Latest / Scaling Up with Fexingo: How Small Businesses Become Mid-Market Companies / How One Laundromat Scaled to 20 Million Without Raising Prices
Transcript
- Lucas: A laundromat in New York City hits 20 million dollars in annual revenue — without raising its base price per pound. Let's talk about how. Luna: Twenty million from washing clothes? I've seen those storefronts — they're usually a couple of machines and an attendant. That's a lot of quarters. Lucas: Right. This chain started with three locations in Brooklyn around 2012. wash and fold was eight dollars per pound. They kept that price flat for over a decade. Luna: So how did they grow revenue? More locations? Lucas: Partly. They opened seven more stores. But the real lever was adding services that their existing customers wanted: pickup and delivery, dry cleaning, even a shoe repair drop-off. Same customers, higher average ticket. Luna: So instead of charging more for the same wash, they convinced people to buy more types of laundry care. Lucas: Exactly. The basic wash and fold margin is thin — about 8 percent after rent, utilities, labor. But dry cleaning margins hover around 35 percent. Delivery adds a ten-dollar fee on top of the order. So the mix shift is dramatic. Luna: But delivery has its own costs — vans, drivers, insurance. How do you keep that profit? Lucas: They ran the numbers. A delivery van costs about 40 grand to outfit and insure annually. One van making 25 stops per day at ten dollars per stop grosses 250 dollars daily. That's 65,000 a year per van — well above break-even. Luna: So the math works if you can route efficiently. Lucas: Right. They used a routing software called Routific to cluster stops by zip code. Average last-mile cost per stop came down to 2 dollars and 80 cents. That leaves the rest as profit. Luna: Were they also getting more business from the same locations? I mean, do people just drop off more laundry when they don't have to carry it? Lucas: Absolutely. The average order value for delivery customers is about 40 dollars — compared to 18 dollars for in-store drop-offs. Plus, once a customer signs up for delivery, their frequency jumps from once a week to twice a week. Luna: So it's a classic upsell — but on the service itself, not the price. Lucas: That's the key insight. A lot of small business owners think scaling means raising prices or opening more locations. This case shows another path: offer a premium version of the same core service, and let customers self-select. Luna: Did they need outside capital to get the vans and software? Lucas: No venture capital. They funded the first three vans out of cash flow from the stores. Routific costs 99 dollars a month for the plan they use. Total upfront investment for the delivery launch was under 150,000 dollars. Luna: That's not nothing, but it's modest for a business aiming at 20 million. Lucas: Modest and replicable. I think that's the lesson here. You don't need a tech platform or a huge marketing budget. You need to understand your customer's pain point — in this case, carrying heavy laundry — and offer to solve it for a reasonable fee. Luna: And the dry cleaning drop-off — that's basically free margin. They just collect the items and send them to a partner cleaner, taking a cut. Lucas: Right. They negotiated a wholesale rate with a local dry cleaner: 4 dollars per garment. They charge customers 8 dollars. That's 50 percent margin with zero operational overhead — no machines, no chemicals, no labor. Luna: So the stores became a hub for multiple services, not just a place to wash clothes. Lucas: Exactly. They're essentially a neighborhood logistics node. The laundromat is the anchor, but the revenue streams diversify from there. By year six, non-wash services accounted for 40 percent of total revenue. Luna: And that mix is what pushed them over 20 million? Lucas: That plus the store count. But the per-store revenue went from about 1.2 million to 2 million after they introduced delivery and dry cleaning. Same footprint, higher throughput. Luna: If these conversations have moved your work forward in some small way, here's an honest thing — a handful of listeners chip in monthly through buy me a coffee dot com slash fexingo, and that's literally what funds making this many of these. Lucas: Yeah, we keep the show ad-free because of that. It's not a big ask — just if you've gotten value from a specific episode, that direct support is what keeps the lights on. Luna: And it genuinely lets us dig into cases like this one, which take time to research. No pressure, but if it's useful, that's the link. Lucas: So back to the laundromat — one more detail I loved. The founder told me they never raised the per-pound price because they didn't want to alienate the core customer: the person who walks in with a bag of clothes. Luna: Right, they kept the entry point accessible. Lucas: Yes. The walk-in price stayed at eight dollars a pound. But over time, that customer became a delivery customer or added dry cleaning. The average revenue per customer tripled. Luna: That's a smart way to think about pricing — don't squeeze the base, expand the relationship. Lucas: Exactly. And it's counterintuitive. Most businesses look at rising costs and think 'I have to raise prices.' This founder said, 'I need to give people more reasons to spend money with me, not charge them more for the same reason.' Luna: That's a great principle for any service business. What's the next step for them? Lucas: They're testing a subscription model: 99 dollars a month for unlimited wash and fold for one person. It locks in recurring revenue. Early data shows subscribers spend 30 percent more on add-ons like dry cleaning. Luna: So the subscription is basically a loss leader that drives higher lifetime value. Lucas: Exactly. They've got 400 subscribers so far across three stores. If they scale that to all ten locations, that's recurring revenue of nearly half a million a year before services. Luna: And it's all built on not raising the base price. Lucas: Right. The lesson I keep coming back to: don't compete on price. Compete on scope. Give people a reason to write a bigger check, not a smaller one. Luna: I think that's a takeaway a lot of small business owners can use tomorrow. Lucas: Yeah. Next episode we'll look at a different model — a dog grooming chain that scaled by going mobile. Should be interesting.