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Buying A Laundry: Coin Operated Laundromat Or Card Operated Laundromat?

More and more we see "Coinless Laundromats". Anyone in the business or entering the business will face the age old question; Coin or Card? Well, perhaps it's not an age old question, as card systems haven't been around very long, but it is a question worth considering. For years coins were the only vehicle to start the equipment.

The first breakthrough in using a different payment method was the "Loyalty Card" system whereby a customer loaded up a card, to be used only in a particular store, for the amount they chose then used this card, which is reusable or reloadable, to start the equipment and use the vending machines or the restroom. In this environment there is only one way to spend money and that is with the card. No bills, coins or credit cards except to load up the card.

The system above is still an option as is a hybrid system whereby one can load up a loyalty card, use a credit card or use coins. Let's bring out the old, and this is old, Ben Franklin balance sheet and sees the positive and negative aspects of all three.

COIN

Positive:

People are use to it, no training                     
Most folks have cash in their pocket          
Some owners like having cash               
Laundry Equipment is coin ready             

Negative:

More potential for theft
Collection is time consuming
Non users of Laundromat take your quarters
Coins are dirty and can affect coin drop

LOYALTY CARD

Positive:
                                                                  
No coin collection, save time                                    
System tracks all transactions                                   
Less chance of theft                                                   
Can monitor what machines do best                         
People misplace card, your gain                               
Can monitor store via web                                        

Negative:

Expensive to buy system
Customers unfamiliar, need training
May need attendant to train and help folks
Cards cost money, need to charge customers
Some customers can't afford to leave money on card
If system goes down no revenue until back up

HYBRID SYSTEM

Positive:
                                                                              
Take all forms of payment                                       
Choice, can capture more customers                 
Can put readers on select machines
Lower cost than Loyalty System
Can run on coin so if reader goes down, ok
Can monitor store via web

Negative:

Still have to do some coin
collection
Cost of System and Readers
Instruction could be needed, labor cost
Cost of merchant account to accept credit cards
Cost per use of credit card

As you see there are good reasons to use any one of these methods of payment. Your first concern should be your customers. Some neighborhoods are great for a card system of some kind but others are not.

I have found that those in lower income areas will shy away from a Loyalty Card store, if they have a choice, as they really can't afford to leave several dollars on a card only usable for laundry and but won't need it until next week. They may need those few dollars to buy something for the family.

Your management style or how you want to spend your time will also be important. A card store would be good for the person who doesn't want to collect coins (and that can get old), wants to track all transactions, wants accurate and automatic accounting and wants to evaluate productivity of each machine.

The hybrid systems seem to be taking over and make a lot of sense to me. Again, with this system you can do it all.  Most importantly you can take payment in any form.  If receiving payment via cash, loyalty card and credit card is good enough for Macy's, Starbucks, Wal-Mart and the like it should be good enough for a Laundromat.

As briefly mentioned above, the hybrid store does not require that you have a reader on every machine.  This allows you to experiment with a system without paying the high price of doing an entire store.  Generally an owner will start with putting readers on several machines.  You will choose the machines used most and the larger washers that require many quarters to start. This will be easier for those that don't want to pump all those quarters in a coin drop and it can also cause some to use large machines as people tend to spend more money with a credit card.

Some are choosing the option of using a credit card and coin only. Though some customers don't have a credit card account they can buy preloaded VISA cards at Wal-mart or Target which gives the customer options for credit card or coin. This can eliminate the need for a loyalty card and the cost of the cards and card dispensing cabinet which can get expensive.

Know that if you have any of the many card or hybrid systems out there that you will be dependent on that manufacturer for the foreseeable future for parts, service and, in most cases, your credit card processing. So make sure you choose a company that has a proven system, has staying power and fair rates for credit card processing.

We will give an honorable mention to tokens as a payment method. This is another method that seems to be coming back in fashion.  There were several companies at the Clean Show in June pushing tokens and I have heard of more owners going in this direction.

There are advantages to the token. One is that it keeps the customer, or non customer, from coming into the store and taking your quarters elsewhere.  This can be a time consuming problem as your quarters leave the store you have to take time and effort to replace them.  Another benefit is that should someone lose a token you, in essence, just made about 12 cents. Lastly, you don't have to buy anything extra or have a computer system to use tokens.

The downside of tokens is similar to the loyalty card. Many people in some neighborhoods don't want to have "money" they can only spend in one place.

The choices are growing to be sure and all of these choices could be good but make sure they are good for YOU.  What works in one store may not work in another. As always; know your customer, think of how you can serve them best then make an informed choice from there.

Categories: BizBen Blog Contributor, Business Valuation Issues, How To Buy A Business

Contributor:

Steve Erlinger
Areas Served: Southern California
Phone:  949-500-5893 Cell, 949-500-5893 Text
I specialize in the laundry industry broker and consultant in Southern California. I assist buyers navigate the many facets of finding, evaluating, and operating a laundry business. I also help current laundry owners find additional stores, sell, evaluate an existing laundromat. Call 949-500-5893.

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