We can’t forget, nor overlook, the huge impact rising water costs have had on both coin and card operated laundries.
Communities and water districts deal with their cost increases in a variety of ways. Some add sewer charges to the water bill, usually asking the laundry owner to pay twice as much for sewer as they pay for the water. There are western areas where the sewer rates are more than double the costs for water.
In other places, they have such a thing as impact fees. They charge substantial amounts of money to hook into the sewer system. These fees can be scary, with amounts up to $6,000 per washer in one California city. That’s for each and every washer installed or hooked up to the system when someone builds a new laundry. That does not include other costs such as setting meters or other construction permit fees.
Perhaps the most pernicious thing is the district will also raise the water rates quickly after the impact fees have been imposed, so it’s a double whammy on the new laundry. Raising the water also raises the sewer fees as well, and they have been raised and raised as we all know.
A new laundry in that city will, at quarter increments per wash, need to do 24,000 cycles just to pay for the hookup fees on just one washer. To put it another way, the owner of a new fifty washer laundry will invest $300,000 in connection fees and it will take him doing 1,200,000 wash loads (at .25 per cycle) to get his or her money back. Still another view, at an average of $3.00 per load, that laundry will have to do about 100,000 wash loads, at retail, to get back the sewer hookup investment.
Washer and dryer vend prices in any given area are driven higher and higher by sewer impact fees. There is only one way to really recover the cost of fees and that is through higher vend prices on the washers and dryers of the laundry.
These fees are something of a double-edged sword. High impact fees make it more difficult for people to get into the laundry business, to become new competitors. On the other hand, the fees make each of the existing laundries tend to price higher when they sell, if they can sell at an inflated price.
That’s because the sales price for existing laundry businesses is based on the net income of the business – a multiplier of what is left on the bottom line after all expenses are paid. That is all that counts. Sewer hookup fees don’t really matter in the resale of a laundry business. They do not materially add to the value. The impact fees really only impact the sale of new laundries to new investors.
There is a serious negative for operators who are grand fathered in when their local water district adds high connection fees. Landlords and property owners know about the increases too, and so it becomes more of a reason for them to not consider renewing a lease. If and when they do offer to renew, it is for far more than just regular rent, because most landlords know the value of the sewer hook up fees that have been grand fathered in to the laundry space, and they have control.
There have been a growing number of instances where the property owner has refused to renew or extend a laundry’s lease. They are then able to take the space back and offer it up for bid to laundry developers who see it as getting a bargain.
They, the developers, pay a signing bonus for the right to have the premises lease, but they end up paying less money than they would if they had to pay the fees in full. They then have a greater profit potential
If you are not able to renew your -laundry lease, and there’s only a short time left on the term, the business’s salvage value for your equipment is about the only thing an owner gets when they sell. If your laundry gets to be a lease short timer, it’s time to consider either getting an extension or get out of business. | 