Dry Cleaning Industry

The industry selected is laundry and dry-cleaning services. This industry has a NAICS code of 812320 "Cleaners, dry-cleaning and laundry." Separate categories 812332 and 812331, exist for industrial laundry and linen supply respectively (U.S. Census.gov, 2012). Companies in 812320 "provide dry-cleaning services," "provide laundering services" or "provide dropoff and pickup sites for laundries/drycleaners." Specialty cleaners are also in this category.

Industry Size and Composition

Industry statistics tend to focus on all laundry businesses without differentiation, presumably in recognition of some overlap. IBIS World estimates the total size of the industry to be around $11 billion in the U.S. annually on the institutional side, $4 billion for laundromats and $9 billion for drycleaners. There are no major players in the dry-cleaning business nor in the laundromat business other than coin-operated. Coin-Mach and Mac-Gray are two major players in coin laundry. On the industrial side, Cinta, Aramark, G&K and UniFirst are among the larger competitors.

The industrial side has much greater concentration in part because there is a need for economies of scale. The customers on that side of the business are very large, and the result is that they need suppliers with substantial economies of scale, leading to much larger firms. Both drycleaners and laundromats operate in industries that are heavily fragmented. There may be small chains, but most of these would be local in scope. In general, the fragmented and diffused customer base on the benefit of having location close to the customer has created an emphasis on small players on this side of the industry.

The industry is characterized by low barriers to entry and low barriers to exit. Businesses can be transient. Most laundries are relatively small operations, ranging from 1500 to 6000 square feet and operate on long-term leases. It is unusual to find a laundry that has a value over $1 million. The financials of the business are unique in that laundries have almost no inventory, no accounts receivable (all cash) and high turnover. Thus, equity can build quickly if the business has limited competition and therefore has the ability to set prices. Firms in the industry have been compelled to adopt a service orientation in...

Extended hours and various tactics to improve ancillary revenues are the norm in the industry, and may require additional investment in staff and fixtures (No author, 2013).
The coin laundry industry is similar with business values topping out around the $1 million mark. Store sizes are comparable with 1500 to 5000 square feet the norm. Many coin laundries share premises with full service laundries, so there is significant overlap between the two industries. Heavily fragmented, there are over 35,000 coin laundries in the U.S. with mean sales around $140,000 per year. Industry growth is spurred by population growth, but demand is related to the local market conditions. The most successful stores operate in areas heavy on rental apartments, especially older stock that was not built with laundry facilities. Nevertheless, demand emerges even in new residential areas. The more intense the population growth, the more opportunity the industry has. Furthermore, consumer segments of the laundry industry have stable demand, unaffected by prevailing economic conditions (CLA, 2013).

IBIS World notes that the industrial laundry and linen business is in decline, having shed 1.7% of its revenues over the course of 2008-13. There are over 3000 businesses, but the share of the largest companies is relatively large and there are markets where they will dominate. There is good distribution around the nation but more firms exist in the Southeast, the West, the Great Lakes and the mid-Atlantic. Over one-quarter of all laundries are in the Southeast, a function of growing population in that region, along with growing tourism that attracts more hospitality development. The hospitality business is the main buyer, along with institutions like hospitals and care homes, for industrial laundry and linen service.

At the local level, the industrial business does not change much. Individual states and cities might have their own local competitors. Some companies might also be vertically integrated and handle their own laundry needs. On the consumer side of things, the fragmentation of the industry is also evident at the local level. There are, however, a variety of local and regional chains both franchised and not that might capture…