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Strategies for Owning a Successful Dry Cleaning Business

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Strategies for Owning a Successful Dry Cleaning Business

Strategies for Owning a Successful Dry Cleaning Business

The dry cleaning industry has experienced slow growth in recent years, slower than the growth of the overall economy. Many consumer habits have changed, affecting the entire landscape of the clothing industry. Casual dress requirements in the office are the new norm and more garments are being worn and washed in standard washing machine. Plus, customer loyalty has declined. As a result, dry cleaning business owners have had to to shift their offerings and services to remain profitable.

What is required to operate a dry cleaning business?

The dry cleaning industry relies heavily on equipment, solvents and less on labor costs. While the startup costs for machines and related equipment can be quite costly, renting instead of buying machines and scheduling jobs to utilize the machine’s full capacity can help to reduce capital expenditures.

  • Startup and maintenance costs may be high. Running a dry cleaning business is primarily cleaning clothing and home furnishings such as rugs and drapes. Equipment required includes specialized commercial washing machines and dryers, cleaning chemicals and presses.Businesses also need an ongoing supply of hangers, tags and garment covers.
  • Cash flow may be affected by seasonality. Demand may lessen during certain months due to vacations and more casual clothing during the warmer seasons. Also, cash flow issues may arise when machines break down and need to be repaired or replaced. Leasing equipment can help alleviate this issue, as repairs and maintenance costs will be a recurring monthly cost.
  • Licenses and certifications are required. Dry clean businesses have strict regulations from state and local agencies as well as the EPA and OSHA. These regulations include properly disposing of cleaning solvents and managing energy emissions.
  • Labor costs are generally low. Dry cleaning businesses are primarily family-owned and operated and may be run with minimal employees. The work is labor intensive but considered low-skilled, therefore less expensive compared to other industries.

Are dry clean businesses very profitable?

The dry cleaning industry as a whole is expected to grow, yet with increased regulations, changes in the garment industry and work attire requirements, profit margins can be slim. According to BizBuySell Insight data, the median revenue for dry cleaning businesses is $80,000. The average cash flow multiple is 2.8, resulting in a median sale price of $195,000. To generate profit, many dry cleaning businesses need to ensure they meet ongoing regulations while monitoring costs, productivity and considering whether to add additional services.

  • Profits vary depending on location and customer loyalty. Areas with high urban populations tend to do best. Retaining customers tends to a be a challenge for dry cleaners, so offering incentives such as coupons and loyalty programs can encourage repeat business.
  • Ongoing operational costs can affect profit margins. State remediation programs, expensive equipment and upkeep can result in loss of revenue. Leasing equipment, encouraging customers to bring in used hangers and stopping the usage of toxic chemicals may help to increase profit margins. However, gross margins account for almost two thirds of sales.
  • Adding additional services can increase revenue. In order to attract new and keep existing customers, dry cleaners can add in additional services such as offering pick-up and delivery, clothing alteration and regular wash and fold services.
  • Market share concentration is average. As demand for dry cleaning has decreased, many players have struggled to maintain or increase sales. The industry is dominated by family-owned business, with the majority of those being run but the owners themselves.
  • Barriers to entry are average. Businesses can be operated with minimal staffing and in a single location. However, startup costs can be a deterrent as franchising, equipment and rent tend to be expensive.Businesses also need to obtain the right licenses and adhere to state and local regulations.
  • Competition can be high. Price and quality of services offered to customers are the main ways in which dry cleaning businesses compete with each other. Since service is often similar, many have offered discounts, such as loyalty programs and first time customer coupons.

Is the dry cleaning industry very competitive?

The dry cleaning industry has seen slow growth, slower than the overall economy. Many businesses have less than four employees and offer the same types of offerings all within relatively close proximity to each other.

What are the keys to a successful dry cleaning business?

Like any other business, a successful dry cleaning business requires a solid understanding of what customers want and how to best deliver unique and high quality service. It also requires sound management skills, and the ability to retain repeat customers.

  • Maintaining high quality of service. Many dry cleaners provide the same service, so it’s imperative that service quality is high. Even a simple issue like a lost button can mean a loss in retaining business.
  • Attracting referrals and local support. Keeping a steady stream of customer support is crucial to longevity. Dry cleaners can do so by engaging with customers on social media and leveraging group discount services such as Groupon.
  • Increase cost per visit. Businesses can grow revenue by offering additional services, discounts for cleaning multiple items or providing premium services such as cleaning designer items that require a higher cost. All of this will help increase the average transaction price each time a customer comes in.

Owning a dry cleaning business can be a challenge, yet the industry is continuing to evolve and market concentration is average. Furthermore, there are a variety of ways that owners can reduce costs, therefore increasing profit margins. With the right strategy and careful planning, buying a dry cleaning business can be a smart move.



Sources:

Verak, Beck. “Dry cleaners, seeking new ways to survive, take inspiration from restaurants and retail.” Chicago Tribune, 24 March 2017, http://www.chicagotribune.com/business/ct-dry-cleaning-industry-washing-up-0326-biz-20170324-story.html#. Accessed July 2018.

LaMarco, Nicole. “How to Open a Laundry & Dry Cleaning Business.” Small Business Chronicle, 29 June 2018, Hearst Newspapers, LLC, https://smallbusiness.chron.com/open-laundry-dry-cleaning-business-18752.html. Accessed July 2018.

“Dry Cleaning & Laundry Services.” Vertical IQ, 13 June 2018, https://verticaliq.com/. Accessed July 2018.

“Laundry Facilities & Dry Cleaning Services.” First Research Profile, First Research, 26 March 2018, http://www.firstresearch.com. Accessed July 2018.