again. The pickup and delivery business requires a mat but has Nothing to do with a mat. It's a completely separate business and better be treated as such.

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    Dave Menz
    Queen City Laundry Chain
    https://www.queencitylaundry.com
    Laundry Magician Pickup & Delivery
    https://www.laundrymagician.com
    Cincinnati, OH
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  • 8.  RE: Coming Competition for WDF in Laundromats?

    Posted 05-15-2019 14:03

    Lastly yes, you better have deep pockets and have a stomach to absorb losses for a few years because you hit the nail on the head again.
    Dave Menz,  05-15-2019 12:28
    This was totally clear to me as I explored.  Sounds like I wasn't pessimistic enough, I figured months, not years to get to break-even but that was based on current competition, not new entrants arriving monthly.  I haven't checked in a while, but there used to be zero competition, then I checked four or five months later and there are four or five fragmented competitors, surely with more to grow.

    The thing that scared me away was going to be the sunk cost in labor.  I don't know your unemployment situation, but we can't even get applications for laundry attendants, let alone drone folders who produce.

    How do you keep staffed?  What does an employee cost you?

    I think clearly you have first-mover advantage; you were able to scale after investing a fortune, probably.  Now a competitor has to not only scale, but scale while competing with you, I see bank accounts getting drained.

    I learned a wise business strategy a long time ago; to scale to efficiency, one must invest a lot of capital.  Think Sam's Club, or Costco.  Amazon.

    Back to the labor thing:  that is the "gotcha".  If there was any way to automate washing and folding, it would work.  But I don't see economies of scale growing as business grows; I see hassles growing.  More pounds means more hands.  And you'd need to do it overnight if you were big enough and your store was busy during the day.  Now you need productive, reliable, minimum-wage workers willing to work late, dealing with other people's dirty laundry, both literally and metaphorically.


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    Luigi
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  • 9.  RE: Coming Competition for WDF in Laundromats?

    Posted 05-15-2019 19:13
    Luigi,

       I'm hesitant to give out too much information as someone who's currently launching in my territory trolls the message boards regularly. Everything you said is true to a certain extent but obviously it can be done and can be done well but it takes a lot of things to make it work. Since our society has proven that there clearly is a market, everybody and their mom thinks it's easy and anyone can do it, especially if you have a mat. That simply isn't true. It's not hard to do it on a small scale and make a little extra money, but it's very difficult to scale and dominate a market. The good news is, if you can figure it out, invest the time and money, find, train, build and keep the right people you will be golden. Best advice that I have for others is if you're in a market where someone's figured it out, you're really behind the 8 ball twice. If you're distracted with running other businesses, working a full time job, etc it will never happen. You must be all in.....

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    Dave Menz
    Queen City Laundry Chain
    https://www.queencitylaundry.com
    Laundry Magician Pickup & Delivery
    https://www.laundrymagician.com
    Cincinnati, OH
    ------------------------------

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  • 10.  RE: Coming Competition for WDF in Laundromats?

    Posted 05-15-2019 20:55
    Dave and Luigi have stated the issues very well.  The passion discussed to make the plan come together is a must to build an excellent business.   A transition team at the right time is also a must.  It is hard to keep the passion going for more than a generation, and hard to find the right person to hand off to inside or outside your family.  As you get older, different things begin to take priority and your passions can change.  Either way, a sales marketing plan is an integral part of any business consideration.

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    LES MONTHEI
    MT VIEW LAUNDROMAT
    LAKEHEAD CA
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  • 11.  RE: Coming Competition for WDF in Laundromats?

    Posted 05-16-2019 15:40

    Articulated points and most are accurate or agree with but I happen to fit the mold of operator and technology partner in one and have a very focused eye on this topic... labor is a reflection of management that simple...yes it takes time to groom folks but if you give respect you get respect...It took me 5 years to get a great GM... I've had a few ok ones and 2 bad ones but you need to plow through it and stay focused on all levels of employees. Product consistency is a must as well as logistics and logistic communication...keeping your customer informed is what THEY want... and what you need... Marketing is a must as well...digital can't go wrong... Technology is what you will need to scale no doubt about that... meaning staffing tools via tech, driving tools via tech, washing/drying tools via tech, marketing tools via tech...get the point...Sorry for those nay sayers who don't have the aptitude or desire to compete... You heard it here first... more then 50% of household laundry will be outsourced (pickup/delivery) within 15 years...same thing happened with oil changes back in the day, same thing happened with car washes, same thing with house cleaning or lawn cutting... look at history, great indicator for the future... Anyone would like to have our own "round table" at the Clean Show, I'm in... collaboration is a good thing don't fear it!

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    Rick Rome
    Owner/Operator
    WashClubTrak
    POS/Laundry Delivery Software
    New York
    Rick@washclubtrak.com
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