Forbes, the fabled publication of the noted businessman and once Presidential hopeful Steven Forbes, suggests Laundromats are a dying industry in a recent publication listing America's Fastest-Dying Industries. Lumping Laundromats with declining beer sales, store production, video stores, pay telephones, tobacco fields, newspaper publishing, music publishing, video game arcades and bowling alleys puts Laundromats in a heady field but I think it more likely the editor wanted ten dying industries and the writers could only come up with nine. They were sent back to come up with one more and Laundromats got the call. Well, Forbes has been wrong in the past, but the swipe is totally without merit.
The full article shows a feeble grasp of our industry including references to the fact that 90% of our businesses have fewer than ten employees and this will lead to "relentless price-cutting" among owners. Actually, if there were more owners with ten employees or more (beyond the cleaning people), price-cutting would be minimal. It is the actual lack of labor costs that allow price-cutting to exist and thrive in certain markets.
America's Fastest-Dying Industries
How many national laundry chains can you name? Chances are, not many. Of the 12,000 establishments nationwide, over 90% have less than 10 employees. This means relentless price-cutting competition among small firms. Combined with rising rents and utility bills, but not-as-rapidly-rising disposable household incomes, laundry services could be hung out to dry. The two large operators, Coinmach and Mac Gray, rely on their institutional clients--hotels, apartment buildings and universities--for the bulk of their revenue.
If you're being affected by the downturn in housing or financial services, hang in there. At some point, those industries will rebound. Others should be so lucky. Just look at apparel manufacturers in the United States. According to the Labor Department, their ranks are expected to decrease by 54% while their output falls more than 43% between 2006 and 2016. Then there's the ailing printing business. Jobs in that U.S. industry will drop by 22% during the next decade, with output falling by 12%.
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The only similar publicly traded company, according to Revere Research, is Mac-Gray [nyse: TUC - news - people] , which saw its stock fall 7 cents, or 0.5%, on Friday, to $14.81. Mac-Gray has a few other business lines, including reprographic machines supplied to schools and libraries, but it is a lot cheaper than Coinmach at its current price. The company would cost a buyer only 2.0 times the value of its assets, compared with the 7.0 Coinmach is fetching, and Mac-Gray's price-to-sales ratio is 0.7, well below the 1.3 times that Babcock is offering for its competitor.
FORBES TAKES SWIPE AT LAUNDROMATS
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