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How Two Entrepreneurs Are Disrupting The Laundromat Industry With Their New Franchise Laundrolab With Alex Smereczniak And Dan D’Aquisto

by | Jul 30, 2022 | Podcast

FM 8 Alex | Laundromat Franchise

 

Alex Smereczniak and Dan D’Aquisto, co-founders of LaundroLab, share their secrets to how they are disrupting the laundromat industry with a tech-enabled business model and expanding it via franchising. They discuss why the laundromat industry is ripe for disruption and how they’ve been able to bring on some big hitters as the first franchise owners. Dan and Alex are seasoned laundrapreneurs. Their first laundry business is a brand called 2ULaundry (think the Uber of laundry pickup and delivery). The duo discusses how they are vertically integrating LaundroLab into their 2ULaundry expansion and the benefits this strategy can provide their franchise owners.

Listen to the podcast here

 

How Two Entrepreneurs Are Disrupting The Laundromat Industry With Their New Franchise Laundrolab With Alex Smereczniak And Dan D’Aquisto

I’m joined by Dan D’Aquisto and Alex Smereczniak of LaundroLab. They’re also the Founders of 2ULaundry, which we will talk about. These guys have some interesting stuff going on. Welcome, Dan and Alex. Thanks for joining.

Thanks for having us.

I’m glad you are here. We got to know each other for a couple of years. You are doing some interesting things, making some moves, and having a concept. I look forward to diving into this. Why don’t we start with you? You’re laundry entrepreneurs, not just in the franchise world. There’s a whole other element and story to what has brought you to the point where you are now franchising LaundroLab, which is a laundromat concept. It’s the Chick-fil-A of laundromats. We’ve got a lot of interesting angles to it. Would you mind talking to us a little bit about who you are, your stories, how you came together, and how you got to this point with LaundroLab?

Alex will touch on it a little bit. We have been best friends for many years. We were born and raised in the Midwest in Minnesota. It’s a small town. Once we graduated high school, we both went our separate ways. Alex, I can’t take credit. He will share the story of how we got into the laundry. I had an entrepreneurial-minded family growing up. I have always wanted to work for startups.

I ended up joining a startup in Minneapolis, working on the sales and marketing side. I’ve always had customer service or sales-oriented jobs growing up. I’m very customer-focused. Naturally, I got into that right after we graduated. I was hanging out in Minneapolis before Alex gave me a call and started talking about all things laundry, which I know he will get into.

Usually, the question that we get asked is, “How in the world did you get into laundry? Was it some traumatic experience you had as kids? Did you get locked in a washer?” Thankfully, it’s nothing like that. Similar to Dan’s family, I grew up in a family that had a front-load-the-job mentality. My dad had me and my brothers working when we were 13 and 14, probably illegally at the ski resort.

When I got to college, the same mindset was there, “Find a job while you’re a student.” I worked as a bag runner for a student-run startup on campus called Wake Wash. It was door-to-door laundry and dry cleaning pickup and delivery. I fell in love with the model. I thought, “This could go to Duke, Chapel Hill, Vanderbilt, and all these other schools.” The guys that ran it at that time looked at it as a resume builder. They were going to sell it when they graduated and be done with it.

I said, “I want to buy this.” They told me, “We’re going to sell it for $30,000.” My nineteen-year-old jaw hit the floor because $30,000 was all the money in the world at that time. It was more money than you could imagine. I had $2,000 or $3,000 saved up. It was not nearly enough. I convinced two others to create bank accounts for me. We took out a loan for the difference. One of their parents was willing to personally guarantee that loan.

We bought it and immediately 10X-ed the business by getting the university to add it as a checkbox option. When you came in as a parent with your freshman son or daughter, it was like, “Get your meal plan, get your parking pass, and get your laundry package.” We grew the business tremendously doing that. I had a blast running it. I remember sitting in finance classes, looking down at my phone, texting customers, and making sure things were happening.

I learned more from that experience than any class I took at Wake, not because Wake had bad education but because getting your hands on a business and a real problem was incredibly engaging. To tie it back to how Dan and I got into 2U and LaundroLab, I sold the college laundry business and thought I was done with it. I moved down to Charlotte to do consulting at Ernst and Young and wasn’t as fulfilled as I was running the college laundry business.

Just ask the question, and either you're going to get an answer or not, but at least you did the part that you could control. Click To Tweet

I saw two companies on the West Coast raise $30 million in venture capital to go after what’s the $40 billion laundry and dry cleaning industry with what felt like the wrong models. They were trying to be Uber for laundry or 1099 contractors going to Dru’s house, picking up his laundry, going to the dry cleaners and the laundromat. They’re going to Dan’s house, picking up his laundry and dry cleaning, and going back to the laundromat. It was very inefficient. There was all this back and forth.

I thought, “There’s no way that’s going to work at scale. I will hate myself if I turned 30, 40, or 50 years old and not go after this with everything that I’ve got.” I called Dan up not because we’re best friends but because he’s got a complementary skillset to me. He’s a sales and marketing guy. I’m more on finance operations. He understood the sacrifice that starting a company from nothing would take because he had seen it and been through it in a way in his past jobs.

Most importantly, we have a deep trust for one another because we have known each other for so long. All the right foundational things were there. I called him up. He quit his job, broke up with his girlfriend at that time, broke the lease on his house, backed up the car, and drove twenty hours straight. They’re now married, so it ended well there. The rest is history. We launched 2U in January of 2016, and I’ve learned a ton ever since.

That’s so cool how everything came full circle, Dan, including for you. Your now-wife took you back to 2ULaundry, “How did you break up with your boyfriend?” “He left me for laundry to start a laundry business.” That was 2016. Fast-forward a few years, you went on the path. It worked. You created a model, went around, brought on some pretty big investors, and had a lot of success with 2U.

When they see people start businesses, everyone aspires. You’re at the bar, writing stuff on a napkin, or thinking of ideas on the plane. People see some of these stories. It looks like a straight line, “They started here and ended up here.” It’s very much a squiggly, curvy, and go-in-circles-and-backward type of line. We had that same type of experience where it didn’t happen the exact way we thought it would. We had those ups and downs. They made us smarter and better at what we’re doing now because of it but it’s not that easy straight line or predictable path. Sometimes people can interpret it to be.

It’s a journey. There’s no doubt about it. You could probably write a movie. You’ve got the enemies and the obstacles to conquer. In the end, it feels like you’ve conquered the world once you’ve gotten to that point where the business is profitable and running and all that good stuff. You were very wise. You went into a bunch of startup think tanks and surrounded yourself with super smart and successful people, not in the laundry world but outside of it. I’m sure that was a big thing to help with and you asked them a lot of questions.

One of the first things we did when we first started was we had five guys living in a three-bedroom apartment with mattresses on the ground, doing whatever it took to get there. One of the first things we did, to your point, about surrounding ourselves with the right people is we would drive Uber in the morning knowing that we were going to be getting what would be some of our first customers. You’re getting rides uptown to work at the banks, consulting firms, and law firms.

People undoubtedly were always asking, “You’re pretty young. Why are you driving Uber at 6:00 AM?” “Let me tell you about this business we’re starting. What do you think?” They would poke holes, and they were then asked to sign up. We would have business cards with promo codes on them. We’re constantly trying to listen to our customers and people that are smarter than us or where we want to be.

In that first year, we evolved. We needed a technology person. We found a technology person and realized very quickly our customers on the 2U side were dual-income families with kids, predominantly women making the purchasing decision for the home. We started surrounding ourselves with mommy bloggers and influencers to learn what is this pain point. We don’t have kids so we weren’t at that point in our life. We were constantly being sponges and surrounding ourselves with people that fill that gap of information that we don’t have.

We’re taking that even a little bit further over the years, even to where we are. One thing Alex and I have done well is to continue to surround ourselves with people like that. We don’t have big egos. We started this business when we were 23. We’re not going to sit here and tell people that we have a ton of management and growth experience, but we are obsessed with learning. We’re sponges when it comes to talking to people who have done things well before.

 

FM 8 Alex | Laundromat Franchise

Laundromat Franchise: Don’t try to be egotistical or naive, and spend your way through this. Make the hard decisions because it’s either now or in three months. You might as well do it now and then start preparing.

 
We’re scrappy to get in front of those people. Over time, we have fortunately built an incredible network of people, as you alluded to, through these different investors, accelerator programs, or entrepreneur networks that we’re now a part of and will continue to be a part of. It’s because I feel pretty confident that we’re one email or one phone call away from some of the best people in all facets of the different verticals that we’re in.

It’s even how we met you. You were a pinnacle part of us launching LaundroLab, getting it off the ground, and navigating a completely new industry that we knew nothing about, specifically franchising. You take hungry and motivated entrepreneurs like us. We’re going to figure it out, solve the problems, get to the right people, ask the right questions, and execute. That’s the other thing that we do well.

Your experience of getting gritty and scrappy is a great lesson, not just in entrepreneurship but also for anybody starting a franchise or franchising their business. You can read all the books, pay all the money to go to all the training, and pay all the consultants to do all the stuff, but at the end of the day, if you want it and you’re paying attention to what’s out there in the world, you can connect the dots pretty easily, start to pick up nuggets here and there, and then start to get all these different bits and pieces of information on the table.

You can get advice from somebody, which is their opinion and advice, and then correlate it with other people’s opinions and advice from the customers of 2U to franchising your business. If you want to get scrappy and get creative, there are ways to figure stuff out. You have to have the mindset that you do and the humility, get creative and pay attention nonstop.

You’re always paying attention. You guys are hiring people now. I bet you’re going to hire the person not through the traditional channels. You’re going to meet them in the coffee line one day. We are going to be talking about it because you always ask a crap load of questions. I can personally attest to that, which is good.

I was going to say two things we always talk about. You can’t be afraid to ask questions. There’s no dumb question. That’s how we learned a lot about the Techstars accelerator program that we went through. We weren’t afraid. Their whole purpose is to surround you with a network of people to leverage to help you solve problems and get connected here and there. A lot of people go into that thinking that all the people are going to tell them what to do, but that’s not the case. You have to ask the questions constantly and be annoying or persistent.

We will email somebody 3 to 4 times until we get a response. People like that. People are so busy. You’ve got to stay top of mind and ask the questions. On a broader level, it takes a village to do what we’re doing. That’s what we have been fortunate with. It’s having a co-founder. I can’t imagine people doing things on their own. Whether it’s a co-founder or not, you have to surround yourself with people who can help you look at things differently, challenge you, and hold you accountable. That’s the other thing that we’re constantly looking at from an accountability perspective.

You’re very smart and successful individuals but you’re not afraid to humble up and put yourself in a room where you aren’t the “smartest person” in the room. You’re not afraid to walk into a room, be comfortable, and be able to navigate it by asking people questions. It’s such a simple thing. Everybody wants to talk about themselves or how much they think they know about something. There are always a couple of nuggets in there that you can start to pick out. That’s how we started working together. I jibber-jabber your ears off until you’re like, “This guy knows what he’s talking about. He can talk a lot about it. That’s for sure.”

My mom was always like, “If you don’t ask, you don’t get.” It’s such a simple line. I always keep that in the back of my head. Ask the question. Either you’re going to get an answer or you’re not, but at least you did the part that you could control by asking the question in the first place. I’m constantly reminding myself, “If you don’t ask, you don’t get.”

Let’s transition a little bit back to the laundry business. You have 2U. It’s this very successful startup and growing like crazy. Talk to us a little bit about where LaundroLab came into the picture and what you are doing with LaundroLab.

Laundry never had a need for mass volume individualized cleaning. Click To Tweet

It would be helpful to give some of the contexts too. When we started that first year, there were a lot of dual-income families using the pickup and delivery service. We had hit a point where we knew we needed to vertically integrate and protect the quality of the product that we were producing. Relying on outsourced mom-and-pops wasn’t scalable. Without going into too much detail, those two competitors that I mentioned, Washio and Rinse, had raised all that venture capital money.

One of them had flamed out after raising $20 million. Dan and I, in doing what we do, wanted to ask questions, “What went wrong? What happened? Give us everything.” There are probably nuggets in that learning that they had. We called their founding team. We talked to their lead investors, and the coolest thing happened. They were both incredibly forthcoming. The investor didn’t have a dog in the fight anymore. They didn’t want to see another one fail, “Here’s everything we did right and everything we did wrong. Take it or leave it.”

The thing that jumped out to us was the unit economics of an on-demand model. The profitability of each order didn’t work because of that point-to-point delivery where it was going to Dru’s house back and Dan’s house back, whereas we were route-based. Think more of UPS or FedEx for laundry. We would go into a neighborhood. We do 30 or 40 orders all at once, bring them to the facility, come back the next day, and drop those 30 or 40 orders off. We checked the box and felt good on that part of the model.

The second thing that caused us to think about our operations was they said quality control on the laundry side. The wash-dry-fold that you would do in your washer and dryer at home, they couldn’t figure out at scale. The reason is that it’s very different on the supply chain side than it is on the dry cleaning side. For dry cleaning, we all go into a brick-and-mortar location and drop it off. Most of us don’t realize they then turn it around and bring it to this big wholesale plant with millions of dollars worth of equipment, 15 to 20 employees, and a good operator behind that whole process.

That scales in every market. Laundry has never had a need for mass volume individualized cleaning, so there isn’t a wholesale equivalent provider like a dry cleaning wholesaler. There’s Cintas and also those big commercial launders but they’re doing hospital beds, uniforms, hotels, and ins where they’re dumping all of the same queen sheet sets into a massive machine, whereas we need to keep Dru’s clothes separate from mine. I might want an Island Breeze scent for the detergent. Dru has sensitive skin or something, so he has hypoallergenic.

There are all these permutations. The only infrastructure to do that is a mom-and-pop coin laundromat because they have 80-plus washers and dryers. At that time, we don’t have enough cash to build our own. We’re 23 or 24. We’re not bankable. We can’t go get one of the parents to PG alone again. What we realized is laundromats generate 80% of their revenue Friday through Sunday. From Monday through the first half of Friday, all that equipment and overhead they have is pretty dead and underutilized. It just sits there.

We went back to the owners and said, “You don’t want to be here more than 5 to 10 hours a week. This is a semi-absentee business but you want the profit and the revenue during times that you’re not busy. Let us rent out your off-hour capacity.” We check the box. They’re happy. We’re happy because we now have full control over the cleaning process without the CapEx. Most importantly, our 2U customers are getting a higher-quality experience consistently.

You talk about serendipity and the right timing. One of my fraternity brothers in college, whose family has been in laundry and dry cleaning for 105 years, sees what we’re doing and says, “I can help bring that cleaning process in-house and manage those teams that we’re cleaning within other people’s laundromats because I’ve done it before.” He comes on and builds that process out. We get smart at laundry and that whole cleaning process. We cut the cost by 15% and the quality shoots to the roof.

As Dan mentioned, we got accepted into one of these global accelerators that accept less than 1% of companies that apply. Things started moving in the right direction for us. We raised $2.5 million from investors at that point and launched in Atlanta. To answer your question, how did you get the LaundroLab and own actual physical laundromats? We hit a point in Charlotte where we had three laundromats that we were putting our teams into. We didn’t own them. They were mom-and-pops out in the world.

That came with its challenges. Legacy laundromats haven’t changed in decades. The owners either have inherited the business from a family member. They’re maybe not super sophisticated business people and they run their business that way and say, “I come in and collect the cash. That’s about it. That’s how it has always been,” whereas we started to realize we have a need for a different type of layout. We need to work with savvy business people because we have ten people coming into those stores. There’s a pretty intensive operation happening.

 

FM 8 Alex | Laundromat Franchise

Laundromat Franchise: People see stories of starting a business and think it looks like a straight line when it’s very much a squiggly curvy that goes in circles and backwards type of line.

 
There are more compounding factors like, “We need to own our stores if this is going to work at scale.” Imagine we have three in Charlotte. What does this look like when it’s 300 across the country? This isn’t going to be as manageable if we don’t own it. We’re not bankable. We didn’t want to use the money we raised to build a store. We wanted to use it for technology and growth. We’re stuck at this crossroads again. Electrolux is an $18 billion appliance company out of Sweden. They own brands like Frigidaire that we’re familiar with as consumers.

Their North American headquarters happens to be in Charlotte, North Carolina. Their head of laundry happens to sit in Charlotte. The head of laundry’s name happens to be Tom Washbrook, which I still find incredibly ironic and funny for the position that he’s in. He reaches out and says, “I’ve been following the story. Why don’t you build your own store?” We give them the same reason I told you. He said, “We can figure that out. We will be the bank, finance 100% of the first store, and de-risk it for you in that way. Let’s build a pilot concept and see how it works.”

We go take down an old McDonald’s here in Charlotte. It’s 6,300 square feet. The idea is that seven days a week, it’s going to be open to the public. There’s a whole new revenue stream. It’s typically a lower-income demographic that doesn’t have their washer and dryer. There’s now a whole new business line. Five days a week, from Monday through Friday, we will shut down 50% of that footprint. Remember, people aren’t in a laundromat typically Tuesday at 11:00 AM. They’re working like the rest of us, so we carved out half of the store to clean all the pickup and delivery volume.

The result 3 or 4 months later blew us all away. It was cashflow positive. It blew past breakeven in less than six months. The 2U, once you layer them on top, becomes this sexy asset utilization play where you’re getting the most bang for your buck out of the equipment that you have in that store. We realized we have to build a lot more of these. We started looking at stores in Atlanta. We raised another $6 million from investors and launched in Raleigh in January 2020.

As we all know, COVID-19 has become a thing. Thankfully, back to what we talked about early on, we have surrounded ourselves with smart people. Our board consists of Eric Eubank, who is the founding partner of a $12 billion private equity group in Charlotte. Kim Jones is the President and CFO of Spanx, Sara Blakely’s company in Atlanta, and then Jared Belsky, who’s the former CEO of a top-five digital marketing agency, 360i. The reason I share that is they have combined a tremendous amount of experience, more so than Dan and I.

They called a meeting in February of 2020. We had a few cases in Washington state, but most of the general population in the United States was like, “That’s over there. It’s in Europe and Asia. We’re all good. It’s fine.” Our board was saying, “This is taking out whole continents. They’re all working from home. They have stay-at-home orders. This is going to happen here. It’s just a matter of time. This is going to become a cash preservation game.” We raised a ton of it, fortunately. We sit on it.

Don’t try to be egotistical or naive and spend your way through this. Make the hard decisions now because it’s either now or in three months. You might as well do it now and then start preparing. We made the hard decision of shutting Raleigh down, which we had launched and was surpassing our initial expectations. At that point, we took 2 to 3 months. The board said, “You have this once in a multi-century opportunity to say, “What would we double down on and shy away from?”

We took those three months, looked at our business, and kept coming back. The laundromat is crushing it. Even during COVID, it’s up 22% when most retail businesses are down 15% to 30%. There’s a theme, “We need way more of these. We need a lot more laundromats faster.” There was this other theme, “We’re trying to run routes, acquire two different customer bases, and run a retail laundromat and a pickup and delivery business. It might make sense to split the two businesses up instead of meshing it all together.”

That’s what the theme of LaundroLab and this idea of franchising the underlying laundromat came into play because we needed to raise $50 million to $100 million, which wasn’t feasible at that time. Even at that point, you would be hiring new employees in each city versus bringing on partners and people that you can trust, have skin in the game, and are right there along with you in the form of a franchise partner. We did what we do. We jumped into franchising and said, “We know nothing about this. Please, everyone, give us any connections in franchising.”

That’s when we originally met you, Dru, Jeff Dudan, and the founders of Sport Clips, Great Clips, and Anytime Fitness. People are poking holes in our model, “You should structure it this way. Don’t do master franchise agreements. Don’t sell at multiple states at once.” We got all this great advice and then launched LaundroLab in January of 2021 under the idea that we will provide everything from the moment you signed to the grand opening and beyond all that support, site selection, construction, design, and marketing.

Others think people will just tell them what to do, but that's not the case. They have to ask the questions constantly and be annoying, and persevere. Click To Tweet

The big kicker is our relationship with Electrolux. We were able to get a pretty significant discount for our franchises that we passed through directly to the franchisee. We have built a ton of home-grown technology out of necessity for our business. They’re not good off-the-shelf solutions for our specific needs. The big kicker is for those that want it, we will bring all this pickup and delivery volume to our franchisees at no additional startup costs to them.

They already have the equipment there. The analogy I use is to think of 2U as DoorDash or Postmates and what they are to any quick-service restaurant franchise. They’re demand aggregators bringing more orders to those franchisees. The franchisees don’t have to manage vehicles, drivers, and customer acquisition. They just get the orders in, make more burgers, have more revenue, and send them out. That’s how we got into LaundroLab.

It’s a brilliant way to increase asset utilization because that’s the beautiful part of owning a laundromat. I went in there because my washer broke. I was talking to Allie. I was like, “Let’s go check out LaundroLab and see what this thing is all about because I had never been in one.” We drive over there. I walked in and I was like, “This is an amazing business.”

My man, Lee, greeted me. He’s an amazing, nice guy. I was like, “How many of you are there?” He was like, “It’s just me. I’ve been here for three years.” There’s only one employee. You’re trading employees for machines. That sounds amazing because dealing with employees is its own thing. Allie and I had saved up a few days’ worths of laundry from the kids and everything.

We’ve got a big load. I was like, “Let’s use the big daddy.” We used the big daddy or the seven-loader. I looked at the price and I’m like, “It’s $10 for one load of laundry. I’m starting to get this thing. I understand they’re making money.” You show your faces. I’m like, “What the heck is going on here?” You had some big investors or potential franchisees there, but I get it.

You have these assets. You need these assets, equipment, and that state-of-the-art and high-efficiency stuff. There are probably not many ways to increase the utilization other than what you have built on the 2U side out there in the country because all the competitors hadn’t figured out the way to properly build that business and scale it, which you have.

That’s the interesting thing that we got so excited about this industry. It hasn’t been disrupted in 100-plus years when you use that term. This is something that hasn’t changed for so long. We almost accidentally got into the laundromat industry through our pickup and delivery. The hardest part of what we’re building was the pickup and delivery. We figured that out, and now, we have worked our way backward, “How do we build this infrastructure faster?” Franchising is such an incredible sector of the business, industry, or however you name it. It’s aligned with exactly our growth path to where we want to eventually take this thing.

It’s an expansion strategy. You’re going to have one expansion strategy for 2U that’s different than the expansion strategy for the laundromats. You’re giving up the bottom-line profits of the laundromat business. This isn’t just some regular laundromat. You put a lot of thought into how you created the laundromat. It wasn’t like you took down a McDonald’s, didn’t put any signage, and cleaned it up.

When you go into one of your laundromats, Lee was cleaning the entire time that I was there if he wasn’t helping somebody or helping that person that pulled up with a 7×12 trailer full of laundry. I was like, “That’s a good account. Everybody should spend some money at this place.” It was the Chick-fil-A of laundromats. The service was amazing. Lee was great. It was clean. The machines were working.

It was a Wednesday but it was pretty busy. There was activity happening there on the retail side, for sure. You put a lot of thought into how you created the laundromat. I walk outside and there’s a stinking laundromat right across the street. That sign is faded. You wouldn’t even know it was there. It was in Spanish or something. You put a lot of thought into how you created the retail aspect of LaundroLab.

 

FM 8 Alex | Laundromat Franchise

Laundromat Franchise: You can’t be afraid to ask questions. There’s no dumb question.

 
It’s a completely underserved community. When you look at the majority of laundromats out there, they’re considered zombie mats. That’s what most of them are called. They’re run down and unsafe. They don’t have amenities. There’s no employee there. That one employee can maximize the customer experience pretty drastically if somebody has a question, or honestly, the cleaning part and maintaining the life of the equipment, which are your most expensive assets in there.

Customers like that consistent, clean experience. That’s why people will wait in a twenty-car line at Chick-fil-A because they know they’re getting the same consistency and quality every time. We took that same mindset of what we built with 2U and applied it to a laundromat. It has worked well. We have a 10X better laundromat than what’s traditionally out there from what we’re able to do for the throughput and the customer experience. That stuff matters.

All of us here are probably very fortunate to be able to do laundry in the comfort and safety of our homes, but there are millions of people out there who don’t have that. We wanted LaundroLab to be an extension of their home in these local communities that we’re building in. It’s something that they can then tell their friends and family to come in with them. At the end of the day, it’s a community laundry center. Our core customer demographic has to do it at least once a week. They’re in our store four times a month.

Laundromats are probably one of the only businesses out there where you’re spending, on average, about 90 minutes inside the store. We take that seriously and we want them to have a great experience. Small things like TVs, free Wi-Fi, games, a kids’ play area, plenty of lounge space, and folding space. That stuff matters. A typical old-school investor in a laundromat is like, “Let’s put as many pieces of equipment in as possible. That will help you drive revenue,” but it’s all about the customer experience.

It has played out well for you. There’s no doubt. Let’s switch gears. You’ve been franchising since January of 2021. It took you a year-ish to pivot. You’re putting together the franchise strategy. How has the franchise expansion gone for you so far?

It has been overwhelmingly exciting. We were optimistic and anticipating. I don’t think it’s as fast as we did. We got a chance to meet you. You’ve been in the industry for quite some time. You helped to launch and scale a brand pretty significantly to an exit. It’s something that we wanted to get a good understanding of. How do you take something that we only had one proof of concept from zero to where we ultimately want to take it?

Thankfully, we were able to surround ourselves with awesome people, including you, to help us ignite off the start there. We launched in January of 2021 with the goal of finding our first five partners. Our yearly goal was to find five franchisees. We knew it was going to be a multiunit play from what we did research on. We anticipated fifteen licenses or so being awarded by the end of the year. That would have been a win key to success for us.

It took a little bit to generate some leads, awareness, and things like that. By the end of May 2021, we had already brought on 5 franchise partners and awarded 17 licenses all across the country. Things dominoed from there. We ended 2021 with a second corporate store open. We had 12 franchise partners and 33 licenses awarded all across the country as far West as Phoenix, North as Detroit, South as Miami, and everywhere in between.

It was exciting to see the level and the caliber of people coming in. People talk about it. Somebody knows somebody who has either owned a laundromat or has always wanted to get into the laundromat industry, car washes, or something that people compare us to all the time because they’re pretty passive semi-absentee and recession-resistant businesses with low labor models.

People are getting smarter with their money. They want to invest, whether it’s real estate, crypto, or all of these other alternative investments. Franchising is emerging, especially during the pandemic. I’m sure you can attest to that from what you’ve seen. All of those things became a tailwind with us coming into the franchising space. We have learned so much about the franchising industry, what people are looking for, and what people are comparing us against.

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We have been very excited about that. We have 16 franchise partners and 44 licenses awarded with a full pipeline to grow pretty drastically here in 2022. We’re going to open our first twelve franchises in 2022. There are twelve partners we brought on in 2021. We’re working tirelessly to get them open and successful here in 2022. We will continue to do that. As we get those open, we will look to layer 2U on those businesses over the next few years.

That’s exciting. Congratulations. There are 16 franchises and 44 licenses in 13 months. This is a sophisticated type of investment. This isn’t like, “Put some money into it and open a laundromat.” It’s a big business. What are some of the backgrounds of the franchise owners that you’re seeing coming on board?

You touched on it. They’re high-net-worth, very sharpened, and sophisticated investors who are detailed in where they’re putting their money. They have worked incredibly hard, whether it was building their own business or another franchise business. They’re looking to simplify their operations or diversify their investment portfolio. Real estate is getting so expensive, especially on the residential side so people are looking at these more passive franchise concepts. We fall under that bucket.

We’re attracting a lot of CEOs, real estate developers, people with a finance background, and existing franchisees. We’re starting to attract a different type of owner than what has historically been in the laundry industry. That’s something that we’re excited about. It’s changing the face of the laundromat industry, which is massive. We’re bringing sharp people in who are not afraid to use technology and spend money on marketing to take care of their employees and build something better and different.

We have perfected finding the right individual coming in. They do like it because it’s a passive business. It’s going to take a decent while to get there, but once that’s there and you have those systems in place, this is a business where you’re generating 80% of your revenue through customers coming in and taking care of themselves. You mentioned it. There’s one employee on-site, so a simple labor model is attractive.

There are some pretty big tax advantages to investing, at least under the current Tax Code, by being able to depreciate the equipment. There are few employees, which is nice but the trade-off is you’re paying for the machine and trading a little bit of labor for the upfront investment. You’ve got that repeat customer that keeps coming in if they have a good experience. From a pure entrepreneurial or almost capitalist perspective, it checks a lot of boxes. You could do the real estate thing too. Do you have any franchisees that are looking at coupling owning the real estate with the laundromat?

That’s something that we’re starting to get a lot more conversations around. We’re attracting these sophisticated real estate developers who want to build wealth in a number of ways. That’s what has been interesting as we have been formulating how people look at LaundroLab. It’s a wealth generation thing or concept where you’re going to cashflow from the business. Most businesses have that or hope to have that. Second, you’re making money by continuing the job. You don’t have to retire to own laundromats. You’re being able to keep the salary that you have for a number of years.

For the people who want to invest in real estate, there’s a big opportunity with owning real estate or finding an appreciating asset, especially with a tenant like your franchise. If you put LaundroLab in there, laundromats have a 95% success rate. Your laundromat isn’t going away in 20 to 30-plus years. It’s almost like an annuity that you have there with the real estate option. With a lot of the lending options out there, you can lower your out-of-pocket cash to own not only a franchise but some real estate right along with it.

The financing is good too. You have done a good job with Electrolux helping the franchisees get some pretty good options, at least for the funding of how to capitalize on the venture. There’s no doubt. There are a lot of interesting angles. You got the whole 2U dynamic of this additional potential revenue stream that’s very unique to what you are building. You’re not going to be able to get that anywhere else. I’m sure everybody is super interested, “What’s it going to take for me to get 2U in my city? How do I get all that business coming into my laundromat?” Have you worked through that yet with how it’s going to work?

First and foremost, we want people to get excited about LaundroLab. We coincidentally happened to own a sister company that can be an exclusive national account to our partners and vendors. The first strategy is going to be to launch our 2U business into major markets across the country. Let’s call them the NFL cities. That’s going to be our first primary strategy, but with the technology that we’re building and the team that we’re developing, we believe we’re going to be able to move 2U pretty quickly.

 

FM 8 Alex | Laundromat Franchise

Laundromat Franchise: Laundromats are probably one of the only businesses out there where you’re spending an average of about 90 minutes inside.

 
Technology enables us to centralize a lot of the ongoing operations, routing, logistics, marketing, and customer support. It’s going to be a matter of how we can get our franchisees up and running as quickly as possible. Having a successful laundromat, we want to get their laundromats to break even. We can talk about the 2U expansion piece.

They’re the major markets first and foremost. The good thing is we can build 10 to 15 and even 20-plus LaundroLabs in a given market. We will be able to support a number of our franchise vendors who are there because we’re not selling out markets to one individual. We will have 3 or 4 franchisees who own 3 or 4 franchises or stores in each market that we can distribute that volume across.

You can put some qualifications on the franchisee to be able to make sure that they can handle that because it adds a little bit of a different operational component to the day-to-day aspects of running the laundromat. They have to be willing to take on and staff because then it brings up a few more people in the logistics of keeping everybody’s laundry straight and all that supply chain stuff. It’s interesting. That’s good stuff. As we wrap up here, do you have any lasting thoughts you want to leave with anybody who may be reading this? If people want to get in touch with you, what’s the best way to find you?

We’re all always open. Book and feel free to reach out and ask any questions. Our website is LaundroLabFranchise.com or 2ULaundry.com.

If you have questions, feel free to reach out to Dan@LaundroLabUSA.com or Alex@LaundroLabUSA.com. It’s worth mentioning where we’re headed. Our goal is to build the first nationally recognized brand in the laundry. I believe that LaundroLab has the first chance to do that. There is a reason that it doesn’t exist. The combination of LaundroLab and 2ULaundry has the opportunity to do that. We’ve got the team to support that growth. We’re actively raising another round of capital. We’re targeting a $10 million capital raise toward the end of 2022 to support all that growth. If you’re interested in learning more or talking about either one, feel free to reach out to us. Thanks for reading our story.

That’s good stuff. I have no doubt that you are going to get there.

We appreciate it.

Thanks for joining me.

Thanks, Dru.

 

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About Alex Smereczniak

FM 8 Alex | Laundromat FranchiseAlex Smereczniak is the co-founder and CEO of Charlotte-based startup, 2ULaundry, which Alex launched with co-founder, Dan D’Aquisto in January of 2016. Alex earned a BS in Finance from Wake Forest University and successfully ran and sold another laundry business prior to moving to Charlotte and joining EY as a financial services consultant. He is a high-performing, strategic-thinking professional with more than four years’ experience in business development and five years of experience in buying, managing, and selling startup companies. He is experienced with strategic relationship building, and has exceptional writing, presenting, and interpersonal communication skills. He is adept at assessing needs, generating options, and advising solutions in collaboration with clients and stakeholders. Alex has prior experience with running his own business and managing projects from the requirements gathering/need identification phase through to completion.

 

About Dan D’Aquisto

FM 8 Alex | Laundromat FranchiseDan Daquisto is the co-founder and CRO of Charlotte-based startup, 2ULaundry, which Dan launched with co-founder, Alex Smereczniak in January of 2016. Dan attended the University of Minnesota before joining high-growth startup Sports Engine (Acquired by NBC Sports) as a top-performing sales executive. Dan was awarded top performer in consecutive months that ultimately lead to achieving Presidents Club honors as the youngest to ever win. He is a Modern Chief Revenue Officer, delivering best in class growth, branding, and retention strategies. He loves to transform insights gathered through market research, qualitative and quantitative user research, data analysis and a pinch of intuition into sound strategy, marketing, product, and organizational design decisions that drive growth and improve end user happiness. Dan is naturally curious and strives to learn something new each day. He believes in the power of the network and is humbled to be part of both the Endeavor Global and Techstars Accelerator Networks. He is passionate in giving back to the local startup communities and loves meeting new founders who are on a mission to solving hard problems.

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