FEASIBILITY STUDY

REPORT
DRY CLEANING & LAUNDRY BUSINESS

INTELLIGENT DATA LIMITED

OMOLEKAN, Olushola
EXECUTIVE SUMMARY

ABC is a Laundry and Dry cleaning outfit that is about to be established in the Victoria
Island/ Lekki axis. The business will provide both dry cleaning and laundry services and will
operate with one or two more outlets or shops, to serve as drop off and pick up centres. The
business is to service both individuals and the wholesale end of the market by providing
different classes of professional cleaning services, including turnkey solutions to guest
houses, hotels, private hospitals and private school hostels.

The demand for laundry and dry cleaning service is increasing due to changing income level,
the stress of self washing, need for proper clothes maintenance and increase in clothing
expenditure.

Start-up financing for the business will be through owner investment. The total requirement is
estimated at about N 35.6m.

In providing exceptional laundry and dry cleaning services for customers in the Victoria
Island/ Lekki axis, we aim to:

 Attain a 30% market share by the year ending 2009.

 Declare first year total sales of over N 14 m

 Producing net profits of about N4,539,600

About the business

Laundry is basically wet-washing. It is carried out using the electric washing machine which
could have a water dispenser tank in built or connected to water pipes directly from a source.
Here, clothes goes in dry and comes out wet, then, the clothes are taken into the Tumble dryer
or another device called Hydro Extractor, used in draining the water out of the cloth.

Dry cleaning on the other hand, is for clothes that use no water for cleaning, examples of this
are suits, jackets and other clothes with labels that reads “Dry clean only”. In place of water,
spray chemicals are used in removing the stains on clothes. A machine called Suit and Jacket
Former is then used to make the suit and jacket smooth and straight instead of using steam
ironing.

In setting up a laundry business, it is expedient to know the level to start with. There are
basically three scales of laundry business, these are;

The Small scale; which requires as low as N 5,000 to start. It could begin with staff strength
of between one to three. The washing is done manually until it grows to having one or two
domestic washing machines.

The medium Scale starts with one or two domestic washing machines and staff strength of
about four to eight. This set up can manage client strength of about fifty to hundred.

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The Large scale; as the name implies, it is set up for a professional standard laundry business,
with heavy duty modern equipment to serve as high as a thousand clients. Usually with more
than one outlets to serve as customer service centres.

BUSINESS DESCRIPTION

Our core services will include;

 Drop & Pick

 Executive home/office delivery

 Corporate/industrial contract cleaning

 Press only

 Stain treatment

The primary focus is the setting up of a professional laundry and dry cleaning outfit to be
able to service both the individuals and the wholesale end of the market by providing
different classes of professional cleaning services to;

 Individuals
 Guest houses
 Hotels
 Offices
 Private hospitals
 Large churches and
 Private boarding schools on the Victoria Island/ Lekki axis.

The business will operate by starting with one outlet, and as the business expands, there will
be need for two more outlets or shops, to serve as drop off and pick up centres and will open
from 8 am-7pm Mondays – Saturdays.

Providing a door-to-door dry cleaning and laundry service in Lekki/Victoria Island will ease
the customer the burden of coming down to the outlets for drop off and pick up. The strategy
and intention is to make loyal customers evangelists of our services, who will in turn
recommend us to other customers, so as to have an increasing number of customers, hence
giving us recognition and market share.

Our Strengths:
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  We will be offering a new service for laundry and dry cleaning, providing another
choice for customers
 We will be providing quick and convenient service in order to save customer time and
energy.
 We will pick up and deliver door to door with regular charge.
Weaknesses:
 Strong competition from already established outfits in V.I/Lekki area.
 Starting with no market share at all
 Less experience than competitors.
Opportunities:
 The demand for the service increases as expenditure on clothing increases, including
expenses clothes.
 People tend to spend more time on leisure, activities rather than doing the house work
like general home cleaning, washing etc.
 There is high likelihood of repeat business
 There is ability to decrease the fixed costs as the sales volume increases.
Threats:
 If the business is successful, there will be new competitors who provide same.
 As economy develops, incomes increases, it is possible for people to be able to afford
domestic washing machines.
 If we fail to satisfy the customers, we may likely lose them to rivals.
 People may decide to wash clothes by themselves most especially when they may no
longer be able to afford dry cleaning professionally.
 Financial constraints.

INDUSTRY ANALYSIS

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Though fluctuations had been observed in the Nigerian economy, most especially in some
other businesses, the dry cleaning and laundry business sector remains dynamic as industry
transformations and new brand innovations had been introduced by various outfits. As of
now, there are over sixty Laundry outfits registered with the Lagos state chapter of the
Association of Dry cleaners aside the small scale launderers.

A number of factors are also significant for the growth of the dry cleaning industry. Among
these include the progress of the hospitality industry in the country, as well as work and home
pressures. Due to these factors, a number of consumers have increased preference for going
for professional cleaning services.

The industry is structured in such a way that the success in this kind of business is dependent
on the following factors;

 Quality of service
 Proper Awareness/Visibility
 Business Location and
 Pricing

For the quality of service provided, the customers want proper and unequalled care of clothes
with convenience and timeliness, the customers would want you to wash for them without
having to come down to your outlets, and would also want their clothes done without the fear
of damages.

It will therefore be wise to offer top quality professional service to customers so as to quickly
make loyal customers upon entry into the market. This will be done by differentiating our
special services, increasing the incentives and value added and conduct periodic customer’s
surveys to learn about their preferences.

The business location is equally important as it affects the success of the trade; the choice
location is ideal for this type of business in that it is highly residential and a large population
of businesses.

A quick look at the industry service rates

 Curtains – per foot range between N 450 to N 950
 Towel – between N450 and N1,150 depending on size.
 Blanket/Bedspread is between N700 and N2,000 depending on fabric and colour.
 Pillow covers(2) between N200 and N400 depending on fabric
 Duvet cover range between N800 and N4,200 depending on size.
 Table clothes per square metres - between N450 and N650.
 Bath robe- between N 450 and N2,150
 Napkins – range between N 150 and N350
 Female Suits- between N1,500 and N2,300 depending on fabric.
 Female native attires range from N750 to N3,500 depending on fabric.
 Men’s suits - between N800 and N3,500
 Men’s native attires range from N900 to N 3,300.depending on fabric.

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  Shirts for men would be washed for between N 400 and N 1,000
 Women’s shirt would be washed for between N 300 and N 800

Express service charge of some outfits is 100% extra of the regular rate. Laundry takes
between three to five days while charges are VAT inclusive.

MARKET ENVIRONMENT

The Victoria Island/ Lekki axis is an ideal environment for a laundry business, this is because
the area is both residential and non-residential. Victoria Island for instance is a highly
populated business area, where a large number of the busy working class people can be
found.

The market in Victoria Island is made up of banks and other financial institution’s executives,
and the middle-level workers that earn between
N 50,000 and N 1.5m monthly salary and cannot afford the time to wash but can pay the
professional dry cleaners to do so. There are also hotels, guest houses, residents and schools
in this area.

The Lekki/Ajah axis is both a residential and a business environment, take for instance the
Lekki phase 1, Admiralty Way, Lekki first roundabout, Chevron area, VGC area towards
Ibeju-Lekki/Ajah which accommodates banks, hotels, guest houses and other businesses is a
beehive of economic activities, setting up a laundry and dry cleaning services is lucrative in
this areas as most workers and residents would prefer to dry clean professionally rather than
self washing.

For this reason, the level of threat of new entrant is high among the players on the V.I/ Lekki
axis; this is for the fear of the new competitor entering into the market to weaken the position
of existing players. In as much as it is not so easy to come into the market because of the
business’s high capital intensive nature, most industry competitors still find the area suitable
for business of laundry.

The laundry outfits do not have much control over driving up prices as there are similar
(close substitutes) outfits that would charge less for the same service, hence gaining more
market share. What this implies is that some customers are price sensitive and would prefer to
pay less for washing if they are faced with choosing between two extremes or closely related
charges for the same service. This may weaken our power to drive up prices.

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The market is dominated by a few large suppliers of laundry equipment, and the supplier’s
customers are fragmented in that, only those who can afford the equipment for large scale
laundry business are able to buy, so the bargaining power of the buyer is low. Suppliers of
washing equipment believe that the industry is growing and that more people are now
investing in the business, so, this is why the suppliers holds the power in bargaining with
buyers on the prices of the equipment.

COMPETITION

Key Industry players with outlets in the Victoria Island / Lekki axis include;

 Garment Care. Located on plot 1088, Adeola Odeku Street and at Plot 6, First
Roundabout, Lekki Phase 1.

 Washaman drycleaners is situated Texaco Filling Station, after Eleganza Estate,

Lekki, and another outlet at Plot 19, Sinari Daranijo Street, Victoria Island.

 Mega Wash is located at Suit C212, Ikota shopping Mall VGC and another outlet at
Oba Adeyekan Estate, Lekki Phase 1.

 Daystar, located at Km 21, Lekki/Epe Express Way, Ajah.

 Clean Touch drycleaners are located on 41c, Ahmadu Bello Way, Victoria Island.

 Cedar Oaks is located at 20, Remi Oyefiade Close, Lekki Ajah and an outlet at
Silvershares Place, Jakande Estate, Lekki, and a new arrival,

 Michael & Solomon dry cleaners, located at Km 24 Lekki/Epe Express Way, by

Ajiwe Bus Stop, Thomas Estate, Ajah.

For most of these outlets, their customers are basically those within and around the business
location.

There are also those of small scale laundry outfits within this choice area. Competition is high
in the Victoria Island/Lekki axis as most dry cleaners take advantage of unique selling
propositions imbibed in marketing strategies and service delivery at gaining customer loyalty.

The two major industry players are Garment Care and Washaman Dry cleaners. Garment care
was established in 1999, to provide a world class cleaning service. Managed by one of the
world’s most experienced hands in laundry and dry cleaning, Brian Pearce and Nana Otedola,
also a UK trained launderer. Their wealth of knowledge has to an extent transformed the
industry as they have the latest equipments in cleaning. They are believed have to about 50%
market shares as they have outlets at Lekki, Ikeja and Victoria Island.

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The second major player is Washaman Dry cleaners. Among the early comers, they currently
operate with five outlets with head office in Ikeja GRA, This outfit operate a regular day to
day dry cleaning with no special services attached, yet they also have a large market share as
they have outlets at Victoria Island and the VGC.

Strengths of competitors: high volume of sales, aggressive pricing i.e some outfits charges
lower than others in order to gain and retain a good market share.

Weaknesses: inadequate services and support knowledge, lack of personal attention to

washing directions and details. Delay in delivery, damage of customer’s clothes.

REGULATIONS/ ENVIRONMENTAL ISSUES

 Registration with the Corporate Affairs Commission (CAC) will be essential, while
joining the association body for launderers and dry cleaners will equally ease the flow
of business especially at the starting stage.

 The office and factory premises will always be kept clean so as to ensure work and
customer friendly environment. Waste gathered from laundry materials will be
properly disposed.

 All stain removal chemicals to be used must be the ones tested and approved by
NAFDAC and FEPA or any other regulatory bodies in ensuring hazardous- free
working situations.

MARKETING AND SALES STRATEGIES

Key marketing strategies will for the purpose of this plan be formulated after the four “Ps” of
marketing, which include price place, product and promotion.

 Product: free home pickup and delivery service, approaching customers once a week,
we will provide convenience and high quality dry cleaning and laundry services to not
only the residents but also the hotels, guest houses, hospitals, schools and churches
located on the Victoria Island / Lekki axis of Lagos.

Incentives will include;

-Perfect and professional dry cleaning of the highest possible standard.

- Same day for dry cleaning services, no deposits.

- Pickup and delivery services at no extra charges

- Efficient and friendly customer care service

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 - Proper care and attention to clothes.

- Fair compensation for loss or damage due to negligence on our part.

- Specially-sized boxes, bags and hangers to fit every garment.

 Place; the choice location is suitable for this nature of business. It is equally
accessible for customers from either the extreme of Ajah towards the Bar beach Eko
Hotel axis. Having one or two more shops or outlets can equally boost the business as
customers can drop and pick up clothes.

 Price; our aim is to do better than what the industry giants are doing at a competitive
price. For instance, Garment Care charges are the highest in the industry for now as
they clean men’s two-piece suits for N2,600, women’s suits for N2,300 and native
attires for between N 1,800 and N 3,500 depending on fabric. Another key player
situated on Victoria Island/Lekki axis, Cedar Oaks, charges N1,500 for men’s suit, N
950 for women’s suit and between N 750 and N 2,000 for native attires. it will be
wise to start with the same price as Cedar Oaks which records an average of N 1.2 m
monthly total revenue from operating in the same area with three outlets in V.I, Lekki
Roundabout and Ajah.

 Promotion;

 well designed and printed handbills and flyers announcing the outfit with its special
offers like discounts, bonuses etc. will be dropped at offices, homes, hotels, guest
houses etc within the V.I/Lekki axis,

 The marketing team will have to push the business as they would meet one-on –one
with clients to promote the special services and the rates. The marketers are to build
and manage a working relationship with the customers, as targets will be set on a
monthly basis.

 Branded vehicles, tricycles and vans will also promote the business while it will
equally be right to advertise in fashion and business magazines, like The Gallery,
Business Day, Genevieve etc.

The total amount that should be allotted to promotion may not be more than N1.5m
for the first year.

Equipments and installations

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The needed heavy duty washing equipments can be sourced from either local suppliers or
ordered directly from the manufacturers.

Most of the manufacturers like the Italian Renzacci and Imesa, Britain’s Pony, America’s
Newmatic and Real star, are commonly used here in Nigeria and have sales offices with their
trained installations and maintenance engineers in Lagos. This makes it easier to purchase
and install locally. The machines are available at Harrimag showroom on Opebi road, Ikeja,
Instant Dry cleaners are sole agents for Renzacci equipments, while Adebowale Electronics
has Imesa, LG and Pony machines in stock.

Renzacci has been in existence for about 45 years and is known for good quality, cost
effective and reliable equipments and that is why the brand has been suggested during
research for the purpose of this project.

At the main office and factory, computerised and latest washing equipments would be
purchased for the quality and standard of service desired. The equipments that will be
required for starting up the outfit include;

Item Qty Description Cost

(N)
1 1 Renzacci Planet Dry-cleaning Machine.10 4,150,000
kg/22 Lbs, Model 20/N Automatic with Card
Programming and circle end alarm. Stainless
steel electric version with pressurised water
for continuous distillation cap. With 2 tanks.
Closed circuit.
2 1 Renzacci Automatic Washer Extractor. Model 1,430,503
LX 22/A. Cap 21kg/44 Lbs. Motor protection
with stainless steel housing electric.
3 1 Renzacci Electric Tumbler Dryer Model D50. 1,233.804
Cap. 25kg/55Lbs stainless steel drum with
motor protection.
4 1 Renzacci Unipress (Hoffman) Utility pressing 2,230,887
machine complete in-built boiler, steam
generator, electro-pump, electro-suction,
vaporization-gun and 1 steam iron with
automatisms.

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5 1 Renzacci Self contained vacuum steam 1,210,739
ironing table (i.e. in-built boiler) and 1 steam
iron.
6 1 Renzacci Pneumatic Hydro- spotting with 825,000
Vacuum and Arm.
7 1 Renzacci Hydro Extractor ZP635 1,350,709
8 1 Renzacci Vertical wall poly bagging machine 350,000
9 1 Renzacci Rotor cabinet with in-built steam 2,337,190
generator.
10 1 Pony SPA Flatwork Ironer, 4.3 fleet 920,000
11 2 Trolleys 150,000
12 1 Mikano 100 KVA sound proofed Generator 2,624,000
+ transportation
TOTAL 18,812,832

COST OF OTHER BRANDS OF EQUIPMENT

Equipment Pony LG Imesa Realstar Beko Electrolux

11kg N/A N/A 920,000 N/A 800,000 1,200,000
Washing
Machine
23kg N/A N/A 2,000,000 N/A N/A N/A
Wasing
Machine
10kg N/A 310,000 N/A 300,000 288,000 N/A
Washing
Machine
30kg N/A N/A 3,200,000 N/A N/A 3,200,000
Washing
Machine
10kg Dry N/A 4,800,000 4,900,000 5,200,000 N/A 4,400,000
cleaning
Machine
16kg Dry N/A N/A N/A N/A N/A 5,800,000
cleaning
Machine
Suit Former 1,000,000 N/A N/A N/A N/A 1,400,000
Finishing 800,000 930,000
Table
10kg 1,300,000 N/A 810,000 1,290,000 800,000 1,200,000
Tumble
Dryer
18kg N/A N/A N/A N/A N/A 1,800,000
Tumble
Dryer

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 12kg Hydro 1,350,000 N/A N/A 1,600,000 N/A N/A
Extractor
Utility 2,250,000 N/A 2,230,000 N/A 2,300,000 2,600,000
Presser
Flatwork 920,000 N/A N/A N/A N/A 930,000
Ironer
Suit Former 1,000,000 N/A 1,000,000 N/A N/A 1,400,000

CAPITAL REQUIREMENTS & STRATEGY

The business will require a start-up capital of about N35.6m

Industry survey puts the minimum monthly nets profit of this kind of professional laundry
business at about N 200,000.00

The business will apart from having a central office operate one or two other outlets as drop-
off and pick-up centres to reach some customers who are not so close to the main office
outlet, while revenue generated from the outlets could serve as additional source of funding
for other expenses like salary payments, maintenance of machineries, material purchase etc.

Funding Options

The aim here, is to consider the financing options for the equipments of about N
18,812,832.00

Loan:
lending plan has to be submitted to the bank six months before starting the business, it may
take up to two months for processing, while we will have a minimum of 3 months to pay
back the loan on short-term with about 21% interest.
This option may not be possible as we are just starting without any market share to guarantee
us of over N 18m in 3 months.

Leasing options
Cost of equipments = 18,812,832
Equity contribution = 3,762,766
Amount to be financed = 15,050,266
Tenor = 24 months
Rate = 36%
Monthly Rental = 888,679.32
For 12 months tenor
Rate = 36%
Rental payment = 1,511,981.11
For 36-month tenor

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Rate = 36%
Monthly Rental = 567,019.78

Decision to Lease means that we desire to buy, but we would also want to consider the
alternatives to buying hence, minimising cost. If we lease the equipments, it will make it
easier for us to focus our resources on other factors. If we choose the 36 months tenor plan,
we will pay a monthly rental of N 567,019.78 from the N 1,200,000 estimated total revenue,
which will leave us with not enough money to cover for the running cost of about N
821,700.00 monthly.

SERVICE/OPERATION REQUIREMENTS

For the proposed establishment of a top service oriented facility that will provide exceptional
customer service, to service the wholesale end of market located within the Victoria
Island/Lekki axis, it can be classified as a large scale. It is important to know the cost
implication of such intention.

We can either buy a house out rightly in V.I/ Lekki for about over N 250m or rent an office
space for about N 3m per annum.

Buying to own means that we no longer have to pay rents which may be increased yearly,
while the decision to rent implies that we can use the funds that we ought to use in buying a
house to acquire more facilities to boost production which would in turn yield enough profit
to later on buy our own property.

The following is an overview of the core requirements for setting up;

 An initial start up capital of about N 35.6m which consists of cost of each of the
following;

Item Description
1 1 Office space of about 350 square metres, which will consist of
the reception, administrative offices, machine, section, ironing
rooms, storage room and rest rooms.
2 Office furniture set, i.e. tables and chairs with 2 cabinets.
3 Furniture for the reception area, with a TV set, and window
blinds, chairs for workers..
4 3 nos. 1.5 HP Air conditioning systems, for the reception,
offices of the manager and the accountant.
5 4 ceiling fans for the factory
6 Laundry & Dry cleaning equipments + installation
7 Office/GSM telephone lines installation+ maintenance ( for a
year)
8 Toyota Hiace bus(new)
9 Water filter machine + installation
10 3 Nos. of Computers and Printers
11 Stationeries

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 12 Salary Payment for one year
13 Utility Costs for a year

Over all start-up Requirements

Start-up Expenses for the first running year

Rent N 3,000,000.00

Equipments N 18,812,832.00

Delivery Van N 3,550,000.00

Office furniture/equipments N 1,800,000.00

Publicity N 1,500,000.00

Operation Cost (for first year) N 1,640,400.00

Salaries (for first year) N 5,220,000.00

Other N 100,000.00

Total Requirements N 35,623,232.00

BREAKDOWN:

Operation costs of about N 1,640,400.00 is made up of the following on a monthly basis;

1. Laundry Chemicals, detergents & starch 10,700

2 Diesel for generator 30 ltrs a day x 28 @N 90 per litre 75,600
3 Hangers, Poly bags & clothes protectors 26,000
4 Payment of electricity, phone bills 10,000
5 Fuelling of Delivery Van 14,400
136,700

A total of N 136,700 monthly will amount to N 1,640,400.00 in twelve months.

MANAGEMENT AND PERSONNEL

The manager of the business will be a laundry expert who will be in charge of operations and
the quality of garment cleaning. Workers will report to the manager who will report to the
CEO.

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A work force of about 15 staff, which will include the management team and the labour
force, will be required in starting the business, but as the business begins to grow, additional
staff may be needed.

The staff that would be employed should be able to carry out working conditions and
requirements:

 Understand and be able to apply dry cleaning and laundry processes

 Meet set standards by following instructions

 Work in hot and humid conditions

 Over time may be called for.

Those required for start up will be persons with a minimum of two year experience in laundry
industry.

Position Required Number Monthly Salary

General Manager 1 N 70,000.00
Accountant 1 N 40,000.00
Laundrymen 3 N 25,000.00 x 3
Ironers 2 N 25,000.00 x 2
Marketers 4 N 30,000.00 x 4
Customer Service Officers 2 N 20,000.00 x 2
Security man 1 N 10,000.00
Bus driver 1 N 20,000.00
Office Cleaner 1 N 10,000.00

TOTAL N 435,000.00

Each marketer will be entitled to a commission of N 10,000.00 on meeting a monthly target

of N 300,000.00, and if they exceed the target, they will receive bonus, while failure to meet
targets may amount to deduction from their salaries.

FINANCIAL PROJECTIONS

To avoid being too optimistic, this sale estimation is calculated based on the current turnover
of competitors
We assume running cost is approximately N 9,860,400.00 per year, which include;

Rent 3,000.000.00

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 Full Payroll 5,220,000.00
Utilities and an estimation of 1,640,400.00
other running cost
TOTAL 9,860,400.00

Monthly Sales forecast

Monthly Revenue 1,200,000.00

Monthly Expenses 821,700.00
Net 378,300.00

The business would have broken even with an excess of N 378,000.00 froms the first month
of operation.

Yearly Forecast

Year 2009 2010 2011

Revenue 14,400,000.00 15,400,000.00 17,400,000.00
Expenses 9,860,400.00 9,909,707.00 9,959,255.54
Net profits 4,539,600.00 5,490.293.00 7,440,744.46

With an aggressive marketing team of four persons and a monthly target of about
N300,000.00 will produce N 1.2m per month. By the end of the month, we should have up to
N 378,300.00 after we have deducted the monthly expenses of about N 821,700.00

We are looking at annual revenue increase of 0.7% after the first year, this may be due to
increase in number of customers, while we have the expenses increasing by 0. 5% yearly due
to likely changes in quantity of materials etc.

 How do you intend to raise the start-up capital?

 How much money do you have at the moment?

 Would you want to rent an apartment or buy a house for the business?

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 When exactly do you intend to start the business?

 What name would you adopt for the business?

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