Indian Institute of Management

Ahmedabad IIMA/MAR0436

Railroad Laundry Service

One hot sticky afternoon in July 1994, Jason Pullman sat in his small office in suburban
Pelham, New York, ruminating on his financial success in the past three years since he had
launched Railroad Laundry Service (RLS). Business looked good with sales touching $ 3
million annually. With no imminent sign of direct competition in the market, Jason was
optimistic of yet another year of good fortune with high growth rate of around 50 per cent.
He wondered why no one had come up with his business idea that had made such an
impact in the market place. It was this idea that had propelled him to instant financial
fortunes in a very short time.

The Working New Yorker

Jason Pullman finished his bachelor’s in Accounting from Tulane University in New Orleans
and headed to New York city (NYC) with the dream of striking gold in the field of business
and commerce in the “Big Apple”, also the financial capital of the world. It was the fall of
1986, when armed with a $ 40,000 per annum job in NYC, Jason took up quarters in the
northern surburbs of New York city in Greenwich, CT.

Workday for Jason meant getting up at 6:30 a.m., making a pot of coffee which he could
barely wash down his throat, grabbing a clean shirt, and with just about enough time to
tighten the noose of the tie around his neck, head out of the front door of his small
apartment to catch the 7:10 Stamford Local train on New York city’s Metro-North rail line.
The Greenwich train station was just around the corner from his apartment block and
reaching it just in time to catch the train was usually not a problem. The Stamford Local
train would disgorge its passengers at New York city’s main terminus, the Grand Central at
8:25 a.m., with enough time for Jason to hail a taxi to take him to his place of work by 8:45
a.m. Jason worked at a small accounting firm in mid-town Manhattan, the pulse of New
York city, and his boss did not like him being late to work. This was, after all, Jason’s first
job after school and he meant to keep it to save enough money for Graduate School.

Work and commuting to and from office consumed most of Jason’s life for the next four
years. Most work days, Jason would return home at about 9:00 p.m., spent by the day’s
trudge and having just enough strength to grab a frozen dinner from the refrigerator and
put it on the gas grill to broil. That would be his dinner on most workdays.

Weekends were meant to catch up on sleep, although weekends also meant getting laundry
done, fixing the house and yard for the homeowners and attending to the countless chores
that suburban living imposed upon New Yorkers. Given their busy lifestyle, most
professionals could not attend to these tasks during the week.

To sum up the life of a typical suburban New Yorker, it did not sound very exciting. More so
for a young single male like Jason Pullman trying to make a future out in the “Big Apple”.

Prepared by Prof. Arindam Banerjee, Indian Institute of Management, Ahmedabad.

Teaching material of the Indian Institute of Management, Ahmedabad is prepared as a basis for class
discussion. Cases are not designed to present illustrations of either correct or incorrect handling of
administrative problems.
© 2013 by the Indian Institute of Management, Ahmedabad.
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The Idea

The daily commute of an hour and fifteen minutes to New York gave Jason a lot of time to
think. Like him, countless New Yorkers living in suburban Westchester county, eastern
counties of New Jersey that bordered on Manhattan and Long Island travelled to and from
work and spent on an average three hours travelling each day. That amounted to an average
of 15 hours each week of travel time. With over 3.5 million commuters travelling to
Manhattan from various locations in Long Island (Long Island railroad), Westchester
County (Metro-North Railroad) and New Jersey (NJ Transit), there were many whose life
was short of one critical thing – time. Like Jason, they spent way too much time travelling
and hence, once they were back home, they had too little time to attend to their daily chores.

One day, in June 1990, while travelling to work on the Stamford Local, Jason made up his
mind. He decided to quit his job in the accounting firm as well as his dream of becoming a
successful financial executive, and launched his company – Railroad Laundry Service.

With a $ 2,500 investment from his bank savings account, Jason rented space at the
Greenwich railroad station from the Metro-North Company and set up a kiosk. Every
morning from 5:45 a.m. onwards, Jason would man his kiosk, which served as a drop off
counter for dirty shirts. Commuters travelling to New York would drop off their shirts to be
taken care of by Jason’s laundry service. The kiosk would remain open until 9:30 a.m. for
people to drop off their laundry.

By mid morning, Jason would cart the entire lot to the local laundry facility in Greenwich to
be washed and cleaned and ironed. The lot would be ready for return by 4:00 p.m. for Jason
to return to his kiosk at the station, in time for the start of the evening rush hour traffic from
New York City. Normally the kiosk would remain open for laundry pick up until 9:00 p.m.
to cater to the late commuters from the city.

Business was uncertain at first, but picked up quite steadily after the first 15 days. In fact,
Jason had to hire someone within the first month to help him with the growing demand.

From a regular customer, “This is very much wanted around here….I mean,….who’s got the time
to get the laundry done at the end of the day….and I don’t have enough shirts to get me through the
week,….this is what was required…just great !!!”

The premium charged by Jason for his service ranged from 15 per cent to as much as 35 per
cent compared to the charges at the regular Laundromat. Prices were higher for delicate
items. Commuters did not mind paying for the service provided, especially since it reduced
the aggravation of getting one’s laundry done at the end of the day or on weekends.

Within six months of operations, Jason was doing about $1200 of business a day. Initially, he
accepted men’s dress shirts for laundry, but eventually he began accepting women’s dresses
too. Soon he realized that his beat up Ford Escort sedan was becoming too small to cart the
laundry over to the local Laundromat, so he leased a pick up truck to relieve the pressure off
his sedan.

A year from the start of operations, Jason had bought out the Laundromat, in the way of
backward integration of his business. He had hired three permanent employees to man his
kiosk and had also opened two new pick up kiosks at Stamford, CT and Rye, NY to cater to
additional customers. He was also eyeing the Long Island Railroad system to expand his
business into other routes in the New York suburban transport system. He realized that the
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potential of his idea was enormous and that he had to quickly move in to capture the
potential market before anyone else could copy his idea.

By July 1994, Railroad Laundry Service was a $ 3.5 million turnover company, employing 45
full time employees and operating across 15 railroad stations across Westchester County,
Long Island, and New Jersey. Competition had been slow to get in and Jason had been
deterring entry by opening kiosks at high density stations which were at least 30 miles from
Grand Central station. In May 1994, a similar service sprang up at Trenton station on the NJ
Transit route.

Questions to be prepared for classroom discussion:

Define the business proposition as specifically as possible. Also, identify the exact target
market segment that requires the service (as defined). Finally, identify the Key Performance
Indicators (KPI) that will address the objectives of the business transaction.