Adding a minilab to our "scratch-built" store

Our retail photofinishing sales were a picayune 6% of total sales! But we had a lot of people come in, ask "do you develop film in an hour?" and walk away when we said no…

I didn't want to add a processing lab. Remember, I'm "retired." Life is supposed to be easier, and if there's anything that will make your life more complicated it's trying to keep a processing lab up and running.

Adding a lab is a huge decision But there's no doubt about it, having a processing lab on site will increase your store's traffic and sales. The one-hour customer puts a premium on convenience and is willing pay for it. The shift in rolls from overnight to on-site has gone so far that today, On-Site comprises nearly half the retail market.

The latest hybrid labs will accept digital pictures just as happily as 35mm color negatives. That's not what I could afford

If you choose to go the on-site lab route, it will change the nature of your business drastically. You stop being just a retailer and become a manufacturer. The demands on your resources increase in all these ways:

• Space required - not just for the lab, but to store the supplies, wash the racks and provide service space.
• Utilities required - you'll use more power, more water and more air conditioning.
• Personnel - you'll need more. As your key lab operators become more skillful, they have a tendency to regard themselves as even more indispensable, and it's not uncommon to see a perfectly normal human being become a grade-A prima donna.
• Valium - there's an undocumented sensor mechanism in all lab equipment that detects when the owner is about to go on a well-deserved vacation, and causes major breakdowns either during or just before that time.
• Insurance - now that you're classified as a "manufacturer" rather than "RETAIL - NOC" your premiums will go up. And of course you've got to keep coverage on that expensive lab equipment.
• Environmental and other regulatory concerns - OSHA and the EPA, as well as your state and local departments of safety and environmental protection, expect you to run a clean, safe and ecologically sound process. With regards to the latter - I've seen labs whose effluent flow was safer than the local drinking water, yet not safe enough to be dumped into the sewers after treatment.
• Money - there will be direct demands on your wallet, too. 

Having your own lab, however, can lead to

• Greater sales of film, batteries, frames and albums
• Greater frequency of visit by most of your customers
• Much higher gross margin of profit (you're cutting your cost of goods dramatically)
• A better bottom line? You hope so, but it's not a given.

Three ways to buy a lab

Buy it outright - one big payment. Most manufacturers will provide a substantial discount for a cash purchase. If you've got deep pockets or an excellent line of credit, this makes sense. Your accountant should be in on this decision.

Lease it to own it. Properly structured leases equalize the cost, usually over a 60-month period. The monthly payment is usually 100% deductible. At the end of the lease you can usually buy the equipment for $1, which may actually be a fair price for it at the time. Don't go for a longer lease period - the usable life span of most lab equipment isn't much more than this. Service contracts can help your lab last longer.

Buy a used lab. The price savings can be huge, but you won't be getting the latest technology. The Kiss Magnum lab pictured here was offered at $3,500 on the Photo/Image News Network's classified ads. You can often find a private seller, but it's a real "buyer beware" situation.

Noritsu sells its own reconditioned labs. They've even got a special web site just for that, http://www.noritsuremarketing.com

BEF in Allentown, PA, is one of the largest refurbishers, as opposed to just a reseller. Ed Brewer's company specializes in Fuji labs that have been traded in, although he sells many other brands.

One problem with second-hand lab equipment is the continued availability of replacement parts. You want to be very careful not to buy an orphan. It's a safe bet that an older lab will require more service than a new one, and absolutely nothing will be under warranty.

Kodak's Qualex On-Site Processing program is unusual. This program has been highly successful in drug chains and mass merchants.

Kodak is currently the world's leader in One Hour Processing, having successfully placed One Hour labs in more store-fronts than any other photofinisher. They've installed about 10,500 labs. 

There's no question that the Kodak OSP program is the closest thing to a true turn-key program in the business. The store operator pays a monthly lease payment and a per-click fee - a flat charge each time a print is made. Qualex provides the equipment installation and all the maintenance. All the consumables are provided - a truck that looks a lot like a Coca Cola delivery truck (except that it's yellow) makes the route supplying paper, premixed chemistry and bags. The consumables remain the property of Kodak until they're sold

Field based Account Development Specialists support in-store marketing, sales training and more.

At this writing most equipment is provided by Gretag, from their Master Lab series. Since all the Master Lab equipment has the same footprint, it's easy to change out equipment as needs change.

No doubt you've seen these lab setups in service. They're in supermarkets, department stores, and many major drug chains. 

Advantages - you know exactly what costs you'll face up front. No nasty surprises. You don't have to invent any new ways to do things, because everything's included - even training. If you want the fastest, most convenient way to turn your camera store into a One Hour lab, you should definitely consider the Kodak OSP program. 

Disadvantages: your potential for profit is limited. Every print you make is going to cost you the "click fee," about 15¢. I hope that wouldn't have a direct effect upon quality control, but isn't it tougher to tell your lab operator to throw 10 prints away if the cost is $1.50 than if the cost is $.60? No matter how many years you make lease payments, the lab never belongs to you.

Kodak and Konica have incentive programs. They'll provide payments for store upgrades when you invest in their lab or their paper.

Preparing your site: 

A typical printer/processor assembly, with chemistry on board, weighs a half-ton or more. Your floors must be strong enough. 

Electrical requirements: You'll need a dedicated 240 volt circuit for the printer processor and a powerful circuit for the film processor.

Air conditioning has to handle the extra load. If your air conditioning system is prone to trouble, the lab's heat output will just make it worse. Most labs will not operate at all if the temperature gets above 90° F. A heat wave, coupled with a marginal ac system, can put you out of production.

You'll need a sink to wash racks.

Your flooring needs to withstand chemicals and stains. That usually means commercial tile, in a color that blends well with ugly brown chemical drips! And you need to be able to take your racks to the sink without ruining anything in between. 

Make plans to circulate the air in your lab. 

Other preparations: 

Staff requirements increase. Every day that you schedule production you need at least one staffer who knows how to start the equipment, process and print, and solve at least minor problems.

You have to get rid of the effluent. Safe and legal disposal of photographic waste is a topic all its own. You can use a silver recovery system that allows you to discharge to sewers, if your locality allows it. Or you might prefer to contact a waste management service. The silver that environmental agencies regard as a contaminant is actually valuable, so some services will collect your waste for free and keep the refined silver as their profit.

You will be changing your business from a retailer to a manufacturer. That has an impact upon your insurance and your workers compensation classifications.

The EPA and your municipality will suddenly take a lot more interest in your operations. For the first time you need to think seriously about OSHA and your state's Right to Know regulations. PMA has some great materials on OSHA compliance.

I did my research and made my decision.