Sunday, February 15, 1998

Execs see coin laundries as a blockbuster business

By ELAINE WALKER / Knight Ridder Newspapers

From garbage to videos, H. Wayne Huizenga built a multibillion-dollar empire by taking over industries once dominated by mom-and-pop operators and building them into household names.

After watching the master in action, two groups of former Blockbuster Entertainment and Republic Industries executives see another opportunity to put his philosophy into action Ñ coin laundries. They hope to pepper the country with super laundries called Laundromax and SpinCycle.

"Our goal is to revolutionize the laundry business," said Alan Haig, president of the Fort Lauderdale-based Laundromax and a former business development executive for Blockbuster and Republic Industries. "We hope to do the same thing for the laundry business as Blockbuster did for the video business."

It's the latest chapter in a superstore craze in this country that has seen a proliferation of "category killers" in everything from office supplies to home furnishings. Time-starved consumers gravitate toward brand names because they're guaranteed a certain level of service and variety of merchandise.

SpinCycle and Laundromax compare today's coin-laundry business to the video industry before Blockbuster. Like videos, the laundry business is dominated by small operators, and many stores don't even have basic services such as air conditioning.

"Blockbuster was a tremendous success in consolidating what previously had been an industry dominated by independent owner/operators," said Chris Lombardi, chief development officer of the Arizona-based SpinCycle and a former Midwest franchise operations manager for Blockbuster. "There's no reason not to mold yourself after a success."

The potential envisioned by SpinCycle and Laundromax is supported by a bankroll of investors that reads like a Who's Who of Huizenga's current and former associates. But Huizenga says he is not investing in either company.

SpinCycle has raised more than $50 million from private investors who include a member of the Huizenga family: Wayne's cousin Peter Huizenga, who runs Huizenga Capital Management Co. in Oakbrook, Ill., and was also an investor in both Waste Management and Blockbuster. Laundromax co-founder Eric Lambert is Huizenga's former son-in-law.

If the Huizenga formula strikes gold again, both groups hope to expand into publicly traded companies.

But like Burger King and McDonald's, the differences between the two laundry brands will be minimal.

The average store will be 4,500-square-feet, about twice the size of the neighborhood coin laundry with more room for everything from washers to folding stations. The big pluses are the amenities such air conditioning, television sets, snacks and kids' games.

"The whole store is designed to make the experience of washing clothes as pleasant as possible," Haig said.

Miami laundry owner Mayra Sasso, who operates three stores, isn't worried about the coming competition. She already offers many of the same types of service that the chains plan to install. She even has a pool table.

"What's important is the treatment you give your customers and the way you keep your store," said Sasso, who owns three Sasso's Coin Laundry stores in Miami. "People don't make a distinction between if it's a big company or a small business."

Small operators like Sasso are the mainstay of the coin laundry industry, which includes about 30,000 operators around the country and 2,500 within Florida. Some own only one store, while others may grow into small regional chains of up to a dozen locations.

While some fear the arrival of the chain operators could make the small operator extinct, industry leaders say that doesn't have to be the case. The key: adapting to the changing market.

"It's a warning that if you're not delivering all the services and amenities the customer needs, chances are there will be another operator who will try to do that," said Brian Wallace, spokesman for the Coin Laundry Association.

SpinCycle and Laundromax plan to try. They each have nationwide expansion plans that call for the opening of between 400 and 500 stores within the next five years.

In the competitive race, SpinCycle has the head start out of the gate. The company opened its first store in April 1996 in Chicago and already has about 80 locations around the country.

"We've been successful, and that's why other people are looking to get into the business," said Peter Ax, chief executive and vice chairman of SpinCycle. "We really don't have any competition. Maybe in six months Laundromax will be competition."

SpinCycle will open another store next month, and plans call for the opening by June of five Miami stores.

Some of the first South Florida customers like what they have found at SpinCycle's Hialeah store, where the Blockbuster connection is evident in the bright blue-and-yellow color scheme.

"Most of the other laundries are a little run-down," said Santos Oliveras, 38, a Hialeah resident who plans to make SpinCycle a regular stop. "This is much better. There are plenty of machines, and the service is very good."

Laundromax hopes to give customers such as Oliveras another alternatives. It plans to open its first three locations this spring in Homestead, West Miami and the downtown Miami area. By the end of the year, it expects to have a total of 10 locations in South Florida and will look to expand within the Southeast during 1999.

"We want to build the Laundromax brand into a distinct name the customers recognize and want to visit," Haig said.

In the search for locations, both companies are looking for sites in high-traffic areas with plenty of parking. The population within a mile should include at least 15,000 low- and middle-income households, who are predominantly renters.

Clark Abbott would love to see a bigger coin laundry open near where he lives in Miami Beach.

"Sometimes it's so busy here I have to wait a half-hour just to wash my clothes," said Abbott, who was doing his weekly wash at a Miami Beach laundry.

While the new stores hold promise for consumers, local operators aren't as excited.

Since SpinCycle opened a store in Hialeah with half-price wash specials, the number of customers at neighboring stores such as El Mar Cold Laundry have started to drop.

"It's hard to tell so far because they only opened at the beginning of January," said manager Elvira Arminan, "but I can tell it has affected our business."

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Knight Ridder Newspapers reporters Anne Moncreiff Arrarte and James McNair contributed to this article.

Distributed by Knight Ridder/Tribune Information Services.