Surprise from my Water Company
Here I am at my computer just back from a 2 week vacation, trying to get up to speed on my myriad of projects and what lands on my desk but a huge water bill for a Laundromat I own in Briarcliff Manor, NY. I have just produced a 6 installment newsletter about how to increase your vend prices for your Laundromat and now I have a 41% increase in my water rates. 41% Ouch. How can this be...?
A 41% increase in my water rates, so what do I do? After my heart gets back under control, I look at my current revenue numbers and also gather a recent copy of my Con Edison electricity and gas bill so I can check out what is does to my Utilities as a Percentage of Gross (UPG). What I find is that I have been asleep at the wheel and that before the water rate increase, our utilities at the Briarcliff Manor were 35% UPG. That is way too high. This year I was so busy that I didn't have time to check the Utilities as a Percent of Gross (UPG). (Writing too many Newsletters; Shame on me.) With the new water rates the Laundromat will come in at 49.2% UPG. This is extremely high; like the Laundromat is no longer making any money kind-of-high. What this means is almost 50 cents of each dollar that goes through my coin drops has to pay for my utilities (water, sewer, electric and gas). Utilities as a Percentage of Gross (UPG), according to my newsletter, should be in the 20-25% range. If the UPG is too high then the owner is paying for customers to use his machines. Where did I (as a Laundry Expert) go wrong?
I should not be so hard on myself. Every month utility costs and expenses change. Sometimes they go down, most of the time they go up. These utility price increases usually fly under the radar screen and we may notice a slight increase, but nothing huge. I confess that with the recession I have been holding my Laundromat vend prices at the same level. But according to my own numbers, during the last 5 years, my Briarcliff Laundromat has gone from being very profitable Laundromat to being barely profitable. This is all due to my in-attention to periodically check my UPG figures. Now what do I do? Sell the store?
Now I have to pull out my Excel spreadsheet and see what we can do about this huge water rate increase and what I can do to make this Laundromat profitable again. I do some math and to get back to utilities at 25% of my gross I need to have a 73.8% price increase on all of my washers. WOW. That would mean my 19 old Wascomat Gen 4 washers would have to have their prices increase substantially (see chart).
Calculating Theoretical Vend Price
I do not think that I can successfully increase my washer vend prices more than a dollar. But I will raise my 18# washers from $2.75 up to $3.25. I will raise my 30# washers up from $4.25 up to $5.00 and I can raise my 50# washers a dollar and bring them up to $7.25 for a wash. Unfortunately this only causes a 16% increase and will only bring my UPG down to 37%. Obviously 37% is better than 49%, but still way too high.
Figuring Realistic Vend Price
Let me tell you about my Briarcliff Laundromat. HK has owned this store since the late 1960's and it has been expanded once and retooled a couple of times. I currently have 19 - 25 year old Wascomat Generation 4 washers with standard wash cycles. I have not been able to replace these washers because I only have a very short term left on my lease. I have been trying to re-negotiate with my landlord for the last several years about obtaining a long term lease, but to no success. I have repeatedly informed my landlord that no lender will authorize a loan unless the length of the lease would be longer than the term of the equipment loan.
Just this month we have just completed lease negotiations with the landlord who is actually a REIT (Real Estate Investment Trust) for a new long term lease. These negotiations have not been as successful as I would have liked, but we have the space for another 10 years. I am now planning to replace these perfectly good washers with new modern energy efficient machines. I can conservatively estimate that with new Huebsch Galaxy 600 washers I will reduce my water & sewer bill by about 50%.
My estimate on renovating the Laundromat
and replacing all of the washers with brand new High Speed Extract Huebsch Galaxy 600's will cost about $200k. If I put down $50k and finance the rest over 7 years at 6% interest my PPM will be about $2191/mo. With New Huebsch washers
I can reduce my water costs by 50% that is a saving of about $25,400 a year or a savings of about $2116/mo.
Wait a minute. My brand new washers will cost me $2191 a month for 7 years and I can save $2116 a month (for as long as I own these machines); that means I am getting brand new washers with a 3 Year / 10 Year Warranty, High Speed Extract Brand New washers, with Extra Wash & Extra Rinse features (that will produce more revenue), Time of Day pricing options and even different pricing for different wash cycle and it is only going to cost me $75.00 a month....how is this possible? (State of the Art, Energy Saving Huebsch washers...and Outrageously High Water Rates).
The better long term news, is now once I re-calculate the reduced water costs (with the new washers), the Laundromat now dials in at UPG of 25%. Wow. This is an extreme situation where the water & sewer rates are so high that the water savings will actually pay for the new machines. I have not seen this kind of subsidy since President Ronald Regan and the "Investment Tax Credits". I am also working with Con Edison to get a rebate for stepping up to Huebsch Galaxy 600, 200G-force washers. I am optimistic that the rebate will cover 20-30% of my down payment. (Not Bad.)
The "NEW" standard in Laundromat operations is to runs as efficient a Laundromat as possible. If you do not have the most energy efficient washers, dryers and hot water heater, then you are giving too much money away to the utility companies and not putting enough money into your pockets. If you have high water & sewer rates and you have the old "electro-mechanical" (fixed timer) washers, you need to take a hard look at your stores profitability. You will be shocked, and not in a good way.
Briarcliff with a new lease, new water rates, new washers and new renovation. So I will be busy this Fall renovating my oldest Laundromat and I will try to pass along my progress.
HK Parts Specials:
Overlay for Huebsch Stack Dryers
List Price $ 35.76
HK Special Pricing $ 16.09
Rollers for Huebsch / Speed Queen Dryers
List Price $ 30.89
HK Special Pricing $ 16.98
Call Anthony at 1-800-229-4572 or
to take advantage of these
Weekly Parts Specials.