For someone who is looking to start a small business, dry cleaning is a popular selection.
It sometimes requires a significant chunk of startup funding, but a successful dry cleaner will deliver a steady income.
Maintaining a stream of returning customers is easier with a dry cleaning business than with some other business models, as long as the customer service is top notch.
Dry cleaning typically requires a bit of knowledge about the business and the laundering process to have the highest level of success from the start.
As with any small business, starting a dry cleaning business is a challenge, but it can be a profitable business opportunity in the right location.
4 Steps to Start a Dry Cleaning Business
Here’s the quickest path to success if you want to open a dry cleaning company:
- Study the initial and ongoing costs
- Study the market
- Create the legal entity and name
- Perform the final pre-opening tasks
The Easy Parts of Starting a Dry Cleaning Business
A dry cleaning business may sound like a simple opportunity for a new small business owner, and it does have some easy-to-follow aspects to it. Some of these include:
Franchise Opportunities
Purchasing a franchise location is an option for the person who simply wants to start a business and focus on dry cleaning. As a franchisee, the business owner would purchase a local branch of a larger brand name dry cleaning company.
With a franchise, the parent company handles most of the preliminary work, including marketing. The local owner gets to use a well-known brand, which helps with some of the primary challenges of introducing a new business to customers. The owner can just focus on running the business.
It’s a People-Oriented Business
For business owners who love the idea of meeting new people and helping customers solve problems, dry cleaning is a great business. For those who find connecting with people easy, this skill will make the company run smoothly.
It’s typically a walk-in business, so the owner is constantly meeting customers face to face. Problems are easier to solve with regular in-person contact. It is also typically a repeat customer type of business, so the owner can get to know the customers and apply their strong customer service skills.
Limited Barriers to Entry
A new business owner can start a dry cleaning business without specific training or many employees required. Although it is helpful to have some experience working in the dry cleaning industry before starting this business, it isn’t necessary. An inexperienced owner would just need to hire an operations manager who has experience.
The biggest issue most people find when trying to start a dry cleaning business is the potentially high initial costs. However, if you choose to lease equipment and a business location, it’s possible to spread those startup costs over a more extended time versus purchasing equipment and a building outright at the start.
Limited Customer-Facing Areas
With a dry cleaning business, most of the actual cleaning work occurs in the back of the building, away from customers’ eyes. This means the area of the company where customers will interact with the owner and employees is small. It’s easier to keep this area looking great to impress customers than a larger store or restaurant.
You’ll also spend less money on decor and design work in a dry cleaning location than in other types of businesses.
The Difficult Parts of Starting a Dry Cleaning Business
As with any small business, launching a dry cleaning business has several challenges. Three of them are:
Pricing Complexity
Dry cleaning businesses can have quite a few complexities in the pricing structure for customers. It can be difficult for employees to track the different prices for laundering shirts, blouses, suits, pants, dresses, and bedding.
Should the business choose to offer special services, the pricing becomes even more complex. For example, when performing quick-turnaround services, prices usually go quite a bit higher than for standard service. Or maybe you’ll choose to offer clothes restoration, tailoring services, or clothing preservation.
It can be tough to track profit margins accurately when constantly dealing with variable prices.
Tracking Clothing
In a dry cleaning business, accurate tracking of the clothing is a huge challenge. Customers expect the cleaner to always find the right piece of clothing. One mistake in this area can drive a customer to a competitor.
Employees must be able to correctly mark each piece of clothing as it comes in. Then, employees have to continue tracking it accurately as the clothes run through the machines and go to the display rack for pickup.
Developing an accurate tracking system and then teaching employees the importance of using it correctly every time is extremely important for any startup dry cleaning business.
Hitting Deadlines
When running a dry cleaning business, owners have to make sure the clothing is clean and ready to pick up for customers at the promised time. Hitting promised deadlines is extremely important for a dry cleaner, or the business will lose customers.
Schedules can be tight for a dry cleaning business, as customers often may want to drop off or pick up clothing ahead of or after normal business hours. This means the business owner needs to have good planning skills and a sense of how long it will take to complete each job, so everything is ready on time. Owners may need to be prepared to work longer hours to accommodate customer demands.
Step 1: Study the Initial and Ongoing Costs
Dry cleaning businesses have a wide range of startup costs. Some of these costs are one-time expenses, while others will be ongoing for leasing equipment and space. Understanding the costs associated with starting the dry cleaning business will help determine the immediate amount needed for seed money.
Building Leasing Costs
Dry cleaners need space for storing clothing and machinery. Expect to need 1,000 to 1,500 square feet of space to start. Leasing retail space in a busy traffic area could cost $5 to $10 per square foot of space per month. Under this model, the ongoing cost for leased retail space could run from $5,000 to $15,000 per month.
If choosing to run a franchise model for the dry cleaning business, the company may have specific requirements for the layout of the space, including the amount of space to rent. Take this into consideration when thinking about starting a business from scratch or joining a franchise.
To save on leasing costs, some dry cleaning businesses will open very small retail storefronts in busy locations as collection points. A delivery driver would pick up the clothing at each satellite location and take it to a main dry cleaning facility. By placing the dry cleaning facility in an area with lower rental and leasing costs, the business can potentially save quite a bit of money.
The advantage of that is being able to service multiple neighborhoods and locations. But the downside is that the accuracy of your system needs to be exact, and you won’t be able to be present to manage each satellite location yourself. Hiring the right people and have great training becomes imperative.
Equipment Costs
Dry cleaners need quite a bit of equipment to do the job. These machines cost around $50,000, and some machines with greener technologies can cost as much as $150,000. It is also possible to lease the machines for an ongoing cost.
When the new business purchases the machines outright, it will have maintenance and repair costs from time to time. With leasing/renting machines, you’ll likely have a service contract in place with the leasing agent.
Supply Costs
Dry cleaning businesses will have ongoing costs for a variety of items related to the company. These supplies will need replacement regularly.
An average startup dry cleaning business can have around a couple of thousand dollars per month in supply costs. The costs depend on the amount of work the business does.
Some required supplies include coat and clothing hangers, clothing racks, plastic bags, tags, and cleaning chemicals.
Step 2: Study the Market
Some areas have quite a few dry cleaning businesses already in place. Others may not have this type of business, meaning a new dry cleaner will be a welcome addition.
Selecting the right location is a significant part of success when starting a dry cleaning business. This is a type of business where repeat customers are essential. It’s also a type of business where most customers will live or work near the retail location they visit.
Instead of placing a dry cleaning business in an area with many residences nearby, some owners may want to put the business near office buildings. This location could serve people who work in an office where employees wear formal business attire. They may want to drop off clothing on the way to work and pick it up on the way home.
Taking on the Competition
If the area into which the dry cleaning business will be going has a heavy presence of competitors, consider creating a niche that will resonate with customers.
- Pickup and drop-off services: If no one else is doing at-home or in-office delivery, a new dry cleaner offering this service can make a name for itself. Customers will appreciate the convenience of this type of service. This is an expensive service to offer, however.
- Eco-friendly services: Potential customers may not like the harsh chemicals some dry cleaners use. A new dry cleaning business can set itself apart by using environmentally friendly cleaners when competitors don’t do this.
- Avoiding allergens: A few customers may have allergic reactions to typical dry cleaning chemicals. A new business may be able to offer a special service that avoids using these chemicals on specific orders, eliminating allergic reactions. For example, maybe you use fragrance-free cleaning products.
- More convenient hours: If the existing dry cleaners in the area don’t open early or stay open late, a new business could create a niche by providing service during uncommon hours or on the weekends.
Before opening a business in a particular area, study the current dry cleaning businesses there. Think of ways to set the new dry cleaning business apart from what the established companies offer.
Step 3: Create the Legal Entity and Name
Any new dry cleaning business needs to have a name that customers will remember and recognize. At the same time, consider what kind of business structure is the best option.
Finding the Right Name
When choosing a business name, it’s essential to follow any rules the state may have. Watch for names already registered in the state. Select a name that has no trademark conflicts.
Before finalizing the name, determine whether the web domain name and social media handles are available for it. This is a critical consideration for creating a consistent brand across all platforms customers may use to interact with the business.
If going with a franchise dry cleaner, the business will already have a name. Being able to use an established brand name is a significant advantage of going with a franchise structure.
Finding the Best Business Structure
Consider what kind of business structure will work best for the business. Multiple options are available. These include:
- LLC: The LLC, or limited liability company, is a highly popular business structure option for small businesses. LLCs separate and protect the business owner’s personal property and wealth from the business assets. Compared to some other options, setting up this business structure is inexpensive and occurs quickly. Secretary of state offices in each state typically oversee the LLC formation process.
- Sole proprietorship: A sole proprietorship works with small businesses that usually have a single owner. However, these businesses don’t provide the same level of protection for the owner’s personal assets as an LLC, as it leaves the company and personal assets intertwined.
- Corporation: The corporation is a business structure that typically works well for large businesses. It allows multiple shareholders to own the company. It is a highly complex structure, but it does provide liability protection for the owners’ personal assets. This structure works best for those seeking investors to help them start the dry cleaning business and who plan to grow quickly.
If operating a franchise, the dry cleaning business owner may still need to operate under a business structure, such as an LLC, for managing the franchise locations. The local franchise owner will not become part of the large corporation that owns the brand name.
Obtain a Tax EIN
To receive official recognition as a business from the federal government, the new dry cleaning business will need to request an Employer Identification Number (EIN) from the IRS.
The EIN works like a Social Security number for businesses. It identifies the company for tax purposes.
You’ll require an EIN to hire employees or to open a business banking account. Additionally, having an EIN places another barrier between the business’ assets and finances and your personal assets.
Step 4: Perform the Final Pre-Opening Tasks
Before the new business can open, the owner will need to complete a few final tasks.
Obtain Licenses
Depending on the location of the new business, it may need a few different types of licenses and permits. Some states require business licenses, as do some local cities or counties.
With the chemicals and processes in use at the business, and depending on local regulations, the dry cleaning business may need special permits to operate legally.
Finally, the business may need a Certificate of Occupancy (CO). This type of license typically shows that the business building is safe for employees and customers. The company must meet zoning laws and building codes to receive the CO. It means local inspectors are giving the building and business the green light to open.
All of these take time, so research what licenses and permits you need with plenty of time before you’re planning to open the doors.
Obtain Insurance
As a new dry cleaning business, having liability insurance is extremely important. Should a customer try to sue the company after some financial loss, this insurance protects the business’s assets.
Additionally, the dry cleaning business almost certainly will need to carry workers’ compensation insurance, per state law (if you have employees). Check with the rules in the state where the business operates to determine when and how to buy workers’ comp insurance.
With all of the machinery and chemicals in use at a dry cleaner, workers’ comp insurance provides coverage if an employee suffers an injury, regardless of the cause. This is a nice safety net for both the employees and the business owner.
Start Marketing and Advertising
Marketing can be a challenge for a new small business owner. Some owners will want to hire an agency to help with this, while others will try to tackle the process themselves.
Marketing through social media and with a web presence is important to connect with customers personally. Check out our guide to learn how to effectively market your small business on social media for great ideas.
For a business owner who chooses to become part of a dry cleaning franchise, the parent brand may handle some marketing and advertising processes. This can be helpful, as the owner can simply focus on running the business and connecting with customers.
In the early days of the dry cleaning business, the owner may need to offer discounted prices or special offers to draw in customers for the first time. Then, hopefully, they will want to return because of the excellent customer service.