Dry cleaning businesses are facing three secular headwinds in the U.S.:
- More casual wear in the workplace
- More people working from home
- An aging-into-retirement population
However, I was still curious what kind of profit margins dry cleaners typically get. I dug around a bit, and the first-person stories I found from people in the dry cleaning industry are listed below.
In general, a well-run dry cleaning business that is operated day-to-day by employees rather than the business owner can expect a pre-tax profit margin of about 12%.
1. John Felt (Dry cleaner owner)
“I opened my dry cleaner in 2008. Nine years later, after many mistakes, missteps, and missed vacations, I am claiming 12% from gross sales of $700,000…[Our] unit sales mix is 70% Laundered Shirt, 25% Dry Cleaning, and 5% other household cleaning…The real profit is made in the dry cleaning… Frankly, I was making $100,000 per year as an employee. [But] I am happier, healthier, and empowered by being my own boss…I am fortunate to have a prime retail location and enough money today to purchase the real estate and own the building. I have a great manager that I pay well and I can jump in my motor home and leave for weeks at a time without worry… There are four key things one needs to do in order to be successful and profitable [as a high-volume dry cleaner].
#1 Location is the most important element in the business. Dry cleaning and laundry customers come from all economic levels, but the most important and highest spending customers come from $80,000+ average household income neighborhoods. Make sure your location has over 10,000 homes that fit that profile.
#2 Don’t pay too much for a lease!… And insist on a drive-thru space or dedicated parking in front of your unit.
#3 Do not buy new equipment… Capital cost for equipment is the biggest expense for a cleaner…
#4 Your business model should define you as a quality cleaner. Do not try to make your business work by being a low price leader.”
John Felt (via Quora)
2. Howard Scott (Industry journalist at American Drycleaner)
“I reviewed a dry cleaner who does $240,000 in revenue. The business has been going for 18 years. The operation incurs $130,000 in expenses [not counting the labor of the owner-operators]. The husband and wife, who both work 50- to 55-hour weeks, take out [the remaining $110,000] as income…[Assuming the owner hired two employees to replace him and his wife at $40,000 per year each] profit is now $30,000… That’s a 12.5% return, which is more or less in order with existing small drycleaner figures.”
Howard Scott