The Spotless Economics of Laundromats

How do these no-frills businesses work? And why do landlords insist on putting machines that cost money into your building’s laundry room?

Economics_Laudromat

I know, I know, in a world where dollar-slice pizza joints can make serious cash, it’s not so crazy that laundromats — where the currency has long been quarters — could do the same. I also realize that a load of laundry or spin in the dryer isn’t just a quarter any more. But like, how? In major cities such as New York and Chicago, laundromats are practically a dime (not a denomination they accept, of course) a dozen, and something always appears out-of-service, the repair of which would seemingly be way more quarters than a laundromat earns in a given week. On the flip side, are landlords so cheap that they can’t allow their tenants to wash their clothes on the premises for free? I mean, given how expensive rent is these days, they can’t spare a few quarters out of the kindness of their hearts?

Allow me to spin (cycle) up some answers…

So, Laundromats. How Do They Make Money?
As suspected, it’s actually a decent business (though it’s a mature, gradually declining one). The Coin Laundry Association estimates the industry does $5 billion in gross revenue annually (that’s 125 billion quarters) among 30,000 of these locations nationwide. They’re mostly self-service, so aside from janitorial services, weekly labor at one tends to only be a few hours per week — resulting in lots of passive income. Better yet, they’re on long-term leases, equipment (from washers to coin changers) lasts five to 15 years, most variable costs (water and electricity) are directly tied to the number of customers and there’s zero inventory or receivables to worry about. Many don’t even bother advertising.

They also sell some low-maintenance extras, like soda and chips via vending machines (under a lease agreement), that entice people while they wait for the permanent press cycle to end. As such, per the Coin Laundry Association, a single laundromat can generate an annual “cash flow” of anywhere from $15,000 a year to well into the six-figures.

Are Laundromats Recession-Proof?
Totally. Aside from the apocalypse, people always need to clean their clothes.

What about Pandemics?
Early on, back in the spring when everyone was wearing gloves and wiping down every surface on earth, people were pretty hesitant about laundromats. That, though, didn’t last very long (see above). But alas, COVID has recently brought about another unexpected challenge for the industry — the national coin shortage. Laundromats are currently scrambling, as banks won’t give some of them more than $20 in quarters at a time when they used to get $400 worth. Some owners are even hitting up their friends (and, presumably, the cushions of their sofa and the floor mats of their cars) for coins.

Wait… They Still Only Deal in Quarters?
Yeah — 60 percent of laundromats are still cash-only. That’s because there’s often not enough competitive pressure for a single laundromat to invest and (modestly) innovate by, say, accepting credit cards.

By the Way, Are They Actually Clean?
They’re generally pretty clean, although people wash all sorts of gross stuff there, either knowingly or unknowingly — e.g., dirty sanitary pads, soiled diapers, clothes with blood or vomit on them… Use your imagination. Or maybe don’t.

But They’re Still Declining?
They are. They obviously thrive in big, dense, old cities with ancient apartment buildings that lack laundry rooms, never mind in-unit machines. But as standards of living increase, renters expect washers and dryers as an amenity, and more landlords are providing them — especially the big developers who build shiny new yuppie-bait infill buildings, full of units that can fetch crazy-high rents. Overall, in 2017, it was reported that laundromats had suffered a 20 percent decline in revenues since 2005.

I wouldn’t even have to use a laundromat if my apartment had a washer and dryer. Why don’t more landlords put them in?
There might be a practical reason for why there’s no washer or dryer in your unit or apartment complex. A washer and dryer require a few things: For the dryer, a gas line, vent and 220- or 240-volt outlet; for the washer, a wastewater outlet line, hot and cold water inlet lines and 120-volt outlet. That stuff can be expensive to install, and some landlords probably figure it’s not worth it. (Most studio apartments certainly don’t have these sorts of hookups.) Other landlords might not want the risk of water damage or lint fires (fire departments respond to something like 16,000 fires a year involving dryers).

For the Apartments with Community Laundry Rooms, Why Do the Machines Cost Money? Is It Honestly That Expensive to Maintain?
Not really — it’s obviously a revenue generator! But there are a few other things at work here. Since tenants don’t tend to directly pay for common-area water and electricity usage, there’s no incentive for them to limit it. So charging money forces tenants to have some skin in the game, ensuring that they’ll make the most of each load. Machines also break down, which occasionally costs a bit of money. And washing and drying clothes does cost a little money each time in water and electricity: For a cold-water wash, it’s about 82 cents to $1.14 to wash and dry (depending on whether the washer is a front or top loader). Hot-water washes and drying costs $1.05 to $1.41.

But again, landlords are out to make money. If machines at your building cost $2 per wash and $1.50 per drying, that’s a profit of roughly $2.09 to $2.61 per load (before maintenance, depreciation, expenses, etc.). Multiply that by the number of units in the building and the number of washes each unit does a week and it starts to really add up. Most of it, too, is going right into your landlord’s thick, plush pocket, just so you and your neighbors can experience the 20th century luxury of machine-washed, clean clothes.

Can I at Least Stage a Rent Strike on This Part of the Tab?
Sure, if you want to wash your clothes in the sink by hand instead.