CHICAGO — When dry cleaners are looking to expand, they can either build new storefronts from scratch or make an offer to cleaners who might be looking to retire or are otherwise looking to leave the industry. While there are challenges with bringing the former competition into your existing system, there are many benefits, as well.
In Part 1 of this series, we looked at some of the different situations that dry cleaners can find stores for sale, and today, we’ll examine ways to bring customers of the purchased cleaners into the new fold.
For Danny Bahlman, president of Bahlman Cleaners in San Angelo, Texas, acquiring the competition is one of the few methods of growth open to him.
“Our area impacts a lot of how we work in West Texas,” he says. “We’re close to a lot of good farmland and close to oil and gas production, but other than that, there are not a lot of people.”
And what people there are in the area are spread out over vast expanses. Bahlman says his local Chamber of Commerce considers its trade area to be nine counties, with a population of around 150,000. The physical area of those nine counties is roughly the size of the state of Maryland.
“It would be the 42nd largest state in terms of area,” he says. “Our growth rate over the last 20 years has been about 9%, so how do you grow when you don’t have population growth? For us, growth in income comes from either raising the prices, getting the business from someone else, or buying the competition.”
Bahlman has made two deals over the past few years to grow his business to its present size of one plant and six stores. One acquisition was from an older couple who were in failing health, and the other as the result of a divorce, with the owner wanting to move out of the area.
“One location was four blocks away from our flagship store,” he says, which caused some surprises along the way. “Some of our customers who lived closer to the new store started going there instead of our flagship. That impact I did not expect. When I looked over (the previous owner’s) customer base, I think there were only three names that I recognized, so I didn’t feel like we were going to lose customers. The traffic pattern was just different.”
Making the Transition
Besides simply having less competition in the area, there are other benefits to buying out a competitor rather than opening a new store,
“You have business right away,” says Randy Parnham, CEO of Acme Cleaners in Orlando, Florida. “When you open a new store, you may not get anybody in the door for a few days. When it’s an existing place, you’ve got to be able to go right then and there.”
Parnham believes that the owner, or at least senior staff, should be available in the first days of a newly rebranded company to ease clients’ minds.
“There might be some hiccups with people who will be reluctant to be with a new company, instead of the neighborhood dry cleaner they’ve been with for a while,” he says. “In our industry, people tend to think it’s either a mom-and-pop store or a franchise. A lot of people don’t want to deal with franchises, and being there, I was able to say, ‘This isn’t a franchise — I’m the owner. We’ve been family-owned and -operated since 1928. Ultimately, it’s your decision, but I ask if you just give us one shot, I think you’ll be happy with the results.’ And that has led to a lot of success.”
Often, there’s room for improvement when a store changes management, says Robert Strong, CEO of Country Club Cleaners in San Ramon, California.
“When we took it over, we improved the service to make sure the clothes were there on time, offered quicker service, cleaned up the storefront and also remodeled,” he says.
It’s important to allow existing customers to get used to a new way of doing business, he says.
“Their prices were lower when we took it over, but we didn’t raise them at first,” Strong says. “With the exception of one or two customers, everyone was on board, and sales increased. Once sales and volume started to increase, then I increased the prices to be that of what I was charging my other Country Club Cleaners customers. That’s when it became very lucrative to own that store.”
Strong also found that there was extra profitability potential at the new location: “(The former owner) was leaving a lot on the table because the business was neglected. I just went in and did the basics. Once I could see that the business was actually growing, not going down, I increased the prices.”
Gary Glover, president of Puritan Cleaners, located in Richmond, Virginia, believes that buying a business just because it becomes available is not a good strategy.
“If it’s a location you wouldn’t want to be in, I wouldn’t go after that company,” he says. “I’d let them sell to someone else or go out of business — whatever they’re going to do — and we’ll try to grab those customers in another way.”
Come back Thursday for the conclusion of this series, when we’ll look at some of the lessons our dry cleaners learned from buying competing stores. For Part 1 of this series, click HERE.
Have a question or comment? E-mail our editor Dave Davis at [email protected].