Ind Overview Sample

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Dry-Cleaning IndustryJanuary 2004

Businesses that are primarily engaged in dry-cleaning or dyeing apparel and household

fabrics other than rugs are classified in Standard Industrial Classification (SIC) code 7216. The dry-

cleaning industry is very fragmented. The International Fabricare Institute reports that approximately

30,000 dry-cleaning businesses currently operate in the U.S. today, employing 200,000 people.1

The

size of dry-cleaning operations varies, but 85 percent are small, single-family, independent mom

and pop- type operations.2According to Dun & Bradstreet data, the average firm employs 5 people

and generates annual sales of .20 million.3

Dry cleaning occupations consist of dry cleaners, spotters, pressers, and counter attendants,

and most dry cleaning establishments require workers to perform at least two of these jobs. The

industry is mature, and is not considered a highly profitable business. An article inInc. magazine

describes the industry: The hours are long and margins are slim, the cleaning process is fraught with

difficulty.4

The most common and most profitable form of dry-cleaning business is the full plant

companies that perform all of the processing on the premises. These firms often include additional

pick-up and drop-off points that provide the main plant with goods to dry-clean. However, some

plants may do the dry-cleaning on the premises and send the dry-cleaning of particular goods, such as

shirts, out to other firms. According to business broker Tom West, the most profitable and desirable

dry-cleaners are the ones with retail, walk-in sales that do the processing of the work in-house where

the owner has control of costs and quality.5


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According to Integra Information, average annual revenues for firms in SIC 7216 increased

by 2.82 percent between 1998 and 2002. Revenues are forecast to increase by an average annual

rate of 3.52 percent between 2003 and 2007 (see Table 1).6

Table 1: Industry Revenue Growth: SIC 7216: Dry-cleaning Plants, except Rugs

Year Historical Growth Year Forecasted Growth

1998 1.80% 2003 3.50%

1999 4.80% 2004 3.60%

2000 3.30% 2005 3.40%

2001 -0.40% 2006 3.60%

2002 4.60% 2007 3.50%

Source: Integra Information

Over the years, the dry-cleaning industry has been pressured by:

intensified competition,

higher minimum wages,

changes by the Federal Trade Commission's changes in care labeling rules due to ,

fashion's fabric trends,

home-care dry cleaning kits,

recent costly environmental regulations,

nonrenewal of leases by building owners where cleaners operate,

increasing public concern about cancer from the cleaning solvents, and


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lifestyle changes and the growing acceptance of casual clothing in the workplace.

Since the 1950s perchloroethylene, referred to as ''perc,'' has been the main cleaning agent in

garment care. This synthesized solvent has been identified as a hazardous air pollutant under the

federal Clean Air Act. It is toxic and may cause dizziness, nausea, drowsiness, and headaches. Some

groups suspect that perc can cause cancer. Historically, dry-cleaners represented 60 percent of all

perc sales, and close to 90 percent of dry cleaners in the U.S. still use perc, alone or in combination

with other solvents.7 However, the past decade has seen a 73 percent decline in perc demand.8

Many dry cleaners are trying to change their business practices involving perc. Depending upon their

volume, dry-cleaners have paid anywhere between $400 and $1,850 a year since 1985 for hazardous

waste removal.

In addition, there are growing health concerns about employees in dry cleaning

establishments, and new workplace regulations have prompted dry-cleaners to change their

equipment. In the past, a worker transferred by hand the solvent-soaked clothes from machine to

machine releasing hazardous fumes into the air. New machines, now required by law, complete the

cleaning process without removing the clothes. Although this new equipment costs $30,000 to

$60,000, they are easier to use and require less solvent.

However, dry-cleaners in some areas are forced to change equipment and procedures. For

example, in late 2002 air quality officials in Southern California approved a gradual phase out of

perc by 2020. Martin Schlageter, spokesman for the Coalition for Clean Air stated Its the death

knell for perc dry cleaning in this area. Under the new rule, which went into affect January 1, 2003,

any new dry cleaning business or facility that adds a machine must add a non-perc machine. While


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existing dry cleaners can continue to operate one perc machine until 2020, by November 2007 all dry

cleaners using perc must utilize state-of-the-art pollution controls to reduce perc emissions.9

Most dry cleaning industry analysts believe that the relatively-new ''wet cleaning'' process is

the future for the industry because it uses water and detergents instead of perc.10 There are two

general categories of wet cleaning. Multi-process wet cleaning refers to a process of cleaning

techniques: hand washing, steam cleaning, and application of soap and water. Machine wet cleaning

occurs in computer-controlled washing and drying machines. Most delicate garments that are

labeled ''dry-clean only'' can be cleaned in this manner. The machines reduce agitation during

washing, increase water extraction, use specially formulated soaps and spotting agents, and closely

monitor heat during the drying process.

Besides the inherent dangers of using carcinogenic solvents in the process, wet-cleaning

systems over a viable alternative if ''perc'' is prohibited by a store-front building or mall owner and a

lower-cost machine when a new cleaning unit is needed. A new wet-cleaning machine ranges from

$22,000 to $37,000 depending on size, but cost less than a conventional perc machine. While perc-

use reduction ranged from 25 percent to 100 percent, electricity costs may be higher and labor time

increases with wet cleaning because more pressing and finishing is required.

The new regulations and dry-cleaning processes have prompted a new crop of dry-cleaning

start-ups that provide a more environmentally-friendly approach to dry-cleaning. In fact, none of

the major retail start-ups use perc. Not only do these new dry-cleaning business have better luck

attracting and keeping employees, they also limit their cleanup costs and liability. One example is

the Hangers chain, which promotes an its own patented, environmentally safe CO2 cleaning

technology.11 However, some industry insiders remain doubtful that the chain will continue to


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increase in size and revenues because the costs for environmentally friendly machines are

significantly higher than the regular dry-cleaning machines.

Outlook

The trend for U.S. consumers to spend less on dry-cleaning because of environmental

concerns and changes in workplace dress will continue to impact the dry-cleaning industry.

However, the industry will still benefit from the baby-boomer generation as its grows older and

continues to have less time, and looks for time-saving conveniences. Economists with Integra

Information are forecasting average annual revenue growth in the mid 4 percent range for the

next couple of years.12


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1 Profile of the Fabricare Industry. International Fabricare Institute. Internet: www.ifi.org/industry/industry-

profile.html.2 Whittelsey, Frances Cerra and Linda Mohr. Dry Cleaning Gender Bias. Internet:

www.sis.org/docs/drycleaning.html.3 Industry: Drycleaning Plants, Except Rugs (7216). Dun & Bradstreet Sales & Marketing Solutions. Internet:

www.zapdata.com. Accessed January 15, 2004.4 Hofman, Mike, An Opportunity to Clean Up. Inc. January 2002.5 West, Tom. Dry Cleaners. 2001 Business Reference Guide.6 Industry Growth Outlook Report: SIC 7216 Dry-cleaning Plants. Integra Information. January 15, 2004.

Internet: www.integrainfo.com.7 Hofman, Mike, An Opportunity to Clean Up. Inc. January 2002.8 Perchloroethylene Hurt by Falling Demand in Dry Cleaning. Chemical Market Reporter, May 20, 2002.9Hess, Glenn. Perc Phaseout in California Could Have a Nationwide Effect. Chemical Market Reporter.

December 16, 2002.10 McComas, Cindy. Alternative Aqueous Cleaning Systems for Dry Cleaners. MnTap Sources, Summer 1996.

Vol. 11, #3. Internet: www.umn.edu/mntap/P2/DRYCL/aque-d1.htm.11 The Hangers Difference. Internet: www.hangersdrycleaners.com/about/whyhangers.html12 Industry Growth Outlook Report: SIC 7216 Dry-cleaning Plants. Integra Information. July 24, 2002.

Internet: www.integrainfo.com.

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