Dry Cleaning Franchises in the USA - Essay Example

L.I.M.E. Dry Cleaning: Strengths Bright, fresh, clean-smelling garments (the solution is odourless) No chemical dye bleeding (the solution is chemically inert). Can clean in full loads, thereby saving labour, utilities, and additives. No disposal fee. No need to separate garments in a customers order (reduces assembly claims and improves efficiency of assembly). PERC poses a far greater risk to workers at dry cleaning establishments than it does to the customers. Even short-term exposure can cause dizziness, fatigue, headaches, and irritation of the skin, eyes, nose, and throat. Long-term, it can lead to liver and kidney damage. Size of company is adaptable. Simplicity, no ancillary products. Specialists in what we do. Local to customers (Location). Innovative and key leader - Brand equity. Service, quality and speed. Machinery and solvent are readily available. Government support readily available due to our ethical nature. Weaknesses Size, geographic limitations. First hand Machines are expensive to buy. Absence of experience in the industry. Limited scope of product offering. Customers have loyalty to existing dry cleaners. Opportunities New Locations. Joint Ventures with major clothing retailers and Loyalty Schemes for customers. Extended services for our product. Public Awareness, emotional appeal of our brand. Enhance the services offered through the use of the website which also increases communication with the consumer. Support local community through CSR. Threats PERC’s usage is becoming more efficient. 80% reduction in emissions between 2000 and 2007. Barriers to Entry are low. The growth of other ethical alternatives in the dry cleaning industry, for example, carbon dioxide dry cleaning. OXXO major threat due to size, knowledge, and market leadership. Problems and Obstacles Within the US the main dry cleaning franchise currently operating is 19 OXXO Care Cleaners, who have 27 outlets in Miami, New Jersey and Washington D.C. The company has around 22 outlets in the Miami State, 3 outlets in New Jersey and 2 outlets in Washington D.C. We feel that the biggest threat to our business will be from OXXO due to its established brand name and financial strength for which competing may be difficult. Also, there are a number of other independent dry cleaners operating in Miami State. The main competitor we see is that of Ecolav Green Dry Cleaners who currently operate within Miami. Opportunities Corporate Social Responsibility As a small company with a big message we are enthusiastic to put corporate social responsibility at the very top of our agenda. We intend to amplify our business by using greener alternatives whenever possible, for example: Sourcing responsibly (e.g. using recycled materials for items such as packaging and coat hangers. Minimising packaging. Buying locally to save fuel costs. Creating an efficient (and fuel-efficient) distribution network. Working with suppliers and distributors who take steps to minimize their environmental impact. Moreover, it is also important for us to be seen in the public domain making a difference. Therefore we will actively work with various local environmental organizations, such as, Miami Green Commission. We are fully aware that as a small company CSR could be viewed as being a token gesture, however, the intention here is to start as we mean to carry on. Porter’s Five Forces Model Bargaining power of customers Over the past five years, there has been an increasing awareness regarding work life balance, mainly due to the rise of dual income families, but also due to flexible working practices affecting quality time spent as a family unit. Customers are influenced mainly by price and convenience, however, information is not readily available in the public domain, hence, shopping for ‘best’ bargains is hampered and reduced to what is available locally in the high street. When surveyed, given a choice of alternatives within the same price bracket, 68% of consumers would choose a greener alternative method of dry cleaning. 82% of consumers had little brand loyalty and could not name the dry cleaning company they used. Therefore, they have considerable power as switching costs are minimal, and the perceived ethical rewards are substantial. Currently, 97% of dry cleaners operating in Miami offer traditional Perc dry cleaning. We also feel that the dry cleaning industry thus far has been slow to make people aware of what is on offer in the industry, this in our view, gives us a considerable advantage. Bargaining power of suppliers Currently there are few suppliers of alternative solvent machines. This seems to give the suppliers a certain degree of power. However, machines are extremely reliable and have a lifespan of almost ten years, thus, limiting the interaction with the supplier. Also, solvents are available from various companies but, levels of usage are not high and their prices have remained static for numerous years without any gaps in supply. Threat of New Entrants: Potential start up costs are relatively low and this would imply that the threat of new entrants is relatively high, however, this threat is negated by the fact that the dry cleaning industry in the US is exceptionally mature and is, therefore, less appealing to new players. We intend to counter this by offering a greener more environmentally friendly way of dry cleaning that is currently a market that is under exposed. For businesses already present in the market, the switching costs in terms of production machinery from traditional methods to a green alternative is relatively high, thereby, lowering the threat of new entrants from existing businesses. Also, many independent cleaners are small family businesses; therefore, seem unwilling to absorb this cost until absolutely necessary. Some franchises such as 19 OXXO are going green, but their stores in Miami have not currently done so. The potential of government legislation on dry cleaning omissions will undoubtedly increase the threat of entrants; however, by this time we would have capitalized on our entry into the market and will hopefully have safeguarded our customer base. Threat of Substitute Goods: Most consumers are unaware of the impact their dry cleaning choice has on the environment. Also, in the long term, Perc is unsuitable for many delicate fabrics as it is too abrasive. As public awareness increases substitutes will emerge. Within the ‘green’ area there are a few options such as that of CO2 dry cleaning or GreenEarth™ products. The CO2 dry cleaning is seen as very expensive and is very much unproven in the dry cleaning industry. The cost of GreenEarth™ is also high with an initial payment needed in order to use it; another issue which has come under scrutiny over the years. Lime Dry cleaners, however, will be using a hydrocarbon which will differentiate us from other dry cleaners. Number of Competitors: Currently, there are 10 dry cleaners surrounding Miami, however hardly any are situated right in the city centre. Most of these are independent dry cleaners just like us. Our main competitor is potentially the OXXO franchisee. None of these dry cleaners (except OXXO) operating currently in Miami are green; this is what will give us a competitive advantage. Read More