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Business Observer Friday, Mar. 15, 2013 7 years ago

A Fresh Scent

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A group of Naples entrepreneurs take their first step in a new trend for dry cleaning.
by: Jean Gruss Contributing Writer

The makers of Tide detergent want to dry clean your clothes, too.

A group of Naples entrepreneurs recently acquired the franchise rights to build Tide-branded dry cleaning stores in Collier, Hardee, Lee and Palm Beach counties. They're among the first in the nation to open these stores.

The first one will open on busy U.S. 41 in north Naples next month and will feature some gee-wiz technology you've never seen at a dry cleaner before, including an ATM-like machine that can deliver your clothes to you curbside when the store is closed.

But franchisees can expect to pay as much as $1.3 million to open just one store, a surprisingly capital-intensive business. The land alone for the Naples store cost $1.1 million, property records show.

Robert Lyons, Jon Kassolis and an undisclosed silent partner say their research shows customers are not loyal to their dry cleaners and many are likely to switch. “A lot of people aren't happy with customer service and quality,” Kassolis says.

Small operators dominate the business today. “It's ripe for consolidation,” says Kassolis, 28, a former tax attorney from Baltimore. Hence the name they gave their company: Consolidated Cleaners.

Rival dry cleaners are watching and wondering how franchisees will break even after building stores in high-traffic locations and outfitting each of them with expensive cleaning machines.

“This is a low-margin business,” says Joe Waite, who owns Platinum Total Fabricare in Naples. The industry average ranges from 10% to 17% profit margin, he says.

Waite's company moves clothes to a central cleaning facility in an industrial area of Naples. Larger dry cleaning operations function that way because it's more efficient than leasing expensive space and buying machines for each location.

Smells like Tide
Jeff Wampler, the CEO of Allied Pursuits, the company that is franchising the Tide stores for owner Procter & Gamble, says consumers like to see how their clothes are being cleaned and to speak directly with the people who are doing the cleaning.

“We learned when there's a plant and an educated staff, they're more likely to provide exceptional customer service,” says Wampler. The dry cleaning machines will be orange, like big boxes of Tide.

The machines will be visible behind glass walls. “It's important they know where their clothes are,” says Lyons, 34, a former real estate development executive. He says the clothes won't be shipped to another location; “We're not going to be the guy in the strip center,” he says.

Wampler says Procter & Gamble tested ideas for two years starting in 2008 before selling franchises. “We're on this charge to leverage the Tide brand and change dry cleaning,” he says.

In Tide's customer research, Wampler says his team discovered that most people are not happy with their dry cleaners. Buttons on their clothes get broken, customer service is shoddy and dry cleaners smell bad because of the chemicals they use.

In the Tide dry cleaning stores, you'll smell Tide, and your clothes will smell like the product as well. Besides the use of Tide scents, the cleaner uses more ecologically friendly liquid-silicone agents made by a company called GreenEarth Cleaning in Kansas City. Kassolis says the dry cleaner will fix buttons or repair a tear in your clothes for free.

When new customers use the Tide dry cleaner for the first time, they'll receive a bag in which they can put their clothes. Employees will heat-seal each article of clothing with a tiny bar code so the cleaner can track them through the system with customer preferences for starch and scent.

Clothes with your barcode on them will be sorted onto a conveyor-belt system that can deliver them curbside in an ATM-like machine after hours. Customers will be able to pull up to the store and use their credit card to pay for the clothes, which will automatically be delivered in a special slot in the wall. “We're working on your schedule,” says Kassolis, responding to a common complaint that dry cleaners are closed after work and on Sundays when you have time to pick up your clothes.

Tide dry cleaning will offer same-day service, and Lyons and Kassolis already started advertising in local newspapers months ahead of the store's opening. They plan to offer a loyalty program, free cleaning of a suit on your birthday and prices that are competitive (they haven't finalized a price list).

Pricey cleaners
This is not Procter & Gamble's first foray into dry cleaning. In 2000, the company created a test facility for a dry cleaning operation in the Atlanta area called Juvian.

Coincidentally, one of the companies Juvian executives consulted with was Platinum Total Fabricare in Naples. Waite remembers sharing his knowledge of the industry with Juvian executives and eventually buying their equipment for his own facility in Naples when they closed the operation.

Waite says Procter & Gamble scrapped Juvian because it couldn't overcome the same challenges that face every dry cleaner: removing difficult stains, fixing buttons and repairing hems and seams. The customer perceived Procter & Gamble to be better than it actually was, Waite says.

However, Wampler says the company has learned from its experience with Juvian and has since developed the training and technology necessary to overcome those challenges. “We're focused on innovation,” Wampler says.

Franchisees can expect to invest from $639,000 to more than $1.3 million to start a franchise Tide dry cleaner. The machines and installation cost between $360,000 and $440,000. In addition, franchisees pay a 7% weekly royalty fee on net sales and another 3% for advertising and development. Annual net sales have ranged about $1.1 million to more than $1.2 million for two existing stores, according to the company's franchise documents.

To own the real estate, Lyons and Kassolis formed a separate company that will lease out part of the 5,000-square-foot building to another tenant. The dry cleaner will take up about 3,000 square feet.

About one-third of the expenses is the cost of labor, franchise documents show. The challenge in Naples is the seasonality of the business and staffing accordingly. Waite says his business slows by half in the summer, for example.

Lyons and Kassolis believe there's enough business from professionals such as bankers and attorneys during the summer to take up some of the slack. Each store will employ 10 to 15 people, they say.

What's more, Kassolis says the cleaners plan to start a pickup and delivery service and call on commercial customers, too. The facility's prime location on U.S. 41 near Vanderbilt Beach Road in this heavily populated and upscale area of Naples will draw from six miles, they estimate. “North Naples is a marquis location,” Kassolis says. “We feel like Collier has its share of year-round residents.”

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