American Coin-Op - September 2012

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I N S I D E : S E P T E IMN BS EI RD E 2: 0J1U2L Y 2 0 0 5 SUCCESSION PLANNING: PASSING THE TORCH

WATER-HEATING EQUIPMENT PRODUCT SHOWCASE

WHAT WILL YOUR OBITUARY SAY ABOUT YOU?

W W W . A M E R I C A N C O I N O P. C O M

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CONTENTS SEPTEMBER 2012 VOLUME 53 ISSUE 9 LET’S MAKE A DEAL: BUYING/SELLING A STORE Costly buying/selling mistakes must be avoided. One of the best ways to ready yourself for a key transaction is to get some professional advice.

COVER STORY

FEATURES 16 PRODUCT SHOWCASE:

WATER-HEATING EQUIPMENT 22 SUCCESSION PLANNING: PASSING THE TORCH Most family business owners expect their thriving enterprises to transfer to the younger generation with minimal fuss and bother. Reality, though, can be far different.

26 ENERGY EFFICIENCY DEDUCTIONS

FOR LAUNDRIES Uncle Sam, in the form of our tax laws, wants to reward every laundry business that improves the energy efficiency of the building housing its business or plant. In fact, all so-called “commercial buildings” may quality for this unique tax deduction, says Mark E. Battersby.

32 COIN-OP 101: COMMERCIAL ACCOUNTS Distributor Todd Santoro says that with proper preparation and marketing to neighborhood businesses, store owners can either start or grow their pickup and drop-off accounts to add revenue.

10 COLUMNS 34 WHAT WILL YOUR OBITUARY SAY ABOUT YOU? Columnist Howard Scott didn’t know 103-year-old Mary Chin, but he found a lot to like about the 4-foot10 mother of nine in her obituary. It tells the tale of a devoted mother and fearless businesswoman who built a laundry on simple rules and sheer force of will.

DEPARTMENTS 4 VIEWPOINT 6 INDUSTRY SURVEY 24 PRODUCT NEWS 28 CALENDAR

30 WEB UPDATE 37 ADVERTISER INDEX 38 CLASSIFIEDS 40 NEWSMAKERS

22 A CLOSER LOOK Absent a carefully designed succession plan, a family business transition can quickly turn into a costly train wreck.

Photo: © iStockphoto/Steve Debenport

Cover Image: © iStockphoto 2

AMERICAN COIN-OP SEPTEMBER 2012

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VIEWPOINT

EDITORIAL Charles Thompson, Publisher E-mail: cthompson@ americantrademagazines.com Phone: 312-361-1680 Bruce Beggs, Editorial Director E-mail: bbeggs@ americantrademagazines.com Phone: 312-361-1683

BUY LOW, SELL HIGH

Roger Napiwocki, Production Manager Jean Teller, Contributing Editor Nathan Frerichs, Digital Media Director E-mail: nfrerichs@ americantrademagazines.com Phone: 312-361-1681

ADVERTISING IN THE MARKET Our main feature covers the buying or selling of a store, including how to go about evaluating a property or location. If the whole idea gives you heartburn just thinking about it, follow the advice of the experts we interviewed and turn to industry professionals to assist you in your quest. If you choose to go it alone, our article also shines a light on routine buying/selling pitfalls to avoid and how to set yourself from the competition. Turn to page 10.

Bruce Beggs NEXT IN LINE Phillip M. Perry examines succession planning and the process of passing the torch. Turning the keys over to the next generation doesn’t sound like it would be hard to do, but doing it in such a way that all parties are protected takes some forethought and legal assistance. Do you know what a buy-sell agreement is and how it works? No? Then turn to page 22 to find out.

THE OBITUARY PAGE Mary Chin died earlier this summer at the age of 103. Who’s Mary Chin? She’s the 4-foot-10 mother of nine who, when she was widowed some 60-odd years earlier, took over her husband’s laundry business and ran it herself for more than 40 years while raising a family. Columnist Howard Scott found a lot to like about this woman who preached being efficient, saving money and working hard to her children. After you’ve learned what Mary Chin’s obituary said about her, give some thought to what yours might say about you. Are there things you’d like to change before it’s written? Howard’s column begins on page 34.

BREAKING NEWS As we were about to go to press, the Clean Executive Committee announced that it had adopted a new mission statement focused on promoting the Clean Show as a forum for the exchange of new ideas before, during and after the event. To that end, it has relaxed long-standing rules that previously prevented exhibitors and associations from scheduling meetings during Clean Show hours. With next year’s show shortened to three days, and now this change, I’m curious to see how the industry will respond. Stay tuned.

Donald Feinstein, Natl. Sales Director E-mail: dfeinstein@ americantrademagazines.com Phone: 312-361-1682

OFFICE INFORMATION Main: 312-361-1700 Fax: 312-361-1685

SUBSCRIPTIONS 630-739-0600 www.AmericanCoinOp.com

American Coin-Op (ISSN 0092-2811) is published monthly except Nov/Dec combined. Subscription prices, payment in advance: U.S. and Possessions, 1 year $39.00; 2 years $73.00. Foreign, 1 year $89.00; 2 years $166.00. Single copies $7.00 for U.S. and Possessions, $14.00 for all other countries. Published by American Trade Magazines LLC, 566 West Lake Street, Suite 420, Chicago, IL 60661. Periodicals postage paid at Chicago, IL and at additional mailing offices.

POSTMASTER, Send changes of address and form 3579 to American Coin-Op, Subscription Dept., 440 Quadrangle Drive, Suite E, Bolingbrook, IL 60440. Volume 53, number 9. Editorial, executive and advertising offices are at 566 West Lake Street, Suite 420, Chicago, IL 60661. Charles Thompson, President and Publisher.

American Coin-Op is distributed selectively to owners, operators and managers of chain and individually owned coin-operated laundry establishments in the United States. No material appearing in American Coin-Op may be reprinted without written permission. The publisher reserves the right to reject any advertising for any reason. © Copyright AMERICAN TRADE MAGAZINES LLC, 2012. Printed in U.S.A.

Bruce Beggs Editorial Director

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INDUSTRY SURVEY

NEARLY HALF OF STORE OWNERS BELIEVE CUSTOMER BASE HAS EXPANDED How does the customer base for your coin laundry compare to the base of last year? Is it larger or smaller? Nearly half of the store owners who took August’s AmericanCoinOp.com Wire survey—47.8%—say their customer base has expanded in the last year. Approximately 39% say their customer base hasn’t grown during that time, and the remaining 13% of respondents are not sure.

Do you believe there are more people using coin laundries in your area than there were last year? More than half of survey respondents—52.2%—say no. Approximately 39% say there are more people using coin laundries in their area, and 8.7% are unsure.

It’s often said that people have less free time and thus are more likely to try a coin laundry once or twice, but the survey results don’t really bear that out. Roughly 59% of respondents say they haven’t seen a bump in business to indicate that people are more likely to try a coin laundry due to busyness. Roughly 36% say they have seen increased business related to this, and 4.5% are unsure.

Why won’t more people give coin laundries a try? Two-thirds of survey respondents say there’s no need for them to visit a coin laundry if they have access to equipment at home. Nineteen percent say it’s became people are creatures of habit, 9.5% say it’s because coin laundries are dirty, and 4.8% believe it’s because they don’t know how to use the equipment. No one who responded to the survey believes it’s because people don’t want to mingle with others, or that coin laundries are too expensive.

If you didn’t have to use a coin laundry, what would be the most important factor in attracting you to a store? Among Wire survey respondents, it would be a bright, clean store (43.5%).

Gaining the ability to shorten wash/dry time would be key for 26.1%, while having the opportunity to use unique equipment to handle a variety of needs would draw 17.4% of respondents.

Smaller shares would be attracted by inexpensive prices (8.7%) or convenient hours (4.3%).

Approximately 61% of respondents believe about the same number of people will be using coin laundries a decade from now. Roughly 26% say there will be more people using them, and 13% say there will be fewer people using coin laundries.

While the survey presents a snapshot of readers’ viewpoints at a particular moment, it should not be considered scientific.

Subscribers to Wire e-mails are invited to take the survey anonymously online each month.

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AMERICAN COIN-OP SEPTEMBER 2012

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Photo: © iStockphoto/Sharon Meredith

W

hether you are buying your second the view of someone who isn’t worried about DON’T TACKLE store or selling your fourth store, it’s getting a commission.”

Most distributors should have the necessary easy to understand why your stomBUYING/SELLING ach is churning.

Costly buying/selling mistakes demographic information, he says. This inforA STORE BY must be avoided. A little bit of tossing and mation is also available online. Larsen lists popturning is par for the course, but one of the ulation density, the percentage of renters in the YOURSELF best ways to ready yourself for a key transac- area, and the age of the area housing as demo-

Photo: © iStockphoto/Sean Locke

By Paul Partyka

tion is to get some professional advice.

In lieu of some antacid, American Coin-Op offers a host of buying and selling tips courtesy of industry veterans.

GET A SECOND OPINION If you are buying a store or building one, it’s key to have high-speed equipment, says Larry Larsen, a managing member of Laundromat123 .com with more than 30 years of experience in the ownership, management and construction of Laundromats. Larsen is also a licensed real estate broker active in the sale of self-service laundries.

Get the help of a professional when it’s time to buy, Larsen advises. “Would you buy a used car without having a mechanic check it out?” A broker, distributor, etc., can see little things that you miss, he adds.

Larsen also suggests getting a fee-based second opinion. “For $300 to $500, you can get

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AMERICAN COIN-OP SEPTEMBER 2012

graphic keys.

Older housing means no laundry rooms or just small ones, which is good for self-service laundries, he says. “Your major competition will be people with home equipment, not other laundries!”

Don’t focus on population within a ZIP code, but instead look at the number of people within concentric circles of one-half, one and two miles in an urban environment, he advises. “ZIP codes can cover too large of an area.”

To avoid unpleasant surprises, Larsen urges prospective owners to visit city hall to “pull permits,” as well as ask around to see if any new laundries are going up. Urban owners should mainly focus on the laundries within a half-mile of the store they intend to buy.

“Drive around within a one-mile location of the store and look for vacant spots where a new store might go up. Ask other laundry owners www.americancoinop.com

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about this. Do the work yourself; don’t rely on your broker to do the research.”

Looks can be deceiving, he warns. Get a copy of the water and other utility bills, tax returns and any record of income. “You also want to look at a store and decide how you can improve it. A store that needs work can turn into a more profitable investment.”

Larsen also believes that it’s crucial to get a woman’s opinion when you are examining the store. “Some men haven’t washed clothes in 20 years!”

The two greatest mistakes made when acquiring a store are not getting a fee-based second opinion and not studying the lease, he says.

You will also need the help of an industry professional when selling, he notes. “The pros know people in the business and can help you find a buyer. I’ve never seen a seller lose money in the long run by getting help. A good broker will help you get every possible dollar.”

Advertising the sale is part of the process.

“Newspaper advertising has diminished.

Instead, tell other industry members about the sale, go to association events, and use industry-specific websites that feature busi-

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ness sales. It’s also crucial to pass out flyers to other laundry owners within five miles of your store.

“If you have a real estate agent, he can put the store in the [Multiple Listing Service]. The information goes to other brokers who might want to sell the laundry and get the commission.”

When meeting with a buyer, you’ll want to know how much money he/she has available, and the money source.

“I don’t deal with people who are putLarsen ting up their home as a guarantee to buy.” It’s also important that the buyer knows how much money will be needed immediately after the sale for a deposit on the lease, insurance costs, and even quarters for the changers, he adds.

There are numerous ways to price a Laundromat. In California, multiples are used, Larsen says. For example, an owner can take the monthly net and multiply it by 50 to 60 or up to 75 to 80 to establish a

price. When doing this, be careful about your income data and consider the expenses of the new owner. “For example, the new owner may do his own repairs.”

Don’t be surprised if you are asked why you are selling, and don’t be surprised if the buyer bolts if you don’t deliver a satisfactory answer, Larsen says.

“In this economy, people are looking for a good investment. A laundry is a good investment, and a fairly priced store will sell.”

STUDY THE LEASE Do you like to purchase a store or build one? “With an existing store, you can get an excellent infrastructure,” says Dan Bowe, national sales manager for Speed Queen. An existing store can also ease your water and sewer concerns, he adds. “The downside to an existing store is that you’re stuck with the layout.”

It’s exciting to build from the ground up and create your own look, Bowe says, while still having flexibility. The downside to building is utility-cost concerns.

Bowe also advises buyers to work with some type of broker, preferably an industry-

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SEPTEMBER 2012

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have to make improve Lending Concerns ments.

“The importance of the competition varies When shopping for a new location, it’s never a bad idea to take a close look at the real estate market. For self-service between markets, but laundry owners, the market is a mixed bag, according the everyone would probaNational Association of Realtors (NAR). bly agree that if there is Shaking off a prolonged impact from the recession, fundano laundry near the mentals are gradually improving in all of the major commerstore, that’s probably cial real estate sectors, according to NAR’s commercial real more of a red flag than if estate forecast. there is a laundry.”

However, a large problem remains for purchases of comThe most common mercial property priced less than $2.5 million. “Our recent mistake made when commercial lending survey shows that there is very little capibuying a laundry is signtal available for small businesses, which is significantly impacting a bad lease, Bowe ing commercial real estate transactions, although funding is says. “Typically, you less restrictive for bigger properties,” says Lawrence Yun, NAR want a 10-year lease chief economist. with two to three fiveLaundry owners may be interested to know that rising year options.” You also apartment rents are having a positive impact on home sales, because many longtime renters now view home ownership as need to calculate what a better long-term option, Yun adds. the maximum rent will The NAR represents 1 million members involved in all be, he adds. aspects of the residential and commercial real estate industries.

If you’re buying, the good news is that there are laundries for sale about every three years, he notes. “The best today, Bowe says.

It’s also key to use a qualified profession- time to sell is winter when you have your al when you’re selling a laundry, he says. In best business.” However, a good industrysome cases, a qualified broker may have a specific broker can navigate a summer sale number of representatives trying to market and explain the cash flow through the seayour property. The broker can also assist the sons, he adds.

Bowe cautions sellers to avoid two key potential buyer with financing, Bowe adds.

“You won’t save money or time if you don’t mistakes: taking on the task yourself to save money and misrepresenting the store have a broker.”

Sellers want qualified buyers for credit- income (potentially leading to court cases). worthiness and ones “If you haven’t continuously reinvested in having enough cash, he your business, you probably can’t expect to Too Good to Be True? notes. Do a credit check. sell the store for what you paid.”

Bowe believes the days Applying for a business loan and securing its approval can of the buyer getting cash KNOW THE BUYER be time-consuming. Should you try to speed things up, you “Generally, I recommend buying a store by refinancing his house might open yourself up to some problems down the road. are pretty much over. It’s rather than building one because the costs The U.S. Small Business Administration (SBA) offers these also standard for distrib- are more controllable,” says Don Cook, a tips on how to avoid potentially costly mistakes: utors and brokers to set Pellerin Milnor Corp. key account represen• Look at the fine print to see if the interest rate is fixed or the buyer up with tative for vended laundries. “When buying a variable (and when it will change) store, I want three years of owner tax financing, he adds.

• Take note of the payment schedules, grace periods and When pricing your returns and I need to know store volume, late-payment fees store, one common for- including the percentage volume from wash, • Are there prepayment penalties if you pay off the loan mula is to take true net dry and fold.” early?

If you build a store, it’s all about finding sales, more importantly • Check the lender’s definition of “default” and the penalties the ideal location with strong demographEBITDA (earnings beincurred fore interest, taxes, ics, Cook says. He looks at the number of • Consult the Better Business Bureau to see if any complaints depreciation and amorti- households in the sales area making less have been made about the lender zation), and use a multi- than $49,000 yearly, and the percentage of • Read all loan-related documents in their entirety as early plier of four to five. renters in the area. In an urban environas you can “People are looking for ment, the sales area may be one mile or less; • Before you sign anything, prepare a list of questions so a 20 to 25% cap rate of in a rural environment, the sales area could that you have a clear understanding of the terms be two miles, he notes. return.”

It’s also important to study both past and The average store sells

specific one. A good broker knows all aspects of the business and can help you understand the lease, he says.

The ideal location should have a large number of renters, low- to medium-income residents, and a high population density, Bowe notes. Average age of the rental properties is key.

Take a look at the laundry’s retail neighbors. Is there a good synergy among the Bowe businesses? Will their customers use your laundry? Will neighboring businesses impact laundry parking? The broker should play a key role in answering these and other questions, he opines.

Trial counts and trial collections can help establish the value of an existing store, Bowe believes. However, in order to get a fair count, he strongly suggests bringing in a third party to install new coin boxes.

Store evaluations can be tricky, he admits.

For example, laundry business is seasonal.

Visiting a store during the slow summer business period might cause a buyer to believe business is always bad.

He recommends focusing on whether the infrastructure can handle change, and if the visibility is good. Poor parking and bad windows are red flags. “Simply, if the owner hasn’t reinvested in the business, you will

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current demographics, he adds. “Four years of demographics would be good.”

Cook requires a minimum of 10 years on the lease, as well as owner financing, if possiCook ble. Cleanliness and lighting also catch his eye when evaluating a store. However, he wouldn’t necessarily shy away from a less-than-ideal store with good volume, because the volume can rise with some store improvement, he explains.

Evaluating the owner’s asking price is difficult because each person has his/her reason for buying and varying profitability expectations. “Don’t forget to look at the store debt.” More importantly, Cook believes if a store isn’t profitable doing two to three turns a day, it’s a lost cause.

Laundry competition rates a 6 or 7 on a 1-to-10 scale, he says. Two old stores in your sales area may not be as important as one new laundry. “This issue goes back to demographics. The demographics let you

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know [how much money] can be generated in the area.”

It’s not really a buyer’s or seller’s market, he believes. “However, the return on investment seems a bit lower these days. A 20% return used to be the norm; today a 15-to18% return is more normal.”

Cook strongly suggests getting a distributor’s help when selling a laundry. “A good number of distributors may have a buying/selling division within the company. A distributor may also have more in-depth experience than a consultant.”

Using a consultant for a second opinion may be helpful, but it’s not crucial, he states.

Cook believes in distributors because they want to do future business with sellers. “A good distributor should also advise you when not to make a sale.”

He doesn’t necessarily rely on a particular pricing formula today, but here’s one he’s used in the past: gross yearly volume less depreciation (washer, dryers, heaters, etc.) value.

The biggest mistake a seller can make is not knowing enough about the buyer, he says. He finds plenty of buyers who aren’t serious. “I conduct investment seminars. If

seven to 12 people show up, only one or two of them are serious buyers. Make sure the buyer has at least $50,000 to $75,000 in cash or (it’s) no deal.”

Knowing the buyer means gathering personal and financial information, he adds. “I want a business resume in order to get an idea of what the person is all about.” Cook admits that the buyer’s background could prevent him from making the sale. More specifically, he demands a credit report plus a financial statement.

ELIMINATE MISTAKES All things being equal, a prospective owner should investigate buying a store rather than building one, says Dick Ruel, Maytag Commercial Laundry national sales manager. “The reasons are varied, but include an already Ruel established market, cash flow, and a distributor who understands the store’s and customer’s needs.”

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Seek assistance when buying a Laundromat, he says. A broker and a knowledgeable distributor can be helpful, and the Coin Laundry Association (CLA) is also a valuable resource to consult when looking to enter the business, he adds.

Prior to buying a store, the owner needs to diligently research the current location, the demographics of the area, and any future changes to the immediate area, Ruel explains. “Reviewing the self-service laundry’s financials isn’t enough to paint the proper picture of the entire business.

Potential owners should obtain a demographic study from the CLA, which can be done fairly inexpensively. Speaking with city planners and the chamber of commerce will provide the best look into the future landscape of the area.”

If you are going to build a store, understanding the demographics and being aware of future construction changes need to be taken into consideration, Ruel advises.

“Also, cash flow is important to understand. The owner must make enough profit to keep operations functioning.”

Before buying a store, a business plan, including a pro forma, is required, Ruel

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SOME KEY POINTS...

• Rely on industry pros to help, whether buying or selling • Analyze area and demographics • Gather financial information • Study potential leases carefully advises. “A pro forma projects an owner’s income, expenses and net revenue based on the store area’s population and demographics. It also provides a break-even point based on estimated expenses and the projected number of turns per day.”

There are several mistakes a buyer can potentially make, according to Ruel. First, maintaining the previous owner’s operation is not enough to guarantee a successful and well-kept store, he notes. “The new owner also needs to do his/her due diligence and request an inspection to ensure that the store meets required standards and/or codes.

“In addition to maintenance and store

operations, a new owner needs to confirm the financials are accurate. And when it comes to determining a fair price, the age of the commercial laundry equipment should not be overestimated.”

Check out the competition. Ruel urges prospective owners to visit the area’s laundries, talk with their customers and discover what they like and don’t like. “The only way to gain market share is to take it from another store. Therefore, new owners need to understand how to set their businesses apart from competitors in the area.”

A broker and the CLA are valuable resources to consult when selling a store, Ruel says. Selecting a real estate agent to help with the selling process also cuts down on the responsibilities of the seller. “The real estate agent will ensure the prospective buyer is pre-approved and that the finances are in order.”

The biggest mistake that sellers make, Ruel believes, is having unrealistic expectations of what their store is worth.

Paul Partyka is a freelance writer based in Chicago, and was editor of American Coin-Op in 1997-2011.

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PRODUCT SHOWCASE

WATER-HEATING EQUIPMENT HAMILTON ENGINEERING amilton Engineering has upgraded its line of copperfinned water heaters. The company’s compact line is designed to accommodate rooms of any size, with models ranging from 100 MBtu to 4,000 MBtu. Hamilton offers a full range of water-heating products, from a low-cost line of copper-fin, 81% efficient water heaters up to the EVO at 99.8% efficiency, as well as its new San-O3-tyzer system.

The San-O3-tyzer uses a blend of heat and ozone in every wash cycle, allowing laundries to provide sanitized washers with every load. hamiltonengineering.com 800-968-5530

H

BOCK WATER HEATERS mployee-owned Bock Water Heaters manufactures gas, oil, dual-fuel, electric, solar and geothermal water heaters.

In business since 1929, the company offers Bock® model HEC (high efficiency, condensing) gas water heaters with quiet operation and high energy efficiency (up to 99% thermal-efficient) that are ideal for automatic laundries.

Equipped with a low-NOx premix burner, the HEC models help reduce air pollution, including elements harmful to human respiratory health, the company says.

PVC venting and zero clearance to combustibles help to make HEC models easy to install. With eight models available ranging from 125,000 to 400,000 Btu/hr, the Bock HEC can accommodate a wide variety of hotwater delivery requirements. bockwaterheaters.com 800-794-2491

E

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AMERICAN COIN-OP SEPTEMBER 2012

RINNAI innai® Tankless Water Heaters save energy, money and space, the company says. Models feature a commercial-grade heat exchanger that ensures durability, performance and a constant supply of hot water in highfrequency applications, such as laundries.

Units can be banked together to ensure peak-demand needs are always met. Rinnai’s EZConnect® cable makes joining two units as easy as plugging them in. For laundries with greater hot-water needs, up to 25 units can be combined with the multi-unit control system, so they operate seamlessly as a single source. Built-in redundancy with the multiple units ensures a Laundromat never has to close due to lack of hot water, Rinnai says.

Rinnai’s wall-mounted heaters also save floor space and can be installed on a building’s exterior, which can equate to additional washers and/or dryers in the facility, ultimately increasing the laundry’s revenue. Installation is easy; exterior installation requires no vent components. rinnai.us 866-RINNAI1

R

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PRODUCT SHOWCASE

NATIONAL COMBUSTION CO.

RHEEM he ENERGY STAR-qualified Rheem Prestige Series Condensing Tankless Water Heater uses condensing technology to heat water only as it is needed, according to company officials.

Features include a spacesaving design (units are the size of a medicine cabinet); a minimum flow rate of .26 GPM and a minimum activation flow rate of .40 GPM, which allows operators with low-flow fixtures to receive warm water without increasing the flow; easy venting; and a commercial conversion chip allowing the unit to operate at 185 F. The tankless water heater also includes an EZ-link cable to enable multiple units to be connected for high-demand situations. rheem.com 800-621-5622

T

ational Combustion Co. recently released its new NATSTAK series of water heaters.

NATSTAKs are fully enclosed and integrated combinations of a Fire Coil 85-style water heater mounted over an 80-gallon storage tank. The heater and pump are pre-piped with an internal circulating pump – installers make only coldwater inlet, hot-water outlet, and (natural or LP) gas connections.

NATSTAK models, available at 199, 299 or 399 MBtu, provide space savings and the convenience of tank-type water heaters.

They are sealed-combustion, meaning that standby losses are low. The cabinet is constructed for outdoor or indoor applications.

NATSTAKs can be vented through roofs or side walls. When inlet air is ducted to NATSTAKs, they are isolated from air movement in a laundry caused by dryers, cooling systems or exhaust fans. All models are low-NOx. nationalcombustion.com 888-656-2826

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Succession Planning:

Passing the Torch Buy-Sell Agreements Smooth Family Business Transitions

By Phillip M. Perry

M

ost family business owners expect their thriving enterprises to transfer to the younger generation with minimal fuss and bother. Reality, though, can be far different. Absent a carefully designed plan, misunderstandings and disputes can turn any business transition— including ownership of coin laundry stores—into a costly train wreck.

Parents must analyze the skills and proclivities of their children before assigning future management roles. While such assessments can help smooth the transition, even the best of such plans needs the support of legal documents that ensure power flows to the right people and sufficient cash is available to make everything happen on cue.

SETTING TERMS Often the most important transition document is the so-called “buy-sell agreement,” which specifies how ownership will be allocated and how the sale of shares will be

funded. “A buy-sell agreement is crucial to a smooth ownership transition for a family business,” says Gregory Herman-Giddens, a board-certified specialist in estate planning at the law firm of TrustCounsel, Chapel Hill, N.C. “It allows for one or more of the children who are active in the business to buy out a parent who retires or dies.”

Buy-sell agreements typically cover an array of issues that go beyond the basic transfer of ownership upon the death or retirement of the original owners. They also typically cover how ownership will transfer when one of the children exits the business, either through death, disability or even a decision to go into another line of work.

Here are some other issues that buy-sell agreements often cover: • What if one of the siblings desires to sell shares to an outside third party?

• Must the siblings be offered the shares first?

• How much time do they have to reach a decision?

• And what if a child wishes to withdraw

capital from the business? How much money can an individual owner take out, over what period of time, and how much prior notice must be given to the other owners?

These agreements also often specify the methods by which internal disputes are resolved. Some issues will lend themselves to arbitration or third-party mediation. For those which can be resolved by voting, the agreement will specify who has the power to vote and whether a simple majority or super majority is called for.

Buy-sell agreements can be real lifesavers in sticky situations. For example, they can avert unexpected shifts in power to unqualified individuals. “Often one member of the second generation receives share of ownership, then gets divorced,” notes John J. Scroggin, a partner at the estate planning law firm of Scroggin & Company, Roswell, Ga. “That individual’s former spouse now owns the equity. Unreasonable demands can follow, and that can be a thorn in the side of the family.”

The solution, says Scroggin, is to draw up clauses in buy-sell agreements that anticipate common and costly events such as divorce or unexpected death. To do this, the document should mandate a “call right” on shares that are gifted to children. The “call right” is a provision that empowers remaining family members to buy out the shares of a non-family spouse who may survive the divorce or death of a family member who was in an ownership position.

PRICING THE BUSINESS

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AMERICAN COIN-OP SEPTEMBER 2012

The buy-sell agreement will usually specify the method for determining the business’ value upon the death or departure of an owner. “Commonly, the plan may call for a valuation to be done by a business valuawww.americancoinop.com

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tion expert or CPA,” says HermanGiddens. “There may also be a tie-breaker provision: Survivors who disagree over the business’ value might be able to choose their own expert, and then either those two experts agree on a third expert or the two values are averaged.”

An alternative valuation system specifies a formula to be used, such as a multiple of earnings. This can be problematic, though, since economic conditions at the time of a partner’s retirement or death may differ substantially from those at the time the plan is put together.

AVOIDING PROBLEMS Successful buy-sell agreements include provisions that anticipate and head off common problems. Here are some tips from Scroggin, who has studied the hidden pitfalls of family business transitions:

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business transition without having a tax expert review the documents and the plan,” advises Scroggin. “Proper planning can substantially reduce the tax cost of the transaction.” In many cases, for example, the sale of the business to family members can create substantially more taxes than a gift.

Funding — It’s important to set up vehicles for funding the buyout. Often, life insurance provides funds for buying the shares of an owner who has died. And if the owner is retiring, there can be provisions for installment payments over time.

Exit Strategy — Suppose one child wants to leave the laundry business after some time passes. How much will that individual be paid for his or her shares? This should be spelled out in a legal document that you can think of as a kind of pre-nuptial for business owners.

Protecting Funds — Suppose your laun-

assets,” says Wayne Rivers, president of the Family Business Institute. They can be written so that rewards are given for performance in or outside of business. And the reward formulas can be flexible.

STARTING EARLY Succession planning should start with individual interviews, assessing the goals of each family member. These goals should be incorporated into documents that ensure the smooth process of business and wealth transfer.

Many family business owners hesitate to draw up transition plans because of the current uncertainty in tax laws. “A qualified attorney can create a flexible plan that anticipates many different tax scenarios,” says Herman-Giddens. “So put a plan in place now and have some peace of mind that you and your family are protected. You can

End of the world predictions.

not dependable.

Non-Compete Agreements — Suppose one family member desires to exit the business but wants some compensation in return. The buy-sell agreement may include a clause that specifies the value the individual will be paid for his or her shares. That sounds fine on the surface, but it can backfire if the individual then goes out and starts a laundry pursuing the same customers.

The way to avoid this pitfall, says Scroggin, is to include a “non-compete provision” that prohibits the departing family member from engaging in a similar business for a set period of time. The agreement can also specify that the departing owner may not solicit the organization’s current customers or vendors, or utilize any of its trade secrets.

Tax Implications — “Never provide for a www.americancoinop.com

dry business has accumulated an amount of money over and beyond that required to fund operations in future years. How can these funds be transferred to the member of the next generation? The answer often poses a puzzle: On the one hand, you want to make sure the funds stay in the family.

On the other hand, you do not want to give so much money to individuals—particularly young ones—that they will lack incentive to do anything productive with their lives.

In many cases, the answer to the puzzle is to establish what is called an incentive trust.

This vehicle provides for the incremental transfer of funds to the next generation, but only when those individuals have reached specified parameters such as finishing their education.

“Incentive trusts are perfect for liquid

always update your plan in a year or two.”

Indeed, delay can be costly. “Don’t wait until one of the owners is sick or gets ready to retire,” says Herman-Giddens. “There can be an unexpected incapacity or death at any time.”

Information in this article is provided for educational and reference purposes only. It is not intended to provide specific advice or individual recommendations. Consult an attorney or financial adviser for advice regarding your particular situation.

Phillip M. Perry is a freelance writer based in New York, N.Y., who has been published widely in the fields of business management, workplace psychology and employment law.

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PRODUCT NEWS

EQUIPPED TO MAKE A DIFFERENCE Pyramid Technologies Inc. (PTI) has launched its new Phoenix thermal printer. Designed with user input in mind, the machine is ideal for a laundry’s amusement, kiosk and gaming needs, the company says.

PTI’s design incorporates all industry standard demands as well as custom features for higher security and ease of use.

The “plug-and-play” thermal printer is DIP switch-configurable, flash memory-upgradable, and customizable to meet specific needs.

“We worked very closely with our customer base during the design process and really honed in on the gaps we found

«

THERMAL PRINTER SUITED FOR LAUNDRY’S AMUSEMENT NEEDS

between what was currently offered and what the users wanted,” says President/CEO David Mays.

“Our engineers did an excellent job incorporating all the input into the product,” adds Sales Manager Kristina Chevalier. “We’re excited for the launch and have no doubt the Phoenix will impress.”

pyramidacceptors.com | 480-507-0088

« 30-POUND STACKED DRYER BLENDS BEST OF OLD WITH NEW capacity tumbler that can handle oversized loads.

The machine is fast drying and efficient, in addition to having exceptionally quiet and smooth operation, ADC says.

Also, exclusive on the AD-30x2, ADC offers various door-trim color options. Store owners can customize the door-trim color to match their laundry’s branding.

amdry.com | 508-678-9000

WASHER-EXTRACTORS REDESIGNED FOR ‘ULTIMATE EFFICIENCY’ Speed Queen recently launched its newly redesigned hardmount washer-extractors that offer “ultimate efficiency” to help reduce operating expenses and increase profits, the company says. Models range from 20 to 80 pounds in capacity.

The new machines use 33% less electrical energy, and 11% less water on average than previous models, thanks to proprietary advanced inverter technology and innovative cylinder and sump system design.

New technology allows for extraction options up to 200 Gforce. To further increase efficiency, the new products offer a cylinder design that provides what Speed Queen says is the industry’s lowest water consumption by minimizing “non-

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AMERICAN COIN-OP SEPTEMBER 2012

«

American Dryer Corp. (ADC) has introduced a new 30-pound stacked dryer to its lineup that boasts many of an ADC dryer’s trademark features plus some new ones.

The AD-30x2 incorporates state-of-the-art design features, with simple controls and an easyto-read LCD screen. It includes efficient transaxial airflow and rugged roller-supported tumblers. The space-saving dryer is only 311/2 inches wide and less than 40 inches deep, with a large-

wash” water with smaller sumps.

The machines also come equipped with Speed Queen’s patented Water Guardian technology, which detects leaks in drain and fill valves.

Easy-to-use Quantum™ controls come standard to further help reduce costs and increase profits, with options including maintenance reminders and cycle modifiers.

speedqueen.com | 800-590-8872 www.americancoinop.com

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« NEW TECHNOLOGY GIVES WASHER-EXTRACTORS A ‘BOOST’ Huebsch’s eBoost™ technology is now available to vended laundry owners looking to maximize efficiency for increased profitability, the company reports.

The eBoost technology is designed to make Huebsch washer-extractors “supremely efficient” by using 33% less electrical energy and 11% less water than two-speed models, according to the company.

“Laundromat owners have been asking for efficient equipment, and Huebsch is here with the answer,” says Gary Dixon, North American sales manager. “With this technolo-

gy, owners no longer need to use a machine that eats away at their profits because it is inefficient. eBoost is exclusive to the Huebsch brand, and we developed it with store owners in mind.”

It provides Huebsch washer-extractors with patented Water Guardian leak detection, a one-of-a-kind technology that detects leaks in the drain and fill valves, eliminating wasted water and resources, according to the company.

Additionally, the eBoost technology spins up to 200 Gforce, removing more water from loads, lowering dry times and gas costs.

It is available on Huebsch’s Galaxy™ washer-extractors.

huebsch.com | 800-553-5120

Miracle diets.

not dependable.

Crossover, the commercial-standard small-chassis washer from Wascomat, is CEE Tier III-qualified for the highest level of energy efficiency, the company says.

Tier III is the highest among three levels recognized by the Consortium for Energy Efficiency, a non-profit public benefits corporation that works to develop initiatives for its members to promote the manufacture and purchase of energy-efficient products and services.

Four years of intensive development went into the Crossover, Wascomat says. Products in the line include a 22-pound-plus stand-alone washer, dryer, and stack washer/ dryer combo.

Crossover is built to last more than 15,000 cycles, more

www.americancoinop.com

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SMALL-CHASSIS WASHER BUILT TO EXCEED 15,000 CYCLES

than double the life of appliance-type front loaders and top loaders, and offers 300-G-force high-speed extraction, Wascomat says.

“We also made sure it would finish each cycle—it doesn’t over-suds, and it stays in balance,” says Neal Milch, CEO of Laundrylux, the equipment’s North American distributor. “It’s perfect for route operators, small OPL operations, and coin laundries.”

laundrylux.com | 800-645-2205 SEPTEMBER 2012

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Energy Efficiency

Deduction for Laundries IRS RULES ALLOW DEDUCTION OF PORTION OF COSTS TO INSTALL ENERGY-EFFICIENT SYSTEMS

Photo: ©iStockphoto/Marcello Bortolino

By Mark E. Battersby ncle Sam, in the form of our tax laws, wants to reward every laundry business that improves the energy efficiency of the building housing its business or plant. In fact, all so-called “commercial buildings” may qualify for this unique tax deduction. Even those that only partially improve energy efficiency may qualify, albeit with a smaller deduction.

While there is some question whether tenants can claim this credit, new guidelines from the Internal Revenue Service make it easier than ever to claim even the partial deduction.

U

ENERGY-EFFICIENT COMMERCIAL BUILDING DEDUCTIONS Our tax rules allow a deduction for a portion of the costs of installing energyefficient systems in a commercial building.

The maximum deduction is generally $1.80 per square foot, less the total amount of any deductions claimed in earlier years.

Qualified systems include interior lighting, heating, cooling, ventilation, hot water systems, and the building’s envelope. Best of all, the deductions don’t expire until Dec. 31, 2013.

The deduction of up to $1.80 per square foot is available to owners or tenants of new or existing commercial buildings that are constructed or reconstructed to save at least 50% of the heating, cooling, ventila26

AMERICAN COIN-OP SEPTEMBER 2012

tion, water heating, and interior lighting energy costs.

Partial deductions of 60 cents per square foot are also available for improvements to any building system that reduces total heating, cooling, ventilation, water heating and interior lighting energy use by a specified— and recently changed—percentage.

COMMERCIAL BUILDING DISCRIMINATION It is no secret that our tax rules have long treated commercial property less favorably than residential property. Today, however, tax breaks are available that create significant incentives for making “commercial” buildings more energy-efficient.

The incentive comes in the form of a tax deduction. The unique Energy Efficient Commercial Building Deduction (EECBD) is already rewarding many commercial building owners—and tenants.

Under EECBD, a laundry or dry cleaning business can claim tax deductions for new or renovated buildings that save 50% or more of projected annual energy costs for heating, cooling and lighting compared to model national standards. Partial deductions are available for efficiency improvements to individual lighting, HVAC and water heating, or envelope systems.

Commercial property is generally defined as property intended for use by retail, wholesale, office, hotel or service users or for manufacturing or other industrial purposes. Examples include shopping centers,

office buildings, hotels and motels, resorts or restaurants, and, of course, laundries.

THE REFERENCE BUILDING Before any laundry owner can claim the EECBD deduction for energy-efficient systems installed in a commercial building, they must obtain certification. Although guidance issued by IRS explains how to calculate a building’s square footage, when a building is considered placed in service, and more, a licensed contractor or engineer must verify the building or portion of the building being submitted is better than the American Society of Heating, Refrigeration and Air Conditioning Engineers’ (ASHRAE) Standard 90.1-2001.

For purposes of the EECBD, the “Reference Building” is a building that is located in the same climate zone as the laundry building and is otherwise comparable to it except that its interior lighting systems, heating, cooling, ventilation, and hot water systems, and building envelope meet the minimum requirements of the ASHRAE 90.1-2001 standards.

WRITE-OFF COMPLEXITIES Rather than a deduction for the actual cost of the systems or equipment purchased to make a commercial building at least 50% more energy efficient, a flat tax deduction of up to $1.80 per square foot is available.

Remember, however, the improvement must save at least 50% of the heating, cooling, www.americancoinop.com

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ventilation, water heating and interior lighting energy cost. A partial deduction of 60 cents per square foot can be taken for improvements made to one of three building systems—the building envelope, lighting or heating, and cooling system.

The deduction applies to “energy-efficient commercial building property,” defined as depreciable property installed as part of a building’s (1) interior lighting systems, (2) heating, cooling, ventilation and hot water systems, or (3) the building’s envelope as part of a certified plan to reduce the total annual energy and power costs to a reference building that meets specified minimum standards.

The Department of Energy maintains a list of the software that must be used to calculate power consumption and energy costs for purposes of certifying the required energy savings necessary to claim the deduction.

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get 50% reduction in energy and power costs is considered partially qualifying commercial building property if it is installed as part of a system that satisfies the applicable energy-savings percentage.

In other words, when it involves the case of a building that does not meet the whole building requirement, a partial deduction is allowed for each separate building system that comprises energy-efficient property.

Thus, deductions of 60 cents per square foot are available to owners of buildings in which individual lighting, building envelope, or heating and cooling systems meet target levels that would reasonably contribute to an overall building savings of 50% if additional systems were installed.

The methods for calculating energy efficiency usually take into account the extent that the current systems exceed “typical” performance. The intent of the rules is for

Or, is the deduction for privately owned buildings restricted to the owner?

As in many matters of tax law, the question is not clear. The business that gets the energy-efficient commercial buildings deduction is the one who “owns” the property for tax purposes. Although in many, if not most, instances in which a tenant improvement will revert to the landlord at the end of a lease, the property is not necessarily owned by the landlord for tax purposes.

It is a question of fact, and the determination depends on arrangements between parties. If the tenant pays for the investment, constructs it to its own specs, and there are no concessions in the lease or from the landlord, it is likely that the tenant will own the improvements for tax purposes and be eligible to claim the deduction.

Fortunately, this question arose under the tax law before the enactment of the energy-

Huebsch laundry equipment.

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With only buildings covered by the scope of the ASHRAE Standard 90-1-2001 eligible, seeking professional assistance is almost mandatory.

The person or organization that makes the expenditure for construction is generally the recipient of the allowed tax deductions. This is usually the building’s owner, but for some HVAC or lighting efficiency projects, it could be the tenant.

PARTIAL DEDUCTION BASICS REVISED The IRS originally provided guidelines for achieving a partial deduction for (1) interior lighting systems, (2) heating, cooling, ventilation, and hot water systems, and (3) the building’s envelope. Under the amended “permanent rule,” property that would be energy-efficient commercial property except for a failure to achieve the tarwww.americancoinop.com

any calculation to be fuel-neutral: the same energy-efficiency features will qualify a building for the deduction, regardless of whether the heating source is a gas or oil furnace, or boiler, or an electric heat pump.

The newly revised energy-savings percentages required by the IRS are now 15% for heating, cooling, ventilation, and hot water systems; 25% for interior lighting systems, and heating, cooling, ventilation, and hot water systems; and 10% for the building’s envelope.

OWNER, OWNER, WHO GETS THE CREDIT? Would a laundry business that is a tenant in a commercial building and that performs a retrofit meeting the energy-savings requirements qualify for the deduction?

Can a tenant in a leased space take advantage of the deduction?

efficient commercial buildings deduction.

In the case of tenant improvements, the tenant and landlord would have to determine the tax “owner” for purposes of claiming depreciation deductions. The energy-efficient commercial buildings deduction does not change that determination. It simply provides a more beneficial deduction than that normally provided by depreciation.

Information in this article is provided for educational and reference purposes only. It is not intended to provide specific advice or individual recommendations. Consult a tax adviser for advice regarding your particular situation.

Mark E. Battersby, Ardmore, Pa., is a freelance writer who has specialized in taxes and finance for more than 25 years.

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all brings calendar full of open houses, service schools

The arrival of fall can only mean one thing for self-service laundry operators—a calendar full of opportunities to attend distributor special events, open houses and service schools.

Here is a brief rundown of events from the American Coin-Op calendar through October — call or visit the website listed for registration information. In many cases, space is limited.

Sept. 12-13 — BDS Laundry Systems Open House & Product Show, St. Paul, Minn.; 800688-0020, bdslaundry.com.

Sept. 12-13 — Gold Coin Laundry Equipment Founder’s Day Sale, Jamaica, N.Y.; 800-952-1474, goldcoinlaundry.com.

Sept. 15 — Professional Laundry Systems Open House and Service School, Feasterville, Pa.; 215-354-0111, plslaundry.com.

Sept. 15 — PWS Open House, San Francisco; 650-871-0300, pwslaundry.com.

Sept. 19 — D&M Equipment Open House

and Service School, Skokie, Ill.; 800-451-2676, dandmequipment.com.

Sept. 19 — Valley Washers Open House, Harrisonburg, Va.; 540-434-8086, valley washers.com.

Sept. 21 — PWS Open House, San Diego; 858-560-6969, pwslaundry.com.

Sept. 21 — Star Distributing Open House and Service School, Knoxville, Tenn.; 800-8977570, stardistributing.com.

Sept. 27 — Commercial Laundry Sales & Service Open House, Wichita, Kan.; 316-2676650, commerciallaundrysales.com.

Sept. 27 — Hynes & Waller Open House, Upper Marlboro, Md.; 301-249-9421, hynes andwaller.com.

Sept. 27 — Star Distributing Open House and Service School, Nashville, Tenn.; 800-8977570, stardistributing.com.

Sept. 28 — PAC Industries Open House, Harrisburg, Pa.; 800-692-6214, pacindustries.com.

Sept. 29 — Professional Laundry Systems Open House and Service School, Orchard Park, N.Y.; 716-662-6100, plslaundry.com.

Oct. 2 — Martin Ray Laundry Systems Open House, Denver; 720-359-8000, martinray.com.

Oct. 4 — Southeastern Laundry Equipment Sales Open House and Service School, Marietta, Ga.; 800-522-9274, selaundryequip.com.

Oct. 8 — Sav-A-Day Laundry Machinery Open House, St. Louis; 800-489-9274, sav-a-day.com.

Oct. 9 — Martin Ray Laundry Systems Open House, Albuquerque, N.M.; 505-883-7277, martinray.com.

Oct. 16 — Coin-O-Matic Open House, Alsip, Ill.; 708-371-9595, millerlaundry.com.

Oct. 16 — Commercial Laundry Equipment Co. Open House, Chester, Va.; 804-231-9668.

Oct. 17 — Commercial Laundry Equipment Co. Open House, Norfolk, Va.; 804-231-9668.

Oct. 18 — Evans Distributing Open House, Salt Lake City, Utah; 801-972-6580, evans laundryequipment.com.

Oct. 19-20 — Western State Design Service School and Open House, Cerritos, Calif.; 800633-7153 x208, westernstatedesign.com.

Oct. 26-27 — Western State Design Service School, Open House and Grand Opening, Hayward, Calif.; 800-633-7153 x208, western statedesign.com.

Check the AmericanCoinOp.com calendar periodically for updates/additions.

EASTERN HAS ITS GRIP ON ANY CHALLENGE

beli

At Eastern Funding, our customers believe in us because we take hold of any challenge by providing financing solutions that laundry owners need to run their day-to-day business activities. We encourage laundry owners to believe in the power of Eastern and apply for laundry financing you can bank on.

Apply Today!

EasternFunding.com I 1.877.819.1764

28

AMERICAN COIN-OP SEPTEMBER 2012

www.americancoinop.com

SERVING THE LAUNDRY INDUSTRY SINCE 1997.

5000 LONG BEACH RD ISLAND PARK, NY 11558

516-432-3834 REBUILT MACHINES

PARTS

NO COMPETITOR GOES TO THE EXTENT WE DO TO REBUILD MACHINES! * THIS IS OUR BUSINESS & OUR POLICY NEVER CHANGES! * WE SELL OUR REBUILT MACHINES AT UNBEATABLE LOW PRICES.

EQUIPMENT ORPHANAGE

Our Parts Department has thousands of products on over an acre lot.

If we don’t have what you want, ask us, and we’ll find it for you.

FACILITY DESIGN From initial site inspections and recommendations to equipment purchase and installation, we are here to help with every aspect of your project.

WASCO 185’s 220/1 & 220/3 WASCO 184’s 220/1 & 220/3 WASCO 125’s 220/1 & 220/3 WASCO 124’s 220/1 & 220/3 WASCO 74’s 110 v & 220/3 WASCO 75’s 110 v & 220/3 WASCO 620’s 110V

$3,500 $2,700 $2,400 $1,850 $ 975 $1,200 $1,600

**6 MONTH PARTS WARRANTY** INCLUDES FREE COIN BOX & EPHOTOS OF MACHINE WILL BE SENT PRIOR TO SHIPMENT

We can help you with specifications, dimensions, illustrations of commercial and on-premise laundry equipment.

FINANCING We are able to offer competitive rates and low, affordable monthly payments for financing coin laundry and laundromat facilities.

We have a coin laundry financing solution to meet the needs of new store owners, and veterans alike.

ACRES OF HARD TO FIND USED WASHER & DRYER PARTS WASHER & DRYER FRONT & SIDE PANELS ALL MAKES AND MODELS STARTING @ $50 WASHER DOOR $35 & UP COMPLETE DRYER DOOR $35 & UP COMPLETE ANY WASHER TUB 18#, 35#, 50#, WITH NEW BEARINGS $175 & UP WITH EXCHANGE ALL DRYER BASKETS $75 & UP ESD CARD READERS $150 EA EMERALD SERIES COMPUTER BOARDS $575 EA LET US REFURBISH YOUR PANELS ~ FRESHLY PAINTED PANELS IN EITHER ALMOND OR WHITE ... $70 EA CALL FOR SPECIAL NEEDS

THERE ARE MANY INTERPRETATIONS OF THE WORD REBUILT—BE A SAVVY CONSUMER— TAKE THE TIME TO VISIT OUR WEBSITE @ www.nylaundry.com VIEW THE ILLUSTRATIONS THAT WILL SHOW YOU THE WAY WE REBUILD MACHINES— THE RIGHT WAY!!

VISIT OUR WEBSITE TO SEE MONTHLY SPECIALS

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WEB UPDATE

Most popular stories from AmericanCoinOp.com for the 30 days ending August 15 — (WE) denotes Web Exclusive

TOP FIVE STORIES

COLUMNISTS/FEATURES

OUR SISTER WEBSITES

• CLA Designs Unique Conference for ‘Top 100’ Laundry Owners

• Top 10 Secrets to Promoting Your Laundry ... Now!

From AmericanLaundryNews.com:

• EIA Lowers Regular Gas Retail Price Forecast for Third Quarter

• Energy Efficiency Deductions for Laundries

• ADC Names Qualclean Equipment Its ‘Premier Partner’

• Extra Profit Centers Big and Small (Pt. 1)

• Drought Monitor Keeping Close Eye as Records Fall (WE) • Laundrylux President Herman Celebrates...

30

AMERICAN COIN-OP SEPTEMBER 2012

• Increasing Profits by Increasing Capacity • Laundry Financing Can Be Had for Good Investment

• Panel of Experts: Consider Impact Before Over/Under-Loading Equipment • Hallak Cleaners Launches New Linen Services Company

From AmericanDrycleaner.com: • La. Cleaner Pleads Guilty to Perc Dumping • Tide Dry Cleaners Opens Its First Ga. Store

www.americancoinop.com

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GET CREDIT

COIN-OP 101

WHERE CREDIT IS DUE Boost your revenue by accepting credit cards

COMMERCIAL ACCOUNTS How to Market Yourself and Grow Your Business

Laundry customers who use credit cards upgrade to larger washers and dryers, use more machines, and spend more money. Credit card acceptance can boost revenues up to 30%. Learn how you can accept credit and debit cards on any or all of your equipment.

Call (508) 837-6514 or visit newenglandcoinlaundry.com

32 AMERICAN COIN-OP SEPTEMBER 2012

Every business requires a steady stream of revenue in order to be successful. In the vended laundry industry, guaranteeing a set amount of cash flow can be difficult, but adding commercial accounts can make a baseline easier to establish.

With proper preparation and marketing to neighborhood businesses, store owners can either start or grow their pickup and dropoff accounts to add revenue, providing their store with stability for the long run.

PREPARATION Before adding commercial accounts, it’s important for store owners to look at their equipment mix. The last thing you want is to have a commercial account take up too many machines and force self-service customers to wait to do their wash.

Another precautionary measure that a business owner should take is tracking the store activity and identifying peak times. If Todd Santoro the store is consistently busy and there is not ample time during the day to process linen from commercial accounts, owners may want to consider adding a shift.

Another option is to add larger machines strictly for use in serving commercial accounts to a specific section of the store. This way, the commercial accounts will not affect self-service business.

After surveying what equipment you have available to dedicate to these accounts, it’s time to determine who will handle the workload.

When choosing attendants to work for your store, you want to make sure they perform their tasks to your standards. Proper training will help ensure optimal client satisfaction. For example, your attendants will need to know how to properly fold linens and how to interact with customers.

It is also a good idea to have written directions that employees can follow, especially if certain accounts have special laundering requirements.

If you plan on laundering specialty items, reach out to your local chemical supply agent. This representative will be able to ensure you have the right chemicals for specific industries, such as fire or healthcare. As with any decision, ask for a few different opinions so you can make sure to deliver your customers what they deserve. www.americancoinop.com

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SOLICITING BUSINESS Once the preparations are in place to handle commercial accounts, it’s time to grow the business. One of the best ways you can go about this is by finding a niche market to serve in your surrounding community. For example, positioning yourself as the laundry specialist to service spas or providing quick turnarounds for entertainers in town is a great way to build your reputation.

An important aspect to any successful business is having and maintaining an informative website. Make sure yours is up to date and emphasizes your commercial-accounts expertise. It should be easy for potential customers to find information about your services and how to contact you. To see if your website comes up in search results, run a few searches as if you were a potential customer. If your competitors appear before you in these searches, you may need to look at optimizing your website content.

As a business owner, you must always sell your store to others.

Make sure everyone you meet knows what business you offer. You never know who could become your next customer.

It’s also important to reach out to businesses within your community. For example, as an owner of five stores, I contacted human resources departments at various companies and offered pick-up and delivery services for their employees. One client uses this as a benefit to employees, and we gain an extra customer. Additionally, some of those companies may have other laundry needs, which can turn into more business for you.

Along with networking with those you come in contact with, it’s a good idea to get involved with community groups. Look for opportunities to join committees within your town’s chamber of commerce or Rotary Club; they provide great ways to meet other business owners. Remember, it all comes back to selling yourself and your business.

COMPETITION If your community has a large population, you are bound to run into some competition. Linen services may offer customers a lower price than you, but here’s where your service and industry niche come into play.

When discussing new business opportunities, it’s important to highlight what you can offer the potential customer. Many linen services do not deliver on weekends, but if you have the capacity to do this, use this as a selling technique. This is important when working with hotels that cater to weddings and large events during weekends.

SERVICE No amount of marketing can make up for bad service. Service should be the cornerstone upon which your business is built, and this is something your employees should embody. The best referral will always come from a satisfied customer.

To accomplish great service and grow your commercial account business, make sure you have the equipment, employees and time necessary to provide superior results. These accounts can provide your store with a significant amount of dependable business and help you become more profitable.

LESS IS MORE Introducing the large capacity, low impact EcoWash.

Return some green to the planet – and your wallet – with the 60-lb capacity EcoWash coin washer from New England Coin Laundry. Its powerful 200 G-Force motor uses less energy, extracts more water, and adds more to your bottom line.

“My customers love it, so I love it” – Fred Ives, Massachusetts

Call (508) 837-6514 or visit newenglandcoinlaundry.com to see our new Build Your Own EcoWash feature, and learn how shorter wash times and reduced water and energy use can build your business.

Todd Santoro is president of Clean Wash Laundry Systems, an IPSO distributor located in Omaha, Neb., serving Iowa, Kansas, Nebraska, North Dakota and South Dakota. He can be reached at 888-990-7191 or tasantoro@clslaundry.com. www.americancoinop.com

SEPTEMBER 2012

AMERICAN COIN-OP 33

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AN OUTSIDER’S VIEW

WHAT WILL YOUR OBITUARY SAY ABOUT YOU? )LQDQFLQJ )UHH %%4 /XQFK 3UR¿W ,QYHVWPHQW 6HPLQDUV 6HUYLFH 6FKRROV

Saturday, Sept. 15 9 am - 4 pm Professional Laundry Systems 1741 Loretta Ave Feasterville, PA 19053 215-354-0111

Saturday, Sept. 29 9 am - 4 pm Professional Laundry Systems 3655 California Rd 2UFKDUG 3DUN 1< 716-662-6100

0XOWLSOH 2I¿FHV to Serve You! PLS -NY/NJ/CT 1-888-637-0600 3/6 %XIIDOR 8SVWDWH 1-866-662-5200 PLS - PA/NJ/DE 1-866-330-0020

6HUYLQJ $OO RU 3DUWV RI NY, NJ, PA, CT & DE. 34 AMERICAN COIN-OP SEPTEMBER 2012

This is not a column from which you are going to learn anything useful and handson. But maybe it will be the best column you ever read. “Live for the obituary” — have you ever heard that expression? It is one used particularly by writers. But it also can be applied across the professions.

It means to live your life so that your obituary acquits you well.

Let me illustrate using a Boston Globe obituary dated June 16. The headline read, “Mary Chin, 103; operated laundry in Charlestown.” The second sentence says it all: “Widowed more than six decades ago when she was a Howard Scott young mother of nine, Mrs. Chin remained a pillar of strength for four generations of her Charlestown family.”

A few sentences round out the story: “Though 4-foot-10, Mrs. Chin seemed to fear nothing and no one. She shooed away drunks who shuffled from bars that flanked her store and deftly handled disputes that inevitably arose as owner of her late husband’s laundry business. And there wasn’t a wrinkle on a customer’s shirt that stood a chance with her, family and friends said.”

And later: “Mrs. Chin bought a Singer sewing machine to mend clothing, and she was involved in all aspects of the family laundry business. Six days a week, she sorted clothes customers dropped off, then washed, dried, and ironed them.

“She also kept books and ran the schedules of her children, who often came into the shop to help when they weren’t doing homework.”

Her children commented on the lessons

she taught them. Don’t waste time. Save your money. Work a little harder. No gossip. Always be polite to even the toughest of customers.

Finally, her son Thomas offers, “She had good rapport with (customers). But the rapport was based on providing good prompt service and being attentive to the customer’s requirements.”

If you are like me, you might be a little teary-eyed after perusing the entire piece.

Or you might be saying, “What a sap. To devote yourself to a lousy little business all your life seems like a fool’s path.”

I’m not here to argue the merits of different philosophies of life, but I am here to say that Mary Chin’s qualities as a businesswoman make hers an extraordinary story.

Clearly, the Boston Globe recognized it as a life well spent. The publication devoted 28 column inches to the piece, while most of us have to pay several hundred dollars for just 3 inches. Mary Chin got her moment of fame for free.

I like the bit about this 4-foot-10 woman being fearless. I see in front of me her picture: round-faced, mouth open, as if ready to answer any question, eyes looking straight out, facing the world unflinchingly.

I can see this little woman standing up to a 6-foot-tall customer, saying she had done everything she could to get the stain out but it was too engrained in the fabric. The angry customer walks out pacified, knowing Mrs. Chin must be right.

As I read the obituary, the story fleshes itself out. She and her husband owned the laundry, when he suddenly died. She was perhaps 35, with nine children, the youngest being 2 years old. So she rolled up her shirtsleeves, arranged with the children and neighbors to take care of the young ones, and ran the business full-time for (story continues on page 36) www.americancoinop.com

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AN OUTSIDER’S VIEW more than 40 years.

Isn’t that just incredible? Spending forty-plus years at the helm of a work-intensive business, with nine children at home. Today, many widows would beg support from family, go on welfare, and seek counseling because of the unfairness of the situation. Not Mary Chin. With her feet apart, and her mouth clenched, she said, “I will not buckle under. I will not let life take me down.”

I do not know her children. But I bet they all respected their mother. And I bet they all have learned her lessons of self-reliance and can-do-ism. And I bet they all are acquitting themselves well, despite the fact that life has thrown them a curve. As they say, hardscrabble circumstances are good for character.

I like her rules of work: work a little harder, don’t gossip, be polite to even the toughest customer, etc. Such principles are the bedrock of good business practice. Work a little harder—can’t we all do that? Can’t we pay closer attention to the details? Can’t we go the full nine yards to research a problem? Can’t we stay late 15 minutes, or come in 15 minutes early, to fix a garment?

No gossip—how many of us spend an hour a day through conversation, e-mail, texts, on the phone “dissing” others? If that hour were spent on productive matters, consider how much more efficient we could be.

About politeness, these days I see so many attendants who exhibit poor attitudes or are just going through the motions. This makes

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AMERICAN COIN-OP SEPTEMBER 2012

me not want to patronize their store. If only attendants would have Mary Chin’s sincerity in trying to help the customer, much dissatisfaction and aggravation would be avoided.

Her son succinctly summarized her business philosophy: maintaining a good rapport with customers based on providing good, prompt service and being attentive to the customer’s requirements.

What a perfect statement of basic business principles! If only every business had that in mind.

I was at a Laundromat where the attendant was chatting away with a customer while another customer with a problem stood there. I’m sure that going through the waiting customer’s head was, “Why doesn’t she look at me?” Mary Chin would have paused her conversation with the one customer, looked to the waiting customer and asked politely how she could assist her.

What will your obituary say about you? This is not a macabre notion. Rather, it’s food for thought. Perhaps working six days a week over 40 years is not your mantra. But you sure wouldn’t like your obit to read, “He spent as much time away from his business fishing and golfing,” would you?

I salute you, Mary Chin. You’re an inspiration to us all.

Howard Scott is a long-time business writer and small-business consultant. He has published four books.

www.americancoinop.com

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ADVERTISERS’ INDEX Advertiser

Page

Advertiser

Page

AC Power Co. ................................................................ 36

New England Coin Laundry...................................... 32, 33

American Switch.............................................................. 39

New York Laundry Equipment ...................................... 29

CILS Inc. ........................................................................ 31

NIE Insurance .................................................................. 7

Coin-O-Matic.................................................................. 17 PLS .................................................................................. 34 Dexter Laundry ..................................................................3 Eastern Funding ........................................................ 15, 28

R&B Wire Products ........................................................ 1

ESD Inc. ............................................................ 20, 21, BC

Royal Basket Trucks ........................................................30

Gold Coin Laundry Equipment ...................................... 13

Setomatic Systems.......................................................... IFC

Great Lakes Commercial Sales ...................................... 38

Speed Queen ............................................................8, 9, 11

HHC Electronic Service .................................................. 39

Star Distributing ..............................................................19

Huebsch ........................................................FC, 23, 25, 27 Super Computer Boards .................................................. 38 Laundry Concepts .......................................................... 35 Launette Equipment Co. ................................................ 14

Vend-Rite .................................................................... 5, 39

Mountain Electronics ...................................................... 38

Wells Fargo Insurance Services ...................................... 18

NATCO............................................................................37

Western State Design .................................................... IBC

www.americancoinop.com

SEPTEMBER 2012

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CLASSIFIEDS

EQUIPMENT FOR SALE

ELECTRONIC REPAIRS

BEARINGS DIRECT LAUNDRY SYSTEM Queens NY 718-468-1119 / 917-678-2095

DIRECT LAUNDRY SYSTEM 98-47-212 St, Queens NY 718-468-1119 / 917-678-2095

Commercial & Industrial Bearing Job & Repairs NY NJ CT PA Area.

Laundry Equipment Parts Repairs Bearing Job Over 20 Years’ Experience.

W 184 W 125 W 74 HC 20 HC 30 HC 50

W 185 W 125 W 75 W 184 W 124 W 74 JT0300 JT32DG

$500.00 $375.00 $250.00 $275.00 $325.00 $500.00

No one done more Bearing Jobs than us, Count on Experience.

Lots of Washers, Dryers, Motors, Baskets, Gas Value, Computers, Doors, Front & Side Panels etc.

20 Years’ Experience Florida & Georgia area VICTOR @ 321-946-9890

Washers comes with 2 Years Bearing, 1 Year Limited Parts & 90 Days Service in the NYC and Tri-State Area.

COIN-OP FOR SALE WELL ESTABLISHED coin laundry with drop off and cleaning business, fully staffed, turn key operation in the most livable city in the U.S. TALLAHASSEE FL. Call 850-402-7683 for more information.

>>>>>>>

COMPUTER BOARDS SOLD & REPAIRED

Many Brand Names not listed.

Florida & Georgia area VICTOR @ 321-946-9890

EQUIPMENT WANTED EQUIPMENT FOR SALE

COMPUTER BOARDS

>>>>>>>

$3000.00 $1700.00 $900.00 $2800.00 $1600.00 $800.00 $1800.00 $1500.00

(Lowest Prices in the U.S.) Hundreds of Computer Boards for Sale!!!

Dexter, ADC, Speed Queen, IPSO, Wascomat, UniMac, Primus & more Timers and Ignitors Repaired!!!

New Touch Pads for S/Q Dryers, S.C. Washers, Dexter Stack

SUPER COMPUTER BOARDS 17812 Wrightwood Ln., Huntington Beach, CA 92649

(877) 870-5553 • (714) 377-9753

WASCOMAT WASHERS. 704-592-2022.

NEED SAVE $ PARTS? $$$

WILL BUY ANY EQUIPMENT (WASHERS AND DRYERS) ON WEST COAST. 888-205-0884.

Call US First!

PARTS FOR YOUR IPSO WASHER at FRONTEC.us Door Handles, Door Locks, Print Boards Get a handle of our End of Summer Sale See our store at www.FRONTEC.us or E-mail info@frontec.us for custom orders.

Check us out online for Specials

• Maytag • Whirlpool • Wascomat • Hamilton Heaters • American Dryer • Electrolux • Greenwald • Standard • Continental-Girbau & MORE

• Bock • R&B Carts • ESD • Vend-Rite • Soap

PARTS FOR SALE

REPAIRS Repair Front Load WASHER Bearings.

Call Tony P. 516-805-4193

www.facebook.com/ greatlakeslaundry

Brookfield, WI Troy, MI Wyoming, MI Dayton, OH Indianapolis, IN

1-800-236-5599 1-888-492-0181 1-800-821-8846 1-888-877-4382 1-800-577-7103

www.greatlakeslaundry.com

Contact classified sales to place your ad! dfeinstein@ americantrademagazines.com

DRY CLEANER FOR SALE Try Dry Cleaners and Shirt Laundry?

Excellent Colorado opportunity outside Denver.

Landlord has authorization to offer business with lease. Retiring owner can train.

1-800-861-8826

38 AMERICAN COIN-OP SEPTEMBER 2012

www.americancoinop.com

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SERVICES AND SUPPLIES

SERVICES AND SUPPLIES

SERVICES AND SUPPLIES

CARD READERS FIXED

WASCO GEN 5 DOOR LOCKS

WASHERS and DRYERS COMPUTER BOARD REPAIR

& TIMERS REBUILT Door Lock $68 • Gen 5 & 6 Timer $85 Gen 4 Timer $75 • Continental Timer $85

ADC 137213 / 137234 . . . . . . . . . . . . . . . .$65.00 Igniters . . . . . . . . . . . . . . . . . . . . . . . . . . .call

DRYER COMPUTER BOARDS ADC Stack $60 • Single $45 Huebsch SQ Board $45 Huebsch Old Style Board $55 Stack Dexter/Continental $60 Washer Coin Boards $55 Some prices may vary!!!!

JECON INC.

HHC

SUITE 272, 11064 QUEENS BLVD.

ELECTRONIC SERVICE

14844 Las Tunas Drive, Hacienda Hts., CA 91745

626-961-8678 • 800-820-9888 E-mail: hhc168@hotmail.com

FOREST HILLS, NY 11375 Send Core Unit with S&H Fees Call Toll Free: 1-888-532-6677 (888-JECON77) • Fax: 212-656-1913

718-525-2266

Visit: JECONINC.COM We Now Accept All Major Credit Cards

Highest quality rebuilding for over 16 years

Gold Medal Soap Vender Parts Going, going, gone…

Speed Queen and Huebsch

ONLY $39!

Call for other brands

Dominic’s New TOUCHPADS TM

The Best!

For Huebsch and Speed Queen Dryers Super-TuffTM overlay - $9.95 - $14.95 Dura-FlexTM touchpad - $19.95 QuickFixTM Overlay Repair - $3.95 American Switch 43 Pleasant Ave., Suite 3 Johnson City, NY 13790 607-759-1995 M/C & Visa Accepted www.domstouchpads.com

www.americancoinop.com

Speed Queen / Huebsch Computers . . . . . . . . . . . . . . . . . . . . .$65.00 Motor Control . . . . . . . . . . . . . . . . . . .$95.00 Volume Discounts.

One-Year Warranty.

Free Return Shipping.

El -Tech, Inc. 26 West St. Colonia, NJ 07067 For Complete Price List Please Call: 732-381-7620 or 908-510-6520 or visit us at www.eltechlab.com

TIMERS REBUILT — IPSO main & reverse, Milnor, Dexter, Primus, Whirlpool, Speed Queen, Maytag & Continental Girbau, Wascomat Generation 4 and 5.

Call for price sheet.

Reeco Timer Co., 2860 Kirby Circle, N.E., Suite 14, Palm Bay, FL 32905, 888-952-1889.

(+$9 shipping ea.)

One-Year Warranty!

Any questions call Ernie at (607) 798-7704 Mastercard and Visa accepted Send your computer to: D&E Dept. 1 1724 Hawleyton Rd. Binghamton, NY 13903 www.dryercomputers.com

Maytag Computers . . . . . . . . . . . . . . . . . . . . .$65.00 23004118 . . . . . . . . . . . . . . . . . . . . . . . . .call W10343020 . . . . . . . . . . . . . . . . . . . . . . .call 33001129 . . . . . . . . . . . . . . . . . . . . . .$85.00 Motor Control . . . . . . . . . . . . . . . . . . .$55.00

One-Year Warranty on All Parts

Local: 718-525-3733

DRYER COMPUTERS REBUILT

Dexter VFD Inverter (Delta Motor Control) All Models (9375-xxx-xxx) . . . . . . . . . . . . .call Stack Dryer . . . . . . . . . . . . . . . . . . . . .$65.00 Coin Accumulator . . . . . . . . . . . . . . . .$55.00

All Gold Medal parts are 50% off while supplies last.

Order your today, when they are gone, there gone.

Call 1-800-777-1802 ask for Jenny

Place your ad

ONLINE www.AmericanCoinOp.com

WASHER AND DRYER COMPUTER BOARDS REBUILT Igniters repaired Washers: $60 - & up Dryers: $35 - & up Igniters: $20 - & up Rebuilt Timers - Wascomat, Huebsch, Speed Queen, IPSO, Laundry Center, Maytag Call for exact price which includes free return shipping METRO LAUNDRY TECH CORP. 253 East 204th Street, Bronx, NY 10458 ONE-YEAR WARRANTY ON ALL REPAIRS Please call 718-742-4137 Or 718-733-4313 Or Visit our website at www.metrolc.com email us at metrolc@hotmail.com SEPTEMBER 2012

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NEWSMAKERS

$24.4 million compared to $21.5 million the previous year.

The overall net-revenue increase of $11.0 million was attributable to revenue increases in the United States and Canada ($8.5 million), Asia ($2.9 million), Latin America ($0.9 million) and the Middle East and Africa ($0.6 million). These increases were partially offset by a decline in Europe revenues of $1.9 million.

The overall net-income increase of $0.2 million for the second quarter was primarily attributable to improved operating income of $2.1 million, a decrease in interest expense of $3.8 million and a decrease in provision for income taxes of $0.6 million. Early extinguishment of $6.2 million in debt partially offset the gains.

Howard Herman (left), who is celebrating his 40th year with Laundrylux, poses with his wife of 45 years, Terry (far right), and their grandchildren.

LAUNDRYLUX PRESIDENT HERMAN CELEBRATES 40 YEARS WITH COMPANY Industry veteran Howard Herman is celebrating his 40th year with Laundrylux, distributor of Wascomat and Electrolux Professional laundry equipment. Herman started in the warehouse and learned every aspect of the business on the path to becoming company president. He currently serves on the board of directors of the Coin Laundry Association.

“Howard has been a mentor to me and a guiding force at Laundrylux,” shares CEO Neal Milch. “Customers, distributors, and other industry players rely on his knowledge and constantly seek out his advice and guidance. He is quite possibly the most knowledgeable and competent person in his field today.”

To honor this special occasion, Milch threw a surprise party and the entire Laundrylux team celebrated in style at the Allegria Hotel in Long Beach, N.Y. Industry pioneer Bernard Milch, now retired from Laundrylux, and his wife Lusia were in attendance, as was Neal’s wife Lesley.

Herman’s wife of 45 years, Terry, and children Laurie and Harris, along with their spouses and Herman’s grandchildren, also took part in the festivities.

“I can’t believe how fast 40 years has flown by,” says Herman. “I still love being in the laundry business, and I truly enjoy the work, the people, and the challenges we face every day. I was extremely touched that the Milch family, my family, and all the Laundrylux employees were there to celebrate with me. It was a terrific surprise, and I thank everyone from the bottom of my heart.”

ALLIANCE LAUNDRY REPORTS RECORD SECOND-QUARTER PERFORMANCE Net revenues for Alliance Laundry Holdings LLC, the parent company of Alliance Laundry Systems (manufacturer of commercial laundry equipment under the Speed Queen, Huebsch, IPSO, UniMac and Cissell brands), were $128.9 million for the quarter ended June 30, a 9.4% increase from second-quarter 2011.

Second-quarter net income was $6.0 million, compared to $5.8 million for second-quarter 2011, up 4.5%. Adjusted EBITDA was 40

AMERICAN COIN-OP SEPTEMBER 2012

Jeff Bailey (right), regional sales manager for IPSO, presents his company’s 2011 Award of Excellence to John George, owner/president of Washington Automated.

Michael Kelson, a 15-year industry veteran, leads Washington Automated’s vended laundry sales department and has been instrumental in expanding its offerings.

IPSO PRESENTS AWARD OF EXCELLENCE TO WASHINGTON AUTOMATED IPSO has presented its 2011 Award of Excellence to Washington Automated, a distributor headquartered in Everett, Wash.

“Washington Automated exhibits all the traits that make a distributor exceptional—sales, service and support,” says Dave Phillips, North American sales manager for IPSO. “Their staff is a great example of outstanding representation of the IPSO brand.

We appreciate their dedication and congratulate their whole team on winning this award.”

John George founded Washington Automated in 1969, and his company has been an IPSO distributor since 2010. Before adding the IPSO vended line, the company was predominately focused on supplying and servicing on-premise laundry accounts.

Washington Automated employs approximately 20 staff members in two offices—its headquarters in Everett and a branch office in Portland, Ore. The distributor provides services for Washington, Oregon and northern Idaho.

The company credits the success of its vended laundry products largely to Michael Kelson, a 15-year industry veteran who leads Washington Automated’s sales department for this business sector and has been instrumental in expanding its offerings.

www.americancoinop.com

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