Pie splitting....

[Kitty]

I had an interesting conversation with a seasoned laundry owner today. This business person stated that splitting the pie of an existing laundromat is very difficult and splitting the pie of current mat customers will never allow the new slice to compete nor make a living. I agree to some degree but wonder, is it the arrogance of the business man to assume such a scenario or is it an accurate statement? We have all said there are idiots out there, and many do not do the homework never knowing the actual numbers to the projected area, or is there any accuracy in numbers??This statement is a great discussion. How can you accurately compute the scenario of the pie?

[JBTcajun]

You never know until you do it. That goes for any biz. He is right the pie is only so big. That does not mean the present suppliers own the recipe. In my case I am hoping my recipe is sweeter, and tastier than the old sour pies around. Do I know for sure no but I am willing to find out.

[pete f]

I agree with the owner, and have seen it first hand a few times now. It goes back to why it is better to buy existing in most cases.

That does not mean a new mat can not be done, but if you put a mat across the street from an existing one thinking you will put them out of business, you have an expensive supprise awaiting you.

[ajay]

I've seen cases, where once the "pie" was split only half way, it is now split atleast 6 times. But they are all doing well and they are surviving. How much better exactly or how much lesser since the split is hard to predict because Economy has lot to do with it as well.

[Anonymous]

Pie spliting is dangerous. I know a town in NJ where there was a fairly large mat and someone built a huge new one and a chain put a huge new one in - all within three blocks. Guess what, the new guys are surviving - but they are certainly not doing the business they hoped for. The old one is a dump, and the machines are very old - BUT they have very low costs and cut prices so low that people go there and not the big bright new mats. This guy will probably win and the new bigs ones will either fold or be sold to some sucker. Only go to war if you know you will win - or you may bleed to death.

[detlaundry]

I agree that the pie can only be sliced so many times if the demographics remain constant ... (and the expense of a newly built mat makes it hard to compete with an existing mat.)

Given the choice, most will choose the best pie around, and some will even pay extra for it. No one wants to be served on a broken plate, in a dirty establishment by waitstaff with a poor attitude.


Note: Fresh pie, or a new mat, does not = better than an existing. A quality product will usually prevail. Whether you can provide that in a new or existing mat is up to you

[detlaundry]

I saw the same thing happen nearby too.

One existing mat
+
3 New mats in about one year and 1 1/2 miles

One was rumored to have cost over a million w/realestate.

I drive by daily and can't figure out how both cars in the lot are paying for it. It has been open for about 3 yrs too.

[cesar]

How about this for a pie.
I recently looked at a mat in RI, it's an older fixer upper. Doing reseach on the competition I found 32 mats within 5miles. Within 1mile there are 13 mats, almost all are old, dirty, and run down. I was down there today and someone is putting in a new Dexter mat and someone else is putting in a new Wascomat mat all within the same 1mile. Needles to say that's one pissing contest I'll stay out of.

[Kitty]

Detlaundry had made a good statement. He said, demographics being constant would not make an ideal situation to try an get a slice of pie. Of course, if the current market is meeting the demand, but what if the population in a given area sees a boom? Then there could be new additional crumbs of pie to gather for any store trying to gain market share? True? Isn't one of the main reasons that many new laundries have surfaced in areas is because of the increase population boom, particularly the hispanic clientelle into these areas? I am guessing that some of these areas have seen saturation because of the population boom...... new laundry customers in these areas, thus giving way to new competition? Too bad too many new stores causing price wars, so stupid, never helps the industry! But I would assume some of the new stores are profitable in some of theses area?

So, the question is, demographic studies..so many of you disgree with these studies and analysis and their use. I would think, along with the warm and fuzzy feeling one may get from a location, can't you identify a more lucrative location by analyzing the demos and crunching a realistic (small) portion of the portion of the population that statistically uses the services and calculate a projected income that would be somewhat accurate? Together with the calculation of the total pie gained from the current stores, based on water usuage, and the demo study and anyalsis could you not gain the information needed to determine the current market share? Thus determine if there is current growth in any particular area? To make an educated descion mustn't you know all of this information in order to size the pie, and see if it is overflowing?

[Gary C]

No demos will compare with driving around an area and seeing with your own eyes whats there. Looking at existing mat's and housing and then make a choice. Sometimes you just need to take a chance. The pie thing does not always hold true, sometimes clustering will attract a larger number of people.

Gary

[Kitty]

Ok, now the pie thing is getting interesting.......driving arround will not give you an accurate assumption of the area, though it will give you a general idea of what type of clientelle you can capture. It will not tell you the size of the pie. If you cannot determine the size of the pie, how can you determine the potential of the location? Is it that people drive around and view competiton and not make a more calculated analysis that creates these new investors that makes decisions of new laundries without truly analyzing the size of the pie?

[mike]

Most of these new mats are not built with real money.

They are built with speculation money. or inheritances or money earned in another field.

It's like Kirby says about owning your own real estate, you have to pay the real rent !

These new stores are not paying "real" interest on the money (well, maybe in the past couple of years with rates low, but that won't last)

[Kitty]

Im not discussing the return, Im discussing the projection of the size of the pie. The owner I spoke with was adament the current size of the pie, in most locations is unable to be split, or evenly distributed as current mats will retain market share. However, I am questioning this assumption and seek a better assessment of how you come up with how big the pie is in a specific area and whether it can withstand additional competition. Of course the assumption can be easily accessed in some markets as stores are visibly meeting the market demands. However, in order to truly assess the market, why is it the demos are dissed as a not needed tool in order to determine the size of the pie? If the numbers do not mean anything then why do they calculate these numbers for projecting income and determining of potential customers

[cesar]

I think Demographic studies are only one ingredient in the pie. You can have a great filling with a lousy crust and the whole thing ends up in the trash.

My point is demos are just numbers they don't tell you the real character of your location for that you have to see it, feel it, smell it. Put it on and live in it for a little bit.

[Gary C]

Kitty, Cesar is right about demos being a piece of the pie. But I don't think you are listening. Sorry if that affends you. driving an area does give you a very good idea of whats going on. I have done it with a few businesses and has worked out very well. I would never start a biz with out spending some time in the neighborhood first. And like I have said in the past sometimes you just have to jump in.

Gary

[Fred50]

Kitty,

Further to everyone's points:

And you know how much I like numbers...

You just never know for sure. If you are relying on demographics or any one thing to convince you to go ahead with a store, then forget it. Do as much research as you can, and then wing it!

To quote Pete F: If it was that easy, everyone would do it!

I know that you are familiar with a risk-reward profile. Take no risk, expect little reward. Take a large risk and you might reap a large reward, but then again...

Good luck!

[Ken]

Laundromat business is very different then others.If the steak is very cheap in store,people will buy or eat more steak but if the vend price is very low in laundromat,custemers won't do laundry more often.
Pie is not getting bigger because more laundromat in the area or cheap vend price.A good quality laundromat may get some people out of their aprtments.Over built is one of biggest problem in this business.

[Kitty]

No, no no, do not get me wrong. I beleive the pie theory. I have used it many many times......current laundry customers going somewhere and a new laundry attempting to gain the share...trying for a peice of the pie......Ive seen stores try for the pie I shared....they got crumbs! Pie stealers make the pie bakers work much harder to keep his slice of the pie! :)

I agree with driving around an area and seeing who is living in the community but you cannot see the actual growth that occurs slowly. The investors who built near me, are problably sorry they sought a peice of pie. But the pie was adequatley being baked and served prior to their surfacing, and a demo study as well as interpreting the water usuage of the areas current mats at the time may have eliminated a poor decision.
If they understood the size of the pie, they might have eliminated the area they did build in?

[Kitty]

First of all, I am not pertaining any of this to my own situations, I will know when it is right for me to make that leap. But because of the converstaion I had yesterday, I challenged the statement. I know, that sometimes you must sink or swim, sit or get off the pot, sip some grey goose or take a shot! :) But, as usual I am being argumentative and I want better answers than what you are given me.

If investors are building stores taking 100 of 1000's of dollars into an area, I would think they would have a much better knowledge of the area and the market share they are trying to capture.

Since you all almost unanimously agreed that capturing a peice of the pie is difficult at best, why are so many areas developing new laundries? While I understand many markets have mats that have alot to be desired, some markets have nice well maintained laundries and investors are still entering those markets. Vieing for there slice. I cannot believe all these people are brain dead. Some of these investors must know there is room for them to capture a peice of pie? Current market must not be adequately serviced? More pie testers than oven space?

[Anonymous]

Kitty,
Just buy a mat already. Try not to over analyze the laundry business. Demos are great if you want to sell equipment, but nothing compares to a drive around a area. My advice to you would be forget about the laundry business for now if you lack the funds and just spend your time building up capital. Get 2 or 3 jobs if needed and save every penny for a couple of years. this board offers alot of help but not all the answers and if you spend too much time here it will cut back on your time to earn money. I hope you didn't take this observation the wrong way.

Good luck, I am going to eat a piece of my pie now.

[Kitty]

I am not over anyalyzing but it befuddles me that so many of you will make an investment based on an "overview" of the area? I agree that this is a preliminary action that will start the homework that is needed, but I wouldn't bet 100's of 1000's of bucks based on this practice alone. I have yet to find a location suitable, or a store for sale, but when I do.......I would think you need to do more than view the area!

I suppose, since many of you insist that a mat that has some form of a track record, these mats will have a better success rate and prove to be potentially profitable with tlc? More so, than a new mat? Bright, clean and shiny and viewed to be needed? Or is it because that the current clientelle is already going somewhere? I agree, some markets cannot house more stores, however, it is possible to narrow down the size and potential of the market share, don't you think??? And in this case, by analzing the current competition, location, demographics and growth of the area, I would guess that having this combined information, capturing market share would be easier than some of you suggest.

[pete f]

Originally posted by Kitty
? I agree, some markets cannot house more stores, however, it is possible to narrow down the size and potential of the market share, don't you think??? And in this case, by analzing the current competition, location, demographics and growth of the area, I would guess that having this combined information, capturing market share would be easier than some of you suggest.

Yes, I could probably figure out market share in any given demo report, but that does not mean I can capture that market, as you suggest. It is not that easy as it looks on paper, as so many have responded so. I don't think you can continue to question answers just becuase you don't like them.

[Kitty]

Do not think I do not like the answers, I am merely questioning what you are saying. Don't keep answering me if you don't like my questions....:)

I do not suggest any new store can automatically capture market share, I am suggesting that with an analytical approach as well as the most common approaches we have discussed, the chances of a realistic view of the "potential" market share could be shown at a much higher accuracy rate than merely viewing the area. Knowing the size of the pie and the area, is important to understand whether you can or cannot acheive any portion of the pie.