National Clothesline

n a recent Wall Street Journal article, Kevin Rollins, president of Dell Computer, said that in today’s economy, “The way the company (Dell Computer) is managing to continue to grow is by taking business away from competitors.”

In the drycleaning industry, the only way you can grow the retail side of your business is by taking customers away from your competitors. This is due to the fact that the retail customer base (people who use drycleaning on a regular basis) is shrinking. There is very little that drycleaners can do as individual businesses or even collectively to increase the customer base.

Therefore, each individual cleaner must determine how best to increase their market share by capturing customers from the cleaner down the street or across town. Just as important is, how do you keep those customers once you have them?

Usually, the first strategy that occurs to business owners when they start thinking about their competitors is pricing. But the one thing you never want to do is get involved in a price war. The road to financial success in this business is not more volume at any cost! There are many tools at your disposal that will help you capture a larger share of the retail market without lowering prices.

Every cleaner is looking for a cost effective, long-term program that will allow them to increase their market share. The best way to do that is to focus on making it more convenient for your customers to do business with you. This brings to mind routes — pick-up and delivery service.

Every day I receive inquiries about routes. I’m being asked:

• Are they profitable?

• Will they work in my market?

• Should I do residential routes? Office buildings?

• What’s the best way to get customers?

• How should customers pay for this service?

• How should I pay my driver(s)?

• What happens when the driver takes a day off?

• Can a driver steal my route customers?

• Should drivers be salesmen, too?

• Is it easier or harder to retain route customers?

There are no “cookie cutter” answers to these questions. What we do know is that routes can be an excellent way to grow your business when done correctly.

The biggest advantage in developing routes is that you can grow them as slowly or as quickly as conditions permit. The determining factors are:

1. How much more capacity do you have in your plant?

2. How much money can you invest in marketing?

3. Are your prices high enough to absorb the additional costs involved in picking-up and delivering your customers’ clothes?

I know several drycleaners who started in routes by delivering to one customer. Today, many of these cleaners are doing over $10,000 per week on their routes.

Over the years I have worked with and talked to hundreds of cleaners who have started routes. The level of success that these owners have achieved is directly related to:

1. Their knowledge of how routes should be developed.

2. How well the involved employees are organized.

3. Having clearly defined levels of authority and responsibility.

4. Having achievable sales goals.

5. Having compensation schedules based on performance.

I have seen many different structures work successfully but the most successful are the ones that were clearly defined before the routes were started. This experience has provided me with a clear understanding of the benefits and shortcomings of the different structures. When you have a clear understanding of these variables you will be in a position to determine which structure fits your needs the best.

What makes this industry so unique, interesting and at the same time a great challenge is that there are so many different ways to do things right. This is also true when building routes.

Another way to increase your share of the retail market is by opening a drop store. Drop stores can be very profitable when they are in a location where weekly sales exceed $3,500 per week.

I have a client in the Midwest who opened a drop store in a new strip mall and within four weeks this store was doing over $4,500 per week. I know several cleaners with drop stores doing more than $20,000 per week but these are the exception, not the rule.

Most new strip malls are built with one of the stores reserved for a cleaner. Often, a cleaner will acquire a new drop store to prevent a competitor from taking it. Or, they will take it on to expand into a new area.

Whatever the reason, opening a new drop store exposes you to more risk than starting a route.

When opening a drop store you are required to sign a minimum three-year lease and you must sign personally. The average rent in a new mall in a good location will cost $2,000 per month including CAM (common area maintenance fees).

For a route, you can purchase or lease a new van for less than $500 per month.

A new drop store will require counters, a computer, lighting, floors and slick rails at a cost of $20,000 to $30,000. The van for a route will need to be wrapped with your name, logo, phone number, etc. at a cost of less than $2,000.

A new drop store requires phone lines, security system, electric, water, air conditioning and insurance at a cost of around $200 per month. The route van requires registration and insurance – cost is around $200 per month.

Your biggest cost for a drop store is the counter labor. If the store is open 60 hours a week and you pay $7.50 per hour — your cost, including the company share of FICA, FUTA and SUTA will be $500 per week.

The goal for CSR labor costs at a drop store is 14 percent of sales. To achieve this goal, the store must produce at least $3,500 a week in sales. When you have a drop store doing $2,000 a week, your CSR is costing you 25 percent of sales.

The labor cost for a route driver will not exceed 10 percent of sales unless the driver is also your route sales person. When the driver is also the salesperson, they are typically paid 15 percent of route sales. No matter how much or how little a route does, your route labor costs will not exceed 15 percent of route sales.

When starting a route you can use part time drivers who are paid $8 to $10 per hour and commission salespeople who start with a weekly draw of $200 to $300 per week. If the sales rep does not perform within two to three weeks, they can be replaced. If your drop store does not perform, you are obligated to the three-year lease and the fixed payroll of $500 per week.

It is easy to see that the risk involved in starting a route is much less than the risk involved in starting a drop store. The most exciting aspect of starting a route is that you can aggressively go after new business by going to the customer and asking for their business. You don’t have to knock yourself out with coupons that have you doing thousands of dollars worth of cleaning for free!

For those who would like to learn more about starting routes or growing existing routes, I will hold seminars this fall on “Building Profitable Routes” in Orlando and Los Angeles. These educational seminars will provide you with easy to follow step by step procedures for:

• Getting started in routes.

• Hiring, training and paying sales reps.

• Hiring, training and paying drivers.

• Organizing route personnel.

• Performance standards for route personnel.

For more information on dates, locations and to register, visit my website: www.bizbuilderonline.com.

In the game of business the more you know the better you can play the game.

Alan Robson is a private consultant dealing with the specialized needs of the drycleaning industry. Contact him by telephone at (941) 408-8819 or send e-mail to him at: alan@bizbuilderonline.com or visit the Biz Builder web site: www.bizbuilderonline.com.