FEASIBILITY STUDY REPORT

DRY CLEANING & LAUNDRY BUSINESS

INTELLIGENT DATA LIMITED

OMOLEKAN, Olushola
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:

 Attain a 30% market share by the year ending 2009.

 Declare first year total sales of over N 14 m

 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;

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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.

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;

 Drop & Pick

 Executive home/office delivery

 Corporate/industrial contract cleaning

 Press only

 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;

 Individuals
 Guest houses
 Hotels
 Offices
 Private hospitals
 Large churches and
 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

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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.

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

 Quality of service
 Proper Awareness/Visibility
 Business Location and
 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

5
the incentives and value added and conduct periodic customer’s 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

 Curtains – per foot range between N 450 to N 950
 Towel – between N450 and N1,150 depending on size.
 Blanket/Bedspread is between N700 and N2,000 depending on
fabric and colour.
 Pillow covers(2) between N200 and N400 depending on fabric
 Duvet cover range between N800 and N4,200 depending on size.
 Table clothes per square metres - between N450 and N650.
 Bath robe- between N 450 and N2,150
 Napkins – range between N 150 and N350
 Female Suits- between N1,500 and N2,300 depending on fabric.
 Female native attires range from N750 to N3,500 depending on
fabric.
 Men’s suits - between N800 and N3,500
 Men’s native attires range from N900 to N 3,300.depending on
fabric.
 Shirts for men would be washed for between N 400 and N 1,000
 Women’s 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

institution’s executives, and the middle-level workers that earn between

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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.

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
business’s high capital intensive nature, most industry competitors still
find 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 supplier’s 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

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Key Industry players with outlets in the Victoria Island / Lekki axis include;

 Garment Care. Located on plot 1088, Adeola Odeku Street and at

Plot 6, First Roundabout, Lekki Phase 1.

 Washaman drycleaners is situated Texaco Filling Station, after

Eleganza Estate, Lekki, and another outlet at Plot 19, Sinari Daranijo
Street, Victoria Island.

 Mega Wash is located at Suit C212, Ikota shopping Mall VGC and
another outlet at Oba Adeyekan Estate, Lekki Phase 1.

 Daystar, located at Km 21, Lekki/Epe Express Way, Ajah.

 Clean Touch drycleaners are located on 41c, Ahmadu Bello Way,

Victoria Island.

 Cedar Oaks is located at 20, Remi Oyefiade Close, Lekki Ajah and
an outlet at Silvershares Place, Jakande Estate, Lekki, and a new
arrival,

 Michael & Solomon dry cleaners, located at Km 24 Lekki/Epe

Express Way, by Ajiwe Bus Stop, Thomas Estate, Ajah.

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 established in 1999, to provide a world class
cleaning service. Managed by one of the world’s 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 Ikeja
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.

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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
customer’s clothes.

REGULATIONS/ ENVIRONMENTAL ISSUES

 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.

 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.

 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.

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.

 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

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 - 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.

 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 men’s two-
piece suits for N2,600, women’s 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 men’s suit, N 950 for women’s 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 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.

 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.

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  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, Britain’s
Pony, America’s 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.

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 Qt Description Cost

y (N)
1 1 Renzacci Planet Dry-cleaning 4,150,000
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.
2 1 Renzacci Automatic Washer 1,430,503

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 Extractor. Model LX 22/A. Cap
21kg/44 Lbs. Motor protection with
stainless steel housing electric.
3 1 Renzacci Electric Tumbler Dryer 1,233.804
Model D50. Cap. 25kg/55Lbs
stainless steel drum with motor
protection.
4 1 Renzacci Unipress (Hoffman) Utility 2,230,887
pressing machine complete in-built
boiler, steam generator, electro-
pump, electro-suction, vaporization-
gun and 1 steam iron with
automatisms.
5 1 Renzacci Self contained vacuum 1,210,739
steam ironing table (i.e. in-built
boiler) and 1 steam iron.
6 1 Renzacci Pneumatic Hydro- spotting 825,000
with Vacuum and Arm.
7 1 Renzacci Hydro Extractor ZP635 1,350,709
8 1 Renzacci Vertical wall poly bagging 350,000
machine
9 1 Renzacci Rotor cabinet with in-built 2,337,190
steam generator.
10 1 Pony SPA Flatwork Ironer, 4.3 fleet 920,000
11 2 Trolleys 150,000
12 1 Mikano 100 KVA sound proofed 2,624,000
Generator + transportation
TOTAL 18,812,832

COST OF OTHER BRANDS OF EQUIPMENT

Equipme Pony LG Imesa Realsta Beko Electrol

nt r ux

11kg N/A N/A 920,000 N/A 800,000 1,200,00

Washing 0
Machine

23kg N/A N/A 2,000,00 N/A N/A N/A

Wasing 0

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Machine

10kg N/A 310,000 N/A 300,000 288,000 N/A

Washing
Machine

30kg N/A N/A 3,200,00 N/A N/A 3,200,00

Washing 0 0
Machine

10kg Dry N/A 4,800,0 4,900,00 5,200,00 N/A 4,400,00

cleaning 00 0 0 0
Machine

16kg Dry N/A N/A N/A N/A N/A 5,800,00

cleaning 0
Machine

Suit 1,000,0 N/A N/A N/A N/A 1,400,00

Former 00 0

Finishing 800,000 930,000

Table

10kg 1,300,0 N/A 810,000 1,290,00 800,000 1,200,00

Tumble 00 0 0
Dryer

18kg N/A N/A N/A N/A N/A 1,800,00

Tumble 0
Dryer

12kg 1,350,0 N/A N/A 1,600,00 N/A N/A

Hydro 00 0
Extractor

Utility 2,250,0 N/A 2,230,00 N/A 2,300,0 2,600,00

Presser 00 0 00 0

Flatwork 920,000 N/A N/A N/A N/A 930,000

Ironer

Suit 1,000,0 N/A 1,000,00 N/A N/A 1,400,00

Former 00 0 0

CAPITAL REQUIREMENTS & STRATEGY

The business will require a start-up capital of about N35.6m

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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

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

14
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;

 An initial start up capital of about N 35.6m which consists of cost of

each of the following;

Item Description

1 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

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 7 Office/GSM telephone lines installation+
maintenance ( for a year)

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 75,600

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 litre

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.

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:

 Understand and be able to apply dry cleaning and laundry

processes

 Meet set standards by following instructions

 Work in hot and humid conditions

 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 Monthly Salary

Number

General Manager 1 N 70,000.00

Accountant 1 N 40,000.00

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 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 2 N 20,000.00 x 2
Officers
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.

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 3,000.000.0
0
Full Payroll 5,220,000.0
0
Utilities and an estimation 1,640,400.0
of other running cost 0
TOTAL 9,860,400.0
0

Monthly Sales forecast

Monthly Revenue 1,200,000.00

Monthly Expenses 821,700.00

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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 14,400,000.0 15,400,000.00 17,400,000.00

0

Expenses 9,860,400.0 9,909,707.00 9,959,255.54

0

Net profits 4,539,600.0 5,490.293.00 7,440,744.46

0

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.

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

 How much money do you have at the moment?

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

 When exactly do you intend to start the business?

 What name would you adopt for the business?

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