Imagine this; you invest your life savings in a brand new Laundromat. You do your research, find the right location, negotiate the right lease and after all the planning and investment open your brand new Laundromat! Congratulations.
This is only the beginning, however. You not only have to successfully run your business, have to protect it from any of the myriad of types of losses that could occur. When we talk about “Protection”, people generally refer to insurance as the main type of protection. In the financial world, “Insurance” is known as a “risk transfer”. That means that you pay the insurance company a little money (premium), and they assume the risk of loss like fire, burglary, etc.
While insurance is certainly one way to protect the Laundromat it certainly should not be the only way. The other way is to “reduce” the risk. That is, take steps to prevent a loss from happening. In these next few pages, we will look at some of the ways you can protect your Laundromat using both insurance on non-insurance methods. Both are equally important. In fact, many insurance companies will give you a discount if you can show you are taking steps to prevent loss.
Non Insurance Solutions
- Maintenance of Dryers: Dryer fires constitute the most devastating (and costly) property insurance claims for self-service laundries. Over the years, many stores have been lost as a result of a dryer fire. Prevention begins with good maintenance habits and lint control. Develop a schedule to keep lint screens clean, prevent lint from accumulating inside the dryer cabinet and clean out ductwork on a regular basis. Other dryer fire culprits include improper installation, insufficient makeup air and spontaneous combustion caused in garments containing grease, cooking oil.
- The second most costly claims in laundries result from an overnight break-in and the subsequent destruction of coin changers. The property damage adds up as damage is done to the building and the changer itself, as well as the loss of the cash inside. Ask a local security store to help alarm the changers themselves. If you have security cameras, make sure at least one camera is on the coin changer area at all times
- Facility Inspection and Maintenance. To keep your Laundromat as safe as possible and to minimize the possibility of insurance claims, be sure to inspect your facility for possible problems on a regular basis and to fix any issues immediately. This includes not only the inside of your laundry, but the outside of the building as well. As a Laundromat owner you can prevent many insurance claims just by operating your coin laundry properly and maintaining the store.Many slips, trips and falls occur outside the walls of the laundry. Be sure to inspect your parking lots and sidewalks for cracks, potholes, uneven pavement, ice, snow and accumulating water. Even if you’re just renting, you could still be held liable for injuries customers might incur just coming to, or leaving from your commercial laundry. If you notice problems with the outside of your store that need the landlords attention, be sure to not only immediately notify the property owner, but to keep all copies of correspondence including package delivery receipts, or confirmations from a certified letter.Cleanliness and adequate lighting are key factors to ensuring a safer store environment and reducing your insurance liability. Be sure to regularly clean your laundry, and to keep floors free of water at all times. Most slip and fall claims result from water that has leaked from a washer and has not been promptly mopped and dried. Also, broken or chipped tiles can cause serious injuries to customers and employees alike. When replacing the floor, use slip-resistant materials and follow manufacturer’s recommendations for maintenance. Also be sure to replace burned out light bulbs promptly both inside and outside your laundry. If street lights in front of your Laundromat are out, contact the landlord (if it is their responsibility) or the city when appropriate
- Check Safety of Laundry Equipment: Unfortunately, the industry has experienced high-profile accidents resulting from safety door locks not operating properly. These accidents have resulted in loss of limbs and other serious medical consequences. No frontload washer door should ever open while the washer is in cycle. No topload washer should ever continue in cycle upon lifting the lid (all lid switches must be in proper working order). All dryers should stop tumbling immediately upon opening the door (all kill switches must be in proper working order).Most new commercial washers feature a red “stop button” prominently on the front of each machine. This allows customers, attendants and store owners to interrupt a wash should an emergency occur such as child trapped inside or an item caught in the door causing water to leak and flood the store.Loose or non-bolted folding tables: Another leading cause of liability claims are tables that are not bolted or loose. They fall on customers or children knock them over. Ensure the tables are properly securedRegular inspections can help reduce the chances of someone being injured as a result of visiting the laundry. As a laundry owners, do everything you can to make your washateria claim resistant
- Employee Theft According to some estimates, approximately 30 percent of business failures can be attributed to employee theft. When employees steal and get caught, the methods used and the reasons for the theft can be as varied as the number of employees. A common occurrence is for attendants to provide their friends, relatives or favorite customers with a free wash. This tends to happen most frequently when drop-off laundry customers are undercharged for the amount of laundry involved or when an attendant has a key and can start the machine from the timer without having to deposit money into the machine.Another common problem in laundries is attendants who “borrow” a small amount of money from the till when they are short of cash and then forget to repay the debt. If the attendants find the job boring or if they are experiencing financial problems at home, they may be tempted to beat the system. If they are successful in cheating just once and get away with it, they may be inclined to do so again and again.Store owners must be cognizant of that fact and take reasonable precautions to guard against internal theft, which can take a variety of forms. Be sure to take the time to know your Laundromat employees. Commercial laundry owners who disregard the possibility of internal theft can be making a monstrous mistake and providing a lucrative hunting ground for would-be thieves. Try to get to know your staff as people rather than just employees, and they are less likely to steal.It is sometimes surprising to see how cash shortages in the till tend to disappear when attendants are asked to sign cash count slips. Experience has shown that most shortages appear at the end of a particular shift. Let employees know that no one will “look the other way,” when it comes to skimming cash from the store, and that they will be prosecuted to the fullest extent of the law if they care caught stealing.
Cash shortages always tend to be in even amounts: $5, $10 or $20. Several store owners suggested that when this occurs consistently and the facts point in one direction, consider re-arranging the work schedule so that it becomes inconvenient for an employee to continue working at the store. This approach frequently leads to the elimination of the persistent shortage. The fact is that most employees are honest and loyal to their jobs and employers. But store owners must be alert to the fact that “bad apples” do exist and a means for sorting them out must be established. When bad employees are allowed to continue, the store owner is the loser, and good employees have their reputations tarnished.
How do you detect employee dishonesty? Here are a few things to keep in mind. Observe your employees’ personality. Are they living beyond their means? Do they abuse alcohol and/or drugs? Are they compulsive gamblers who may ask for salary advances?
Employees who ask for frequent salary advances or to borrow a little money may be those tempted to take money from your cash register without permission. Watch your employees who are consistently “short” or “over” particularly in even increments ($2, $5, $10, etc.) this may suggest they are borrowing and then (sometimes) repaying the “loans”
Be sure to establish a cash handling system for the drop-off laundry or any other services offered. The system should put responsibility on each individual employee, so that he/she becomes accountable for their transactions. By having each employee sign a cash count slip at the end of each shift, you will know where to look if a shortage occurs.
To help identify employee theft at your Laundromat, be sure to talk to your regular customers and see if they mention anything suspicious about your staff. Spending extra time in your laundry can often be very enlightening. Be sure to also alternate the days and time of day that you make collections. It’s easy to fall into a routine of making your Laundromat collections a particular time, however if no one knows when the laundry owner is expected to appear, it limits the chance that someone might try to steal from your business.
- Bad Debt & Customer Theft Another source of internal theft experienced by Laundromat owners can be customers. This can come in a couple different forms, but most commonly commercial laundry owners will have either fraudulent loss claims or bad checks.Occasional in your laundry, you may have fraudulent loss claims by customers who come into the store and claim that they put money into the machine but that it didn’t start properly. The attendants should be instructed to follow a procedure where they insert the coins themselves to see if the machine starts. If it does, something might be amiss. If it doesn’t, the attendant may be able to make immediate repair to minimize downtime on that machine.When giving customer refunds at your Laundromat, be sure to have your attendants have the customer sign his/her name on a piece of paper stating the problem. Then you have records to use to determine if this customer is routinely not paying the vend price and attempting to cheat your store. Many Laundromat owners have found that by simply having the customer sign his or her name to a claim slip, the fraud problem immediately stops.Short of instituting a “no check policy”, the best way to minimize your Laundromat’s loss due to bad checks is to have your attendants obtain a valid driver’s license with a picture or photo I.D. with each check they accept. Establish a policy to always view a driver’s license and jot down the license number before accepting a check. The photo on the license assures that the person writing the check is actually the person whose name is printed on the check, and if the check is bad, you can then provide the license number to the police department. Frequently, a call from the police will result in the check writer making good on the payment
- Video Surveillance and Lock: If you are a security-conscious Laundromat or washateria owner, you probably try to face the challenge of keeping up with the latest security technology. Video surveillance helps deter potential robbers, burglars, thieving employees and would-be scam artists from staging fraudulent slips and falls. Video evidence is the best way to protect oneself from phony slips, trips and falls. When you do have security cameras or devices you do need to anticipate the possibility of people tampering with or destroying them. If you put in a security device in your laundry, do make it obvious. Use signage in your Laundromat to inform people that cameras are present. Also, having visible security can give your staff and customers a feeling of safety when they are in your laundryHaving security equipment and video systems can also help tech savvy Laundromat owners with insurance liability, thefts and other security issues. These high-tech cameras can allow you to watch over your store 24/7 via the internet and provide valuable evidence when needed for insurance claims or to prosecute vandals or theft
You’ve taken all the precautions but still are not adequately protected. The next step is to buy the right insurance from a professional that specializes in Coin Operated Laundromats. Ask your agent how many Laundromats they insure. Do they have a “Coverage Checklist” to ensure that you have all the right coverages? Here are some of the things you should look for when buying insurance
Washer/Dryer Insurance Trap: One of the biggest mistakes I see Laundromat Owners make is underinsuring the amount of coverage needed. Here’s what generally happens; the lender loans you $150,000 for the equipment and requires you to insure to at least that amount. The problem is, however, that you have $250,000 in equipment in the store. The lender only cares about how much they loan you. You are stuck for the difference. This is what I call the “Washer”Dryer Insurance Trap”
- The major part of your investment is the cost of the washer and dryers. They can run anywhere from $1,200 for a top load washing machine to over $10,000 for a 50lb dryer. Add up how much it would cost to replace all your washer/dryers if you had to buy them new today. Be sure to insure them not just for the amount of the loan, but for full replacement cost. This is how much did you pay for it? If your equipment is old, it is best to insure it for “cost new”.
- Buildout or Cost of Construction: This is one of the most over-looked parts of a Laundromat that is left uninsured and unprotected. A “Buildout” is the amount of money you put into the space you rent less the washer & dryers. Very often, the “buildout” costs are very significant. According a leading industry association, buildouts can run anywhere between $75,000 to well over $500,000.When you insure for Buildout, check your lease. In some cases, once the buildout is completed (regardless of whom paid for it), it becomes property of the landlord. If that is the case, the landlord’s building insurance will pay for it. If you are responsible, proper insurance can mean the difference between re-opening after a loss or not. Some insurance companies include the buildout in the Contents limit, while others have a separate limit for it. Ask!
- Customers Goods: In the event of a loss such as a fire, you are responsible for the loss of customers’ goods while they are on your premises. Does your store have “wash & fold service”? Make sure you are properly protected for that. On an average day, you may have $10,000 of customers’ goods on your premises.
- Other Contents: Besides the washers & dryers and the construction costs, the modern Laundromat will have substantial contents that are at risk. For example change makers, vending machines, big screen TV’s, stock, and other items like tables & chairs. Make sure your policy includes coverage for these items as well.
- Business Interruption: If you suffer a loss and damage to your Laundromat premises force you to close while repairs are made, you may still need to pay employees, loans, leases and other expenses. These ongoing expenses can mount up quickly for a business with reduced or no income. These continued expenses and Loss of Income is called Business Interruption Insurance. Many business owners don’t even think about it until such coverage is needed. Fortunately a standard Business Owner Policy that most Laundromat owners have includes Business Interruption coverage. Having said that, all Business Interruption coverages are not created equal. Does it cover salary to key employees? What is the time limitation for this coverage or does it have a specific dollar amount. One other consideration when it comes to Business Interruption Insurance. We know that Laundromat’s are cash businesses. Sometimes not every dollar of income is reported on the tax return or financial statements. This could have a negative impact on a Business Interruption claim. If you cannot prove you had income, it’s hard to prove loss of income.
- Liability Coverage: Slip and falls, a child pulling a table on himself while playing in the store; These are all potential types of Liability claims that may arise while operation the Laundromat. This insurance is purchased to protect against claims resulting from injury, accidents, or events determined to be the fault of the Laundromat owner. Landlords will frequently request in a lease that you name them as “Additional Insured.” This addition to the policy requires a small charge to the Laundromat owner, since the possibility could arise where separate attorneys need to be hired for both the Laundromat owner and the landlord.