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The Koerner Office - Business Ideas and Deep Dives with Chris Koerner
The $300K/Year Business That Almost Never Fails⏐Ep. #239
00:51:07
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- [00:00]
A
I'm like, well, can I see how well it does? He's like, yeah, here's my books. Take a look. And I looked and I was like, wow. Did not expect that.
- [00:08]
B
That's so interesting. I'm just fascinated by this business.
- [00:11]
A
People have to have clean clothes. We're already at like a 500k that first month.
- [00:15]
B
Wow.
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A
It's just so resistant to anything economic wise or pandemic wise. It's just a crazy, bulletproof business with great margins.
- [00:23]
B
Have you put any other competitors out of business?
- [00:25]
A
Yeah, we've put 11 out of business.
- [00:28]
B
Holy cow. Not that you're counting.
- [00:31]
A
It's a badge of honor.
- [00:35]
B
Welcome to the Kerner office, your one stop shop for watching me chase all of my shiny objects in real time. Today I interviewed Tyler Purcell and he owns four Laundromats. In addition, he has a full time job running a wealth management firm. He's a busy guy and he loves both of his things, so he won't quit either one of them. But he's an open book when it comes to the Laundromat business. He answered every question I threw at him. Hard numbers, net profits, how he does his research when he opens a facility, how he puts competitors out of business, what ideas he's seeing in the laundry industry that anyone could capitalize on even if they don't have much money. Where the industry's headed, where people are failing. I hope you like this. Please like and subscribe. Share with your friends so more people can quit their jobs. All right, enjoy. How, why and when did you make the big jump from financial planning to laundromats? And I know you're still doing financial planning, right? Yeah.
- [01:27]
A
Yeah. So financial planning practice is growing like crazy. I tell everybody I have the two best jobs. I have that, and then I have Laundromats. We manage about 250 million. We've grown about by about 30 million this year, so probably our best year ever. That's always been the main thing. That's what I love doing. Not that I don't love Laundromats, but I don't see myself ever giving this up to fully do Laundromats. And we can get into that later.
- [01:48]
B
All right, so what, first planted that seed about Laundromats in your head?
- [01:52]
A
Yeah. So it's actually a family business, but not on my side. 10 years ago, started dating my wife. Found out her dad had a Laundromat. Didn't really think anything of it.
- [02:02]
B
He's like, oh, now we're definitely getting married. Yeah, I've been watching Cody Sanchez and I heard this is good.
- [02:11]
A
Yeah, he's loaded, just collects quarters all day. No, he's a smart guy. He was in and had his own PNC insurance practice was into some commercial real estate. So I'm like, hey, it must be a good business. Never thought about wanting to get into the laundromat business or anything like that. Fast forward four years down the road, we get married. About a year into to marriage, he approaches us and then also his son and says, hey, I think I have a good thing going. Do you guys want to team up and open more laundromats? And I'm like, ah, laundromats not sexy. Like, I was 28 at the time. I think when he approached that was your ego talking.
- [02:49]
B
Your ego was responding.
- [02:51]
A
Yeah. I'm like, do I want to be a laundromat owner? Like, yeah, it probably not, right? I want to do something cool, right? Vc, PE stuff. I'm a numbers guy, so I'm like, well, can I see how well it does? He's like, yeah, here's my books. Take a look. And I looked and I was like, wow, did not expect that. I think that location was doing like 250 net at that time for a single laundromat location. I'm like, man, if we could have five, 10 of these, you know, that's a dang good business. So that's how we started. Came up with the name Laundry Spot. He rebranded his store Laundry Spot and now we have four locations.
- [03:27]
B
I don't know why I'm making this connection right now, but like to think that a laundromat would be making 250net when like a Subway sandwich location, the average one nets like 35, 50 grand, right? Yeah. And there's 35,000 of them. And it's like when the average business owner or wannabe business owner goes to think of like, what should I do? What should I start? They don't think laundromat. They think something that's probably less profitable. Why do you think that is? Do you think it's because they're primarily in low income communities. So a lot of there's like a selection bias where a lot of the people that might be able to start one of these just don't live in that world. It's not familiar to them.
- [04:06]
A
Yeah, I think you're spot on there. Also, the laundromat industry is probably 10 years behind any other industry as far as innovation. Most people think when they think laundromats, they think, oh, the 25 year old laundromat down the street from me, that's dirty, there's crime there, drugs. And it never kind of evolved. And so I think of it as now, finally the industry is coming along. It's like where car washes were 10 years ago. And now you see, you know, there's a car wash on every block.
- [04:35]
B
Interesting. That's true.
- [04:37]
A
So I kind of view it like, hey, we're five years behind the car wash industry, but it's coming. I mean there's a lot of money coming to the laundromat space right now.
- [04:45]
B
So let's do that for a sec. Compare the, and contrast the car wash and the laundromat industry. Because on the surface I get that. I remember car washes were like, no one thought of them and now they're everywhere. And I went on an 80 mile bike ride around DFW, like around all some of the fastest growing suburbs in the country. And there was, I forget the name of it, but there was one car wash brand that I saw like four going up, four brand new on one bike ride. And I wasn't even looking for em and I'm like, holy cow, someone is onto something. But then I think, okay, well rich, poor, middle class, they're all driving cars. What percentage of the population is actually using a laundromat on a weekly basis? 20%? 30?
- [05:26]
A
Yeah, probably not even to be honest. So you know, that's a big thing. People are like, oh, laundromats. No one uses laundromats anymore. Right? Everyone has washer, dryer in their home. The funny thing is they don't think about them breaking right. We have people every day coming to our store who are like, hey, my washer's down. People who live in high class neighborhoods who are upper middle class and they come and do, they do. They do their laundry at our store because it's nice, clean, they feel safe, it's attended. We're pulling in people who aren't the normal laundromat users. So we probably pull a bigger percentage of what your normal laundromat would. But the demographics, they're all across the board, right? We offer drop off laundry, that's upper middle class. People who have big families who don't have the time, they want to outsource that. So we offer all sorts of services on top of just the self service part of it. I think there are a lot of similarities. One is the, the depreciation, right? Like car washes, you can depreciate a ton of the equipment. Same with Laundromat. One of the great things is you open up a Laundromat and you have $800,000 worth of laundry machines. You can depreciate all that. We could bonus depreciate it if you want to. So that's a huge benefit that both of those have. One major difference that and why it's funny because my father in law actually looked at car washes at one point and the main difference was when, you know, shit hits the fan, people are still washing their clothes, right? When the economy's down, they still got to wash their clothes. They may come a little bit less often. People are cutting your monthly subscription at the car wash, right? Like yeah, that's probably one of the first things to go. People have to have clean clothes. And I've been doing this for seven years now and I've seen a few ups and downs, right. Covid business didn't change. It actually exploded during COVID And so it's just so resistant to anything economic wise or pandemic wise. Right. Like it's just a crazy bulletproof business and that's with great margins. And so that's why we prefer that over something like a car wash.
- [07:27]
B
It's funny, as you talk about it, I'm maybe for the first time making the connection between your business and my business and mobile home and RV park business, right? Because when we went through Covid, we didn't see anything because a rent is like top of mind first. The month rolls around and they gotta pay rent first, right? And so that came to us as mobile home and RV park owners, that that's a non negotiable, they can't get kicked out of their house. Whereas like you said, the monthly car wash subscription, the Netflix subscription, those other nice to haves go first and rent and laundry, they get paid first. So. And it's also interesting because for instance, a long term RV park, most people, middle and upper middle class Americans, don't even know that those exist. They think that you go to a KOA and stay in a nice campground. People don't know that other people live in RVs for months and years at a time. Not because they're living the van life and on Instagram, but because they only have $500 a month for rent, but they just, they can't afford more. And so they, they will live in a portable RV for years and decades of their life, right? So it's like there's not a lot of people investing in that asset class because they don't know it exists, you know.
- [08:39]
A
Exactly. Yeah. Very similar.
- [08:41]
B
So how did you go from this is interesting, 250 per location to you open up your first laundromat.
- [08:48]
A
Yeah. So my brother in law, he is really good at the creative side of things. Like what I'm not good at. Software developer graphic. So we created this awesome brand. I give him most of the props, the laundry spot, the logo. It's an absolutely great brand in my opinion. I'm biased, but we came up with that. And then we're like, okay, where do we put our first store? We're learning a lot. Obviously. My father in law had been in the business for a while, so he had his opinions and what he knew about the industry. But the main thing and how we open up new stores is we go to where there are already laundromats and we look for those rundown stores who still have customers coming in and out. And the story for our first one that we opened up together, we went and looked at this laundromat. We were looking at a spot right across the street in a shopping center directly across a highly trafficked road. We walk into this laundromat. It's packed and it was probably the dirtiest thing I've ever seen. Visible cockroaches crawling on the ground. Children.
- [09:50]
B
You were drooling. Yeah, like, oh yes.
- [09:52]
A
I mean, part of me was sad as well. There's kids running around, people are washing their clothes in a place like this. I'm like, this is horrible. How are there not better options than this? But yeah, then we're like, man, this thing is probably doing crazy numbers and it's horrible. It's horribly run, it's disgusting. And so we went right across the street from that one and put them out of business within six months. That's kind of what we look for, right? Pockets of three, four laundromats in an area. We call them zombie mats. Basically. They haven't been updated in 20 years. They're eating their own business, essentially just running until they die. We look for the best location near three or four. And that's where we go into. We match up the demographics on what we know works, things like that.
- [10:36]
B
Is there ever a world where it would make sense to buy one of those zombie mats, close it for three months, just completely renovate it, like literally turn it into what you're starting from scratch and then not even have to worry about the location. People can just keep coming to where they were always coming. Or is that just not of interest? Yeah.
- [10:53]
A
So there Are people that do that in our industry? That's not how we do things. For a few reasons. We actually looked at the beginning. We looked at buying four laundromats that were already up and running. They were for sale. We're go in there, redo them all. When we started diving into things, we're like, we're going to spend all this money redoing this location. Usually old laundromats. The infrastructure's poor, right. Utilities are not great, they're not big enough to handle modern washers. And then also the volume we'd want to do. Layouts of the stores aren't great. So we'd want to switch where the washers are, where the dryers are.
- [11:28]
B
It's just too much. You might as well start from scratch. Yeah.
- [11:30]
A
So we're like, why would we pay to do this? Let's just go across the street again. You know, that's formulated our opinion of how we do things. And so through that due diligence. Yeah, that's just kind of how we were like, yeah, let's not buy old ones. Let's go into a white box or build our own building and do it exactly how we want from the beginning, knowing that we're going to be here for 20, 25, 30 years.
- [11:52]
B
Now what if you find the perfect location? All the demographics match up. There's three or four zombie mats and there's a shopping center across the street, but it is just a garbage shopping center. Just vape shops, tattoo parlors. Do you open or do you not? Because you don't really want to be this nice, clean, bright building in a terrible shopping center, do you?
- [12:12]
A
So you would, you would think so. But actually one of our best performing self service stores is kind of in a shopping center like that. There was nobody in there except for one or two people out of eight, I think, spaces. We approached the landlord, we're like, hey, we want to put a laundromat. And he was like, ah, you know, oh, I don't want a laundromat. Well then we showed him our other stores and he's like, oh, wow, okay. Yeah, I would love to have you guys. So we go in there and then a year later, the whole place is now nice, right?
- [12:42]
B
Interesting.
- [12:43]
A
Every spot is leased out. The landlord loves us. He's like, you guys need to open more of these. In my other buildings across Cincinnati.
- [12:50]
B
Yeah. How long of a lease do you have there? Because you'll be in the driver's seat when you go to renew that.
- [12:54]
A
We own three of the Buildings. But this one is a lease and you know, you want to work for those long term leases. So we had a 30 year lease, all five year options on it. I look at this lease and I'm like, I don't know how we got it 25 years down the road. Our per square foot is still under $14.
- [13:14]
B
Holy cow.
- [13:16]
A
I don't know why this landlord agreed to that, but he did. And so it's almost like an asset, right? Yeah, I'm 25 years from now, rent is going to be double that at least. You know, I mean probably triple that. And we're sitting here with a cheap, cheap lease. So it's all about what you can work the lease out. You want long term. Right. You don't spend all this money on infrastructure and things and then get kicked out five years down the road.
- [13:38]
B
It reminds me of like an Apple or a Tesla store in a mall. Like malls love to have them in because it brings in a higher quality of client to the mall that go shop at the other stores. Right. You elevated the profile of that entire shopping center. Yeah.
- [13:51]
A
It's kind of funny because you're like, oh, a laundromat, elevating a shopping center.
- [13:54]
B
Yeah, right. It's such a good framework to take something that's ignored, ugly and forgotten and make it into like an Apple store experience. And I don't think it would work for just any industry, but you've clearly proven it to work in that industry. Okay, so six months to start. How much money to open your doors?
- [14:14]
A
Yeah, so it's probably right now with where prices are, to open up a 4,000 to 5,000 square foot store right now is probably going to cost you about 1.5. That's all in equipment. Build out everything.
- [14:26]
B
Can you get loans for that?
- [14:27]
A
There's a few options in our industry. All the equipment manufacturers, they'll offer equipment financing. There are some lending companies out there who just focus on laundromats and car washes. Some good ones we went with just local bank relationship that we had. So for us they rolled up the business loan and the equipment all in one and we just pay on that one loan. So look into your options, verify who's easiest to work with, best terms, etc.
- [14:55]
B
How much did you have to put down of the 1.5?
- [14:57]
A
We put 20% down.
- [14:59]
B
Okay. Okay. So yeah, 300 down to create an asset. That's netting. I mean would you mind saying what your stores net each?
- [15:09]
A
Yeah, so our average store net's about 300. A little over 300.
- [15:13]
B
Wow.
- [15:14]
A
Yeah. Last year we did about 3 million. Top line 1.1 NAT. This year we're on pace to do probably 3.2 and 1.4 net.
- [15:26]
B
Wow. And then talk about your grand opening process. I assume you don't, I mean, you don't want to sit around and wait two or three years to really ramp up. What do you do to get foot traffic in the door on day one? And how is it unique for the industry?
- [15:39]
A
Yeah, we do a lot of build up. So just a couple things. It's nothing super revolutionary, but there's a couple things that I'm proud of that we've done. So we do in our industry, physical mail works well. So postcards, we do a lot of postcards. So we'll send out two rounds of coming soon postcards. Then we have grand opening weekends. We do back to back free laundry weekends. So we'll send out a postcard postcard for that. And then we'll also do as many interviews, talk with as many papers as we can, local papers, build the hype up for that grand opening free weekend. You know, post on socials, run Google Ads, really build that hype up because that, that can make or break the store. It's getting that initial, just getting people in the door. One cool thing we did this past grand opening with our newest store. We had a VIP party at our store and we invited city officials, we invited business owners in the area. We had it catered, we had a bartender, we had a band. It was a red carpet event for a laundromat. And you know, that kind of generated a ton of buzz. Some news, local news companies came by, did some segments on it. So that, that was really cool. That was something new that we did for this most recent opening and that was a hit. We got a lot of commercial business off of that, made a lot of connections. And then you get the city on your side. You know, that's huge. When they still think of laundromats as the same thing we all do. Right. So getting them on your side helps a ton. So that was very cool. And then our grand opening weekends, I mean that is all hands on deck. You know, we have all of our employees, all the owners are working.
- [17:21]
B
How many employees per store?
- [17:23]
A
We probably have about 12, 15 on rotation. Usually 2 to 4 working at a time, depending on how much commercial laundry we have. There's probably, I'd say 12 of us in there. That 12 hours were open on those three laundry weekends. And you know, we're just trying to blow the Customer service out of the park. We'll do hundreds of five star reviews just on those weekends.
- [17:46]
B
Wow.
- [17:47]
A
So right off the bat, boom, new laundromat in town. Okay. We have 255 star reviews. People obviously are like, what is going on here? I need to check this place out. So that's the most important thing for us. If you look at the month after we do those grand opening weekends, we're already at like a 500k revenue run rate that first month.
- [18:08]
B
Wow.
- [18:09]
A
Just right off the bat, we're ramped up. So that's why we put so much time and effort and work into those.
- [18:15]
B
At like 30% margins. Ish.
- [18:17]
A
Yeah.
- [18:18]
B
30.
- [18:18]
A
40. We shoot for 40%.
- [18:20]
B
Wow.
- [18:21]
A
Yeah.
- [18:22]
B
So many good principles at play here. It's interesting because you do the free weekend. And in my head, one of the reasons I want to do. I would. Would want to do that is because it's provides, like the illusion of popularity, right? It's like, wow, this place. Something's. Now everyone knows that it's free that weekend, right? But still, it's like just the. There's like a safety in numbers. Like, this is popular. Like, these people must know about this place. Like, this must be a brand. I want to come here. This is the next big thing, right. It just kind of implicitly shows that. But if you have crappy customer service, even if it's free, you shoot yourself in the foot. So you have to do both at the same time. You have to fill the doors and you have to provide an amazing experience. Otherwise you're. You might be doing yourself even more of a disservice than not having this grand opening weekend. Right. I'm curious. What did you see in the numbers or in the data when you opened your first store? Maybe you started with one weekend of free laundry and then you expanded to two. Was that the case? And if so, what made you do that?
- [19:21]
A
Yeah, that's exactly what happened. We did just one free weekend the first time we opened, and it was so popular, we're like, why don't we do two? Our cost is just in the utilities and the employees. Right. It's not killing us to give away free laundry for a weekend. And we knew. We figured out once we get people into our store, they're not going back to their other laundromat. It's just not happening. So all we need to do is get people into our store, get to see our modern equipment, how fast they can do laundry, how clean it gets our customer service, all those things. And so we're like, let's do the second weekend. And what we realized was the people that come on the first weekend, go tell everybody else. They know.
- [20:02]
B
Yeah, there it is.
- [20:03]
A
Okay, second weekend.
- [20:04]
B
Perfect.
- [20:05]
A
So, you know, we can get one person in that first weekend. They're gonna go tell for their family members. And now they're all coming that second week. So we saw that play out. And it's just. I mean, it's madness, right? Like, we're having people wait for washing machines because it's so crowded. And we're. We got one over here. We got one over here. I mean, it's a fun. It's like.
- [20:27]
B
It's like the Wall street floor.
- [20:28]
A
Yeah, yeah, it is, it is. You know, we're playing music, we'll have pizza, you know, drink. I mean, it's an experience. And people are just like, this is crazy. We hear stories and like, I've shed tears on those free weekends because people will come up to us and be like, I haven't done my laundry in three months because I couldn't afford it. Ten bags of laundry.
- [20:49]
B
It's like, you know what? You can come free for life.
- [20:51]
A
Yeah. Yeah. I love the business. It makes a lot of money. But there's also the aspect of that part of it. Like, we do a lot of charity. We do a lot of giving away free laundry. We go into these communities that may not have something like this, right? They have the cockroach infested laundromat, and we come in and give them a way better experience. And it's not like we gouge them on prices. Like, we're barely more expensive than what we were. What they were paying beforehand. And they're thankful, like, it's crazy that they'll come up and say thank you for bringing this to our community. So that's a part I love about it as well.
- [21:28]
B
And I imagine you're more expensive than the neighbors, right?
- [21:31]
A
Yeah, people ask that question a lot. But it's not like we're not much more expensive. I'm talking, like, maybe 50 cents more expensive per load.
- [21:38]
B
Yeah. Like, but on a percentage basis, how much more is that?
- [21:42]
A
So on a small load, you're talking 3.50 to $4.
- [21:45]
B
Okay, so 15.
- [21:47]
A
Yeah, 15 here and there, depending on size of lobster.
- [21:50]
B
It's funny because there's so many crossovers with the mobile home and RV park industry, because we'll do that. We will raise rent when we buy the park, but we'll also clean it up and we'll put in cameras and they Feel safer. And we feel safer. And we trim the trees, we fill the potholes, and we will go and make testimonial videos. And they're like. They're in tears. They're like, this is the first park I've had where I'm not worried about someone breaking in. Like, my kids are safe to go play in the yard. And it's like people read a tweet and they're like, oh, this guy's just sucking the life from the poor. Right. It's like, well, no, not at all. But it does. It does feel good.
- [22:26]
A
Yeah.
- [22:27]
B
Do you have any hard data on what your attendance is like on weekend one versus weekend two? And why not weekdays? Is it just because it's easier for people to get out there when they're not working on the weekend?
- [22:37]
A
Laundry day. Saturday and Sunday are the biggest days of the week. Sunday by far. So we do as much laundry, actually more laundry on Saturday and Sunday than we do Monday through Friday combined.
- [22:48]
B
Oh, wow.
- [22:48]
A
So it's just. That's when people are free. That's when they get out, when they're not working. So it just makes sense to do it on those days. Plus, we all have jobs, so we're working on the weekdays. So to get all the owners there and participating, weekends work great. But it's almost double what comes the second weekend versus the first week.
- [23:05]
B
Wow.
- [23:06]
A
Yeah.
- [23:07]
B
So that's just a huge unlock there.
- [23:09]
A
It is. We even talked about doing, like, a full free week or, like, how can.
- [23:13]
B
We do this more? Right?
- [23:14]
A
Like, exactly, Exactly. There's obviously an end point of how many customers we have in an area. You know, your normal laundromat customer is not going to travel outside of, like, three miles to get to your store.
- [23:25]
B
Yeah.
- [23:25]
A
There is terminal velocity on how many people we can actually get that use a laundromat.
- [23:31]
B
Yeah. It's so interesting, the concept of that. Like, I wrestle with that. So I call it, like, the McRib effect. Right. Like, it's. It's pretty bold of McDonald's to say you only get the McRib, and I've never eaten one in my life, so every October or whatever. Or the Shamrock Shake. Right. Because they sell really, really well. But, like, I know what they're going for. It needs to be scarce. It needs to be special and unique. Or like the Monopoly game. I don't know what all my examples are, McDonald's, but it's kind of like what you're doing, right? It's like, we can't make this, like, the first Saturday of every month, necessarily. Maybe once a year, maybe only at open. It's just so hard to balance keeping it special and unique versus really just driving a lot of traffic. Right.
- [24:15]
A
Yeah. No, totally agree. Yeah, we do. We do another big thing that's called Free Dry July where drying is free all of July and people, they know like that's the month they get ready for it, things like that. So yeah, creating certain things, marketing ideas like that. Yeah, spot on.
- [24:32]
B
This might be a terrible question, but do people ever, during Free Dry July, do they bring their washed clothes from somewhere else and then dry it there?
- [24:40]
A
Yeah, it happens. Yep.
- [24:41]
B
That's interesting for sure. Do you have any data on how many people from week one come back to week two versus all new people?
- [24:50]
A
That's basically impossible to track.
- [24:53]
B
It's hard, right?
- [24:53]
A
We don't collect customer information on those. I mean, we really don't at all. The only way we can collect customer information is if they use our loyalty card. They can add their name, address and things like that. So our industry is tough with stuff like that. Right. Tracking customer acquisition cost is hard to track. In our industry, we still allow coins. 35% of our customers still use quarters.
- [25:18]
B
Interesting.
- [25:19]
A
The other percent is using loyalty card or credit card or, you know, other forms of payment.
- [25:23]
B
This might be another dumb question, but do you prefer cash? And like, I assume you're reporting it like an old school laundromat might not. Right. But like, you're a financial planner. You got to keep the books clean. And a lot of people don't prefer cash because it's a liability and it's a cost to have to move it and deposit it. Or do you prefer cash or not?
- [25:42]
A
I don't think we prefer it like if everybody paid by loyalty card or credit card, that would be great. We just don't want to discriminate on how you want to pay.
- [25:50]
B
Right, sure, sure.
- [25:52]
A
We deal with the headache of, okay, we got to remove the coins, we reuse them, essentially we just put them back in the build a coin machine. It's not that much of a headache. We let our managers do that. Some laundromat owners are like, oh, you let your managers touch the coins, like touch money. But we, our tracking system is, we see every quarter that goes into a machine. We can run reports. Our security systems and camera systems at our stores are better than your local bank. You can put a 20 bill in to our bill changer and we can zoom in and basically read the serial number number. People learn, like, probably shouldn't try to steal from these people, from these guys. Or a lot of the times in older laundromats, people will be like, oh, I didn't get my change. I put in a five and didn't get this. And people try that at the beginning when we open. And they're like, no, I just zoomed in. I saw you put in a twenty, you know, a five dollar bill, not a twenty bill. And I saw you collect this at this time. And they're like, okay. They hang up.
- [26:45]
B
And you're like, dude, I've seen enough TV shows to know this is like the oldest con in the book. Yeah, come on.
- [26:49]
A
And so we don't have a lot of that at our stores. We don't have a lot of crime. We don't have a lot of drug usage. Just because of that reason, the community starts to figure it out. Like, this is not the place to do those things.
- [27:00]
B
Well, it's such an interesting psychological phenomenon where people walk in the door and it's the same people that were walking in the zombie mats that might walk in and want to scam or walk in and want to break the rules or whatever, but when they walk into your place, the whole experience is elevated. Yeah. And they just act better, you know, and it just makes it easier for everyone, especially yourself. And I do think it's interesting that you don't prefer cash, because I would think a zombie mat owner would say the exact opposite. Like, he would love for it all to be cash, and he might just report five grand at the end of the year.
- [27:33]
A
That. That's the funny thing. That's what they all do. Like, I talk to a lot of people who are looking at buying laundromats, and I'm like, okay, do they have a pnl? And they're like, no, they have an Excel spreadsheet. Like, I'm like, I mean, almost every single time. And so it's so hard to verify revenue and, you know, net income off of what these old owners are doing. They don't have a bookkeeper. It's crazy. So, yeah, we do things totally different.
- [28:01]
B
If you can't really collect much customer data, do you know what, like, your lifetime value is of a customer or, like, ballpark?
- [28:08]
A
It's tough. So we do one marketing campaign with postcards, and what we do is we send out a postcard and we say, this postcard is worth a $30 loyalty card for free.
- [28:20]
B
Oh, wow.
- [28:20]
A
Bring it in.
- [28:21]
B
It's like a gift card, essentially.
- [28:23]
A
A gift card. Yeah. On a postcard. So that's how we start to track where we're pulling or new customers. Because when they bring that card in, we have our attendance, get their name, we have their addresses, and then they ask if they're a new customer or not. So we, with that campaign, we can kind of track what our acquisition cost is and the, the lifetime value if they're using a loyalty card. So we're able to track that card across its whole lifetime. And you know, I don't have exact numbers on that, but it's high. I mean, if we spend $30 on a loyalty card to get a customer in thousands and thousands and thousands of dollars over the lifetime, because they're coming once a week as long as they.
- [29:07]
B
Live in that area. Right. I mean, why would they stop?
- [29:10]
A
Exactly. Like I mentioned, if we get them in our doors, they're a customer for life. Likely.
- [29:14]
B
And what's the average spend per visit for a customer?
- [29:17]
A
It's around $20 probably. Surprisingly, it's fairly high. I mean, our big machines are 80 pounders. They're 1125 to start.
- [29:28]
B
Wow.
- [29:28]
A
So you do one big load, then you dry. It's a few dollars to dry. So you're already at 15 on, on one big load. If you're running three small machines, you know, could be 12, 15 there. Same thing. So it's interesting watching the preferences of customers. Right. Like some people prefer three 30 pound machines versus the one big 80 pound machine. They could throw that all in there and save money, but they just prefer it that way. So. Yeah, it's interesting looking at stuff like that in our business.
- [30:00]
B
And do most come weekly or like bi weekly?
- [30:03]
A
It's split. Yeah. I mean it's in that range once.
- [30:06]
B
Every week to two weeks, ten days or so.
- [30:08]
A
Yeah. Yeah.
- [30:10]
B
Okay. It's just crazy to me how much you could spend on laundry. Right. Like you could buy a used washer dryer every month or two with what they're spending on laundry.
- [30:21]
A
Yeah, yeah.
- [30:22]
B
But I know that plays on a lot more societal, cultural factors that are systemic and just hard to turn that around.
- [30:29]
A
Like you, yeah. Like you said, rent gets paid first, laundry actually gets paid first. When it's the first of the month, we, we. Our business goes up.
- [30:37]
B
Yeah.
- [30:37]
A
Like that first week of the month is usually the best week. So. Yeah, A lot of factors like you said, go in, go into that and.
- [30:44]
B
Well, and Friday is payday too. Right. So you go into the weekend, you've got time to do your laundry. You have money to do your laundry. You said four locations. Yeah. Of your four locations are you, how often are you at capacity on the weekends where people are waiting for machines and do you measure that and if so, how?
- [31:01]
A
Probably two of our stores have probably hit weekend capacity. The other two still have room to grow. So we're still trying to grow that self service. The problem is we have tried to move those weekend customers to the week.
- [31:14]
B
That's where I'm going with this.
- [31:15]
A
Yeah, we offer discounts and free dry and we've tried and tried and it just doesn't work.
- [31:22]
B
Discounts don't do it.
- [31:23]
A
Yeah, they don't do it.
- [31:25]
B
How aggressive do you get with your discounts?
- [31:26]
A
We would go 20% free dry. We're talking on a 20 load. You know, they're saving $5 probably across the spectrum. It did not move the needle and.
- [31:36]
B
So it's like do anything.
- [31:37]
A
Yeah, it's like we're not going to go down to 50 discount. Right. Just to move some people. So yeah, it's, it was super interesting as we were messing with that and trying to make it work. But yeah, we just, it just doesn't happen.
- [31:49]
B
Now, is it you offer free dries instead of free washes because it's lower cost for you? Is that the thesis?
- [31:55]
A
So our equipment is very, very good. By the time you take something out of the washer, it almost feels dry. Like it's barely damp. So people can dry for 15 minutes and their clothes are ready to go. So it's inexpensive for us to offer that. It's a good value. The customer is getting something for free. They're getting their whole drive for free. Right. Like, oh, I'm getting half of my.
- [32:16]
B
Experience for free, but it's like 30 of your margin as opposed to 50.
- [32:20]
A
Right, right, exactly.
- [32:21]
B
I wonder if you tried something completely off the wall and different to get people there during the week. More like a Planet Fitness model. Like free pizza Tuesdays, you know, and like just like nothing related to laundry at all. Keep the prices the same and just like just try something different, you know?
- [32:37]
A
Yeah, yeah. I don't know, we could get crazy. But I mean we, yeah, we've, we tried all sorts of discounts. We've tried anything to do with pricing and that nothing works. So I just don't know if pizza's gonna get him there, you know?
- [32:52]
B
Right, right. Have you ever considered going the opposite direction and increasing the price on the weekends only?
- [32:58]
A
We have thought about that, but part of that makes my skin crawl too, you know? Yeah. We want to be fair. We want to create a great experience. We want to make some money Doing it, but we don't want to, you know, gouge our customers like that.
- [33:09]
B
You know, I think this is one of those critical moments where, like, your financial brain crosses over with, like, your empathetic brain, and it's like, which one is going to win? All right, let's be the good guy here. These are profitable. They're doing great. Like, we don't need to optimize everything to the hilt. There's just going to be a wait for these two locations on the weekend.
- [33:29]
A
Yeah.
- [33:29]
B
Not going to raise prices. I tried to get them there during the weekday because it's not unethical to lower prices.
- [33:35]
A
Right.
- [33:35]
B
They're just not coming. Like, there's probably a single parent working during the week or two parents both working during the week, and it doesn't matter if you have free laundry on Wednesday, they can't make it.
- [33:46]
A
Right. Exactly. Yeah. You're spot on. And that's what we found. Testing all those things.
- [33:50]
B
That's so interesting. I'm just fascinated by this business. What about if. If you wanted to capture more data, could you offer like a free wash in exchange for an email address or something? If they don't have a loyalty card? Have you tried to get creative with that?
- [34:04]
A
We basically only tried to capture data on the loyalty cards. Here's the thing. Here's another thing. Our demographic doesn't like to give out much information.
- [34:12]
B
Okay.
- [34:13]
A
The average laundromat user doesn't want to give out a lot of information. They don't like to use credit cards or debit cards because of that reason. So that's why we still have, you know, the 30, 35% coin usage. They don't even want anybody to know they're there, essentially. Right. So that's one battle dealing with the customer base that we service.
- [34:35]
B
Interesting. Because, like, in the mobile home park world, we don't really need a lot of their information. Right. We need what any landlord needs. We don't. We're not sending marketing emails or anything. So we don't deal with that. But I have a friend that sells software to school districts, and he said that one of the biggest problems that low income school districts face is just contacting parents, like getting their number, answering a text or a call or an email. They're not checking their emails. It cost them like millions of dollars just not being able to get in touch with them.
- [35:06]
A
Right.
- [35:06]
B
So it totally jives with what you're saying.
- [35:09]
A
Yep.
- [35:10]
B
Interesting. All right, so these are super profitable. Why haven't you opened any for two years?
- [35:16]
A
We all have successful day jobs that we absolutely love. And we look at each other and we're like, why don't we quit and open up 20 or 50 of these? And it's kind of the Spider man meme where we're all like, well, you quit. You know, you.
- [35:27]
B
You.
- [35:27]
A
Yeah, we're all pointing at each other, and we're all like, I'm not quitting. So we've kind of battled that. But over the last year, we've been exploring how do we grow in the capacity that we have. And we've learned a lot. We've investigated a lot of avenues, and we have a lot of good stuff going on in the background that I can't quite share yet, but hopefully soon. But, yeah, there's big plans. My goal is to have 200 laundry spots across the US at some point and put a lot of people in business, help a lot of communities, give them a better experience doing their laundry, and have a great brand.
- [36:03]
B
Let's talk about what you look for in a location. What all kind of demographic research are you doing to make sure that it's a good location? Because from what I understand, you've never had a location fail, Right? You're batting a thousand. What are you looking for?
- [36:17]
A
So, again, first off the bat is what's in the area, what Laundromats are already there. Let's find those pockets. Then we go and we do a ton of due diligence on those laundromats. We go do laundry there. We write down everything. Equipment manufacturer, the pricing, our notes, anything. And then we get our hands dirty a little bit. We'll run water readings on the laundry mats, and we can kind of backtrack and see what revenue they're making just by knowing their pricing, what type of equipment they're using, and the utility usage. So we can kind of look and say, okay, between these three or four laundromats, this is the market that's there. Yeah, yeah. And we know we expand the TAM when we move into an area. So, okay, we have another 20 on top of that number that we'll probably bring in. And then we just go and we run our demographic reports, and we say, okay, do these just line up with what we're seeing with the competitors already there? And a lot of times they obviously do. And then we just go look for the best possible location in that area. Right. Ton of visibility, great signage, a lot of parking. A lot of laundromats suffer from lack of parking. And if your parking lot's full and they can't they'll just drive right. Right on by to the next Laundromat. So that's a huge thing that I feel like a lot of owners don't really look into or underestimate a bit. Yeah.
- [37:41]
B
I mean, if your parking lot's full but you're not at capacity, like that's the worst situation you could have, Right?
- [37:46]
A
Exactly. Yeah.
- [37:46]
B
You'll never be at capacity.
- [37:48]
A
Exactly. Most of our locations have 20, 30 spots for parking because on the weekend you can almost get to capacity, you know, on a Sunday. 20, 30 cars there at one time.
- [38:00]
B
It's interesting because what I'm hearing from the research is like, yeah, you're going to look at apartment data and income data and all that and like location Data, but the 80, 20 of it is like competitor data. Like if there's four spots and they're busy, you're going to make it. Have you put any other competitors out of business so far?
- [38:18]
A
Yeah, we've put 11 out of business.
- [38:21]
B
Holy cow. Not that you're counting.
- [38:24]
A
It's a badge of honor. Part of me feels bad, but, you know, it's like if you're not providing what the community needs, like, I don't feel badly. Right.
- [38:32]
B
Like, it's like you're negatively affecting 11 business owners who've been neglecting their business in favor of giving thousands of residents a better experience and a safer experience.
- [38:42]
A
Exactly. Yes. Think of it for the greater good. Right?
- [38:45]
B
Yeah. Three locations per location. Basically you're putting three competitors per location.
- [38:52]
A
When I say like we find three or four in the area, like I mean it, like we're going in there to eventually.
- [38:58]
B
Yeah.
- [38:58]
A
Take all of the business. That's our goal.
- [39:01]
B
Yeah, that's so interesting. What other opportunities or ideas are you seeing in this industry that you're too focused to chase down? Because despite the fact that you have a full time business job and the laundromat stuff, it seems like you're very, very focused and detail oriented, which I know nothing about either one of those things. So what are you saying no to right now that you think is promising?
- [39:26]
A
Yeah, so right now. So we do a lot of commercial business and we found that's a huge market that your average Laundromat user is not doing. Right. The big dogs of the world, Centos Unifirst, they are doing that. That market is massive. So we've really been focusing on that because profit margins are great. You go pick up £2,000 of laundry right at one time and then process it. There's efficiency there. What we've kind of put on the back burner which I think is it has the market to. To do well, is just your residential pickup and delivery. Right. We've just recently started focusing on that because we've been focusing so much on commercial and ramping up our new store self service residential pickup and delivery. The problem is you need those efficiencies already built in. So since we have these commercial routes, we can now kind of branch off of those and start doing some residential pickup and delivery. So that's actually started to really gain some steam in our business and we've started to put more focus there. That's kind of probably the last piece of the puzzle for us. We do dry cleaning but we just outsource it. So we're pretty much taking care of any sort of laundry, dry cleaning need as a one stop shop. So yeah, again to answer your question, I think the residential pickup and delivery takes a minute to get there to get it right. But I think that's probably our next focus along with continuing to grow the commercial side.
- [40:52]
B
So let's say you pick a neighborhood, you saturate it with mailers or whatever, Facebook ads. Yeah. And then you just, you provide them bags and every Friday at 10am you're going to stop by, pick up the bags, take it back to your facility, do the laundry, fold it. Are you folding it for them or is that an extra charge?
- [41:11]
A
No, it's all included in the price per pound.
- [41:13]
B
Okay. And then you just bring it back later that same day.
- [41:16]
A
Not the same. I mean we usually don't do same day service. We'll do next day or two day usually depending on the account or where they're located.
- [41:25]
B
Are you doing any of that right now or. Yeah, that's just something you're.
- [41:29]
A
Yes, we do do weekly. We have, I think last time I looked like 35 recurring pickup residential pickup delivery customers and that was 0 six months ago.
- [41:41]
B
What do the unit economics look like.
- [41:42]
A
On that average pickup is like 20 pounds. It's small. So that's another thing to get by. It's like okay, where do you put your minimum pickup at? What are the economics for profit there? So that's what we've had to work through, making sure the numbers are accurate. And having our driver already in the area is probably the most important part. Right. Like we Pay our driver 20 to $22 an hour depending on what driver it is. So him having to drive 30 minutes out to get one bag or two bags and drive back, like we're not making money on that?
- [42:17]
B
Yeah. What do you charge for that for like a 20 pound bag?
- [42:20]
A
2$2 a pound.
- [42:22]
B
Okay. So it's by the pound and the customer has no idea how much it weighs. They're just kind of trusting you.
- [42:27]
A
Correct. But our bags, we tell them, hey, our bag can hold 25 pounds, one bag. Like they can request an extra bag if they want, but they can get an idea. Hey, if you stuff this bag full, like it's going to be probably £25.
- [42:40]
B
Yeah. And you're like, and, and we're going to weigh it after we wash it. So it's, that's where you juice your margins.
- [42:46]
A
We actually, yeah, no, we don't do that. But we actually weigh it when we get it. So whatever it is, we weigh it and then we do it for them. But it comes back beautiful, clean, smelling good. We do stain removal, you name it, folded super nice. Then we clean the bag for them. We wipe out the bag, return it to. So in case they did have something spill in there, dirty clothes we don't want to, we plastic bag the new clothes, put them inside of the bag, deliver it back after we've wiped the bag on things.
- [43:14]
B
Okay. So for someone fills a 25 pound bag, it's 50 bucks all in folded delivery, everything.
- [43:21]
A
Exactly, yeah.
- [43:23]
B
So interesting.
- [43:23]
A
A lot of the customers we see are young, single people. Right. They don't have a ton of laundry. They want to do something else than spend time doing laundry. Elderly people, actually, who we've, you know, they can't really do their laundry or it's tough for them to do laundry. We've started to see a lot more of those customers. What we haven't seen yet, and what I think in my head is a big part of the market is your family with five kids and just in sports. And there's no time to do laundry. And it's just insurmountable. The problem there is it gets expensive.
- [43:57]
B
Yeah. You know, I'm thinking of my family. What would that cost? Jeez.
- [44:01]
A
Exactly. So I think, I think it's there. I think it's just, I look at it, it's like the lawn mowing experience. Right. 20 years ago, everyone moved their lawn and now everybody pays for it. Like if you can afford it, like you're paying for it. So we're trying to get that experience to people. Hey, look how much time you can take back and, you know, take stress off your shoulders, things like that.
- [44:24]
B
Now do the unit. If a young entrepreneur wanted to start this residential laundry pickup, did the unit economics make sense? For them if they don't have a laundromat or could they just do it like at home?
- [44:36]
A
I would say no. A lot of companies have tried to do that and be the Uber of laundry. Right. And do it at their home. The margins are so thin as they are. Already even have an established business like ours trying to do it on your own or use a laundromat to go and do it. You're not going to make any money.
- [44:55]
B
Yeah.
- [44:56]
A
You've seen a ton of pickup and delivery businesses fail. Everybody wants in that space. Because you think about it, you're like, oh, there's a huge market. Right? Like huge market. So there's VC money is poured into that space. You know, a couple companies raised $20 million trying to break in a space. And it's tough. If you don't know the laundromat industry, making residential pickup and delivery work on scale is tough.
- [45:20]
B
And it's almost like you have to supplement that business with the retail business as well. And I imagine a lot of these VC funded companies are like they're just opening a laundromat in like a commercial location that's not open to the public. And it's like that doesn't really work because those machines are just going to sit unused for 80, 90% of the time.
- [45:38]
A
Exactly. The key is having a laundromat already that's making money and then utilizing it for that pickup and delivery service.
- [45:45]
B
Interesting. I really like the sound of that business for you. But I don't like the idea of that business for basically anyone else for all those reasons. Right. Like it's really hard convincing consumers to change their behaviors and to pay a lot of money for it. To contrast it with like the new trend of paying someone a few dollars to bring in your trash cans. Right. That's like, okay, it's a convenience and I'm changing my behavior, but it only cost me a few bucks, so it's worth it. But to pay hundreds of dollars a month and to stop the habit of doing laundry while you're listening to your true crime novel or whatever, like you're changing all these habits and having to pay a bunch for it. Unless you happen to have a highly profitable public facing laundromat that's doing everything right. It's just not a good business.
- [46:30]
A
Right. And people are picky about their laundry. Man. We allow notes because they've done it.
- [46:34]
B
Themselves their whole lives. Right.
- [46:35]
A
Exactly. Certain detergents and no fragrance and folded a certain way and oh, I want my socks bundled a Certain way. It's very hard to change those. Those habits, like you said. So I don't know. We're continuing to try to figure this. That part out. Again, I do think there's a huge market for it and there's some people doing a great job of it. So just trying to make that part of the business work.
- [47:00]
B
I wonder if there's a. There's another business opportunity where someone could go to your house and do your laundry for you. Like, that's it. Like, no cleaner, no private chef. Only someone that does laundry but on site. Is that a thing? Are people doing that?
- [47:15]
A
I have not seen that. Outside of just your normal nanny type. I have not seen someone who specifically goes into your house and does laundry.
- [47:22]
B
Yeah, because we have a cleaner and she'll wash our linens. Right. While she's there. And it works out really well because she'll. First thing she does is she throws them in and then she'll clean the house and then she'll pull them out before she leaves.
- [47:33]
A
Here's the thing, Chris, though. You're probably going to pay that person 15, $20 an hour. Right. And it's going to take them two hours, maybe three. Why not just do pickup and delivery at that point? Yeah, it's going to be the same. It's going to be the same price, essentially. Or close.
- [47:48]
B
What are they going to do while they wait for it to finish? Washing? Right. They might as well clean the house or they might as well.
- [47:53]
A
Exactly. Yeah.
- [47:55]
B
Interesting.
- [47:56]
A
Combine that with a nanny or a housekeeper or whatever.
- [47:59]
B
Is there anything else you're seeing that might have a lower barrier to entry, like a CRM or on the software side or servicing Laundromats or selling something to Laundromats? Like, is there a vendor that you're missing in your life?
- [48:11]
A
There is a lot of innovating going on in the space. Like I said, we're finally catching up. So there's a lot of cool software companies coming into the space. So that is fun to see. We never had access to something like this in the Laundromats and now we do, which is really cool. So a lot of that is happening. As far as something that I wish we had that we don't. I don't know. It's. I don't think so. Just improving what's available on the market.
- [48:38]
B
Yeah.
- [48:40]
A
You know, like the equipment manufacturers, like, okay, you're making a great piece of equipment that can last 20 years if you take care of it. Can we make it look a little nicer? Like, does it have to look so industrial and ugly. It's like, I look at it like how the electric car companies make their car so ugly.
- [48:59]
B
Yeah.
- [48:59]
A
Are you doing that on purpose? Like, I don't get it. Make it look prettier. Right.
- [49:04]
B
It's like Toyota's like, the Prius is the best selling hybrid of all time. It's like you probably would have sold three times as many if it didn't look so terrible.
- [49:11]
A
I know. I just. It baffles me. I'm like, I don't get it. So that's. You know, these commercial equipment manufacturers, they're not creating the most beautiful machines, so we spice them up with decals and things and make them look prettier. But. Yeah, how about you get a design team in there and just make the piece of equipment look a little nicer?
- [49:30]
B
Yeah. I'm over here trying to think of ideas. Like, could you. They have companies that make wraps for refrigerators. Right? Like, for 30 bucks, you can buy a wrap that makes your white refrigerator look stainless steel, for instance. I wonder if there's something for these ugly industrial laundry machines. But then I think, ah, it's going to be really hard to sell anything to those zombie mat business owners. Right. Like, you might be a buyer, but you're already doing that. And there's only. You're probably like 5% of the market, right? Yeah.
- [49:58]
A
And we don't like.
- [49:59]
B
But owners like you are like a very small percentage of the market.
- [50:02]
A
Yeah, we do that. We put decals and wraps on. On the equipment to make it look nicer. And yeah, a lot of the good laundromat owners are doing that, but yeah, the market is just not huge. Like, to build a whole business off of that probably wouldn't make much sense.
- [50:15]
B
Yeah. Interesting. Well, Tyler, I'm out of questions, but I've learned a ton and I appreciate your time. Where can everyone find you?
- [50:23]
A
You can find me on Twitter. That's where I talk most about Laundromats. Have a decent following on Twitter, LinkedIn. I love chatting with people about this stuff. I probably talk to two or three people every single week who are like, man, tell me about laundromats. I'm looking to buy one. Or here's a laundromat that I'm looking to buy. What do you think? So just love helping people. I don't charge for anything. I probably should. Should probably be a mini laundromat guru and charge 200 bucks an hour.
- [50:48]
B
But, you know, laundromat guy. Yeah. Just.
- [50:51]
A
I like doing it. I like helping people. I'm not out here. Like I said to. To gouge anybody. So, yeah, reach out, find me. And happy to chat.
- [50:59]
B
Cool. Well, thanks for your time, Tyler.
- [51:01]
A
Thanks for having me, man. It was a blast.
- [51:02]
B
Okay, thanks for listening. Please, like and subscribe and share this with all your friends, and we'll see you next time.