Impact of Inflation of Laundromat Costs

Impact of Inflation on Laundromat Costs

By: “Laundromat 123”

Inflation impacts the cost of food, fuel and yes, Laundromat parts, equipment and insurance.

In the past few years, my distributor price lists show equipment prices to have increased from 30-50%. Parts prices have often gone up even higher in some cases. The movement to factory owned local distributorships and the growth of a few large companies acquiring multiple distributors has reduced competition, and resulted in higher prices, in most areas of the country. Some manufacturers are discontinuing needed parts for repair of older models in their product line. Some speculate that these realities are being done to encourage (force) Laundromat owners to replace their older models with the costly new equipment being sold by these manufacturers.

One supersized washer bearing kit that was $350.00 some years ago is now $4,250.00 for the same kit. Add these price increases, based on partial inflation impacts, and the cost to purchase equipment parts has increased significantly. The equipment and parts costs appear to exceed the actual inflation increases.

As prices go up, the needs for adequate insurance also increase. Laundromat owners need to review their insurance policies to ensure that they still have enough property coverage to rebuild their store in the event of a major loss.

As for liability coverage a standard industry selection is one million per claim with a two million limit per year regardless of the number of claims submitted. In light of inflation and increased jury awards, this liability coverage should be increased to a minimum of two million per claim with a four-million-dollar limit per year.

Inflation has impacted jury awards so a recent liability settlement based on a child who put his finger in a floor electrical outlet and burned off his finger tip resulted in a million-dollar settlement. The previous highest award in SoCal against a Laundromat owner was a $350,00.00 award for a youngster who had his arm torn off when the owner bypassed a door lock mechanism. Quite a jump in settlements for an apparently lesser injury. Soon you'll want to be looking to increase your liability coverage to two million per claim and four million per year.

For those owners who have added additional income sources, including Wash/Dry/Fold and pickup and delivery, should ensure all their services are covered by their Laundromat policies. Owners need to pay special attention to workers compensation coverage and the risks you may encounter by providing new services to your customers. The youngster injury noted above happened because the owner left an electrical outlet available for customers to charge their cellphones. Thoughtful but a resulting negative impact on time and stress for the owner.

Workers’ comp is based on the job and not the size or value of the business. Each type of job requires a different risk and therefore a different cost per $100.00 of labor cost. Attendants, repair workers, cleaning people and pickup and delivery drivers all have different risks and rates. Owners who offer pickup and delivery and are counting on the auto insurance of their delivery drivers and not a policy of their own, or who assign jobs of higher risks to lower rated jobs is taking a risk. There is a potential for a denial of coverage, or dropping of coverage, if you have your cleaning staff perform duties outside their classification including asking them to climb a ladder to replace your burnt-out lights or do your yearly roof repairs or swamp cooler maintenance.

The number of owners who don't read their policies and have no idea what their policies cover or fail to cover is common in our industry. Next to leases, insurance policies are the least read documents encountered in the Laundromat business. If you’re going to operate a small business in this era of blame and lawsuits it is extremely important to pay attention to your workers compensation and business insurance coverage. With increased inflation on the rise, many Laundromat owners may be underinsured. Take the time to read and correct your estimated insurance coverage costs and increased parts and equipment in your projected income reports as needed.