FEASIBILITY STUDY

REPORT

DRY CLEANING & LAUNDRY BUSINESS




12/18/2008
INTELLIGENT DATA LIMITED
OMOLEKAN, Olushola
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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:
y Attain a 30% market share by the year ending 2009.
y Declare first year total sales of over N 14 m
y 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.
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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.
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;
y Drop & Pick
y Executive home/office delivery
y Corporate/industrial contract cleaning
y Press only
y 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;

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










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INDUSTRY ANALYSIS
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 intr oduced 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;

y Quality of service
y Proper Awareness/Visibility
y Business Location and
y 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 customers 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
y Curtains per foot range between N 450 to N 950
y Towel between N450 and N1,150 depending on size.
y Blanket/Bedspread is between N700 and N2,000 depending on fabric
and colour.
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y Pillow covers(2) between N200 and N400 depending on fabric
y Duvet cover range between N800 and N4,200 depending on size.
y Table cl othes per square metres - between N450 and N650.
y Bath robe- between N 450 and N2,150
y Napkins range between N 150 and N350
y Female Suits- between N1,500 and N2,300 depending on fabric.
y Female native attires range from N750 to N3,500 depending on fabric.
y Mens suits - between N800 and N3,500
y Mens native attires range from N900 to N 3,300.depending on fabric.
y Shirts for men would be washed for between N 400 and N 1,000
y Womens 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
institutions 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.

7

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 businesss high capital intensive
nature, most industry competitors still f ind 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.

The market is dominated by a few large suppliers of laundry equipment, and
the suppliers 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;
y Garment Care. Located on plot 1088, Adeola Odeku Street and at Plot
6, First Roundabout, Lekki Phase 1.
y Washaman drycleaners is situated Texaco Filling Station, after Eleganza
Estate, Lekki, and another outlet at Plot 19, Sinari Daranijo Street,
Victoria Island.
y Mega Wash is located at Suit C212, Ikota shopping Mall VGC and
another outlet at Oba Adeyekan Estate, Lekki Phase 1.
y Daystar, located at Km 21, Lekki/Epe Express Way, Ajah.
y Clean Touch drycleaners are located on 41c, Ahmadu Bello Way,
Victoria Island.
y Cedar Oaks is located at 20, Remi Oyefiade Close, Lekki Ajah and an
outlet at Silvershares Place, Jakande Estate, Lekki, and a new arrival,
y Michael & Solomon dry cleaners, located at Km 24 Lekki/Epe Express
Way, by Ajiwe Bus Stop, Thomas Estate, Ajah.
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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 establ ished in 1999, to provide a world class
cleaning service. Managed by one of the worlds 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.
The second major player is Washaman Dry cleaners. Among the early
comers, they currently operate with five outlets with head office in I keja 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
customers clothes.

REGULATIONS/ ENVIRONMENTAL ISSUES
y 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.
y 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.
y 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.

9


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.
y 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
- 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.

y 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 mens two-piece suits for
N2,600, womens 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 mens suit, N
950 for womens 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
10

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.

y 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

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, Britains Pony,
Americas 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.

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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 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.
4,150,000
2 1 Renzacci Automatic Washer
Extractor. Model LX 22/A. Cap
21kg/44 Lbs. Motor protection with
stainless steel housing electric.
1,430,503
3 1 Renzacci Electric Tumbler Dryer Model
D50. Cap. 25kg/55Lbs stainless steel
drum with motor protection.
1,233.804
4 1 Renzacci Unipress (Hoffman) Utility
pressing machine complete in-built
boiler, steam generator, electro-
pump, electro-suction, vaporization-
gun and 1 steam iron with
automatisms.
2,230,887
5 1 Renzacci Self contained vacuum
steam ironing table (i.e. in-built boiler)
and 1 steam iron.
1,210,739
6 1 Renzacci Pneumatic Hydro- spotting
with Vacuum and Arm.
825,000
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 generator.
2,337,190
10 1 Pony SPA Flatwork Ironer, 4.3 fleet 920,000
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11 2 Trolleys 150,000
12 1 Mikano 100 KVA sound proofed
Generator + transportation
2,624,000
TOTAL 18,812,832
COST OF OTHER BRANDS OF EQUIPMENT
Equipment Pony LG Imesa Realstar Beko Electrolux
11kg
Washing
Machine
N/A N/A 920,000 N/A 800,000 1,200,000
23kg
Wasing
Machine
N/A N/A 2,000,000 N/A N/A N/A
10kg
Washing
Machine
N/A 310,000 N/A 300,000 288,000 N/A
30kg
Washing
Machine
N/A N/A 3,200,000 N/A N/A 3,200,000
10kg Dry
cleaning
Machine
N/A 4,800,000 4,900,000 5,200,000 N/A 4,400,000
16kg Dry
cleaning
Machine
N/A N/A N/A N/A N/A 5,800,000
Suit
Former
1,000,000 N/A N/A N/A N/A 1,400,000
Finishing
Table
800,000 930,000
10kg
Tumble
Dryer
1,300,000 N/A 810,000 1,290,000 800,000 1,200,000
18kg
Tumble
Dryer
N/A N/A N/A N/A N/A 1,800,000
12kg
Hydro
Extractor
1,350,000 N/A N/A 1,600,000 N/A N/A
Utility
Presser
2,250,000 N/A 2,230,000 N/A 2,300,000 2,600,000
Flatwork
Ironer
920,000 N/A N/A N/A N/A 930,000
Suit
Former
1,000,000 N/A 1,000,000 N/A N/A 1,400,000
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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
Rate = 36%
Monthly Rental = 567,019.78

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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;
y An initial start up capital of about N 35.6m which consists of cost of
each of the following;
Item Description
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)
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8 Toyota Hiace bus(new)
9 Water filter machine + installation
10 3 Nos. of Computers and Printers
11 Stationeries
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.

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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.
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:
y Understand and be able to apply dry cleaning and laundry
processes
y Meet set standards by following instructions
y Work in hot and humid conditions
y 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.



17

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



18


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

y How much money do you have at the moment?

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

y When exactly do you intend to start the business?

y What name would you adopt for the business?