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...
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