Market Driver
The US dry Cleaning industry is ready for consolidation due to these factors:
- Dry cleaning is one of the most stable and lowest risk of all retail industries.
- The market is estimated to be $8-$10 billion per year.
- There are an estimated 27,000 dry cleaners in the U.S.
- Nearly 70% of all dry cleaners have been in business over 5 years.
- Nearly 50% have been in business over 10 years.
- Many stores owned by second and third generation.
- Many second and third generation owners would like an exit strategy.
- U.S. Dry Cleaning Corporation is a “first mover” into dry cleaning consolidation.
- The dry cleaning industry is very similar to the video industry of 1986- prior to the consolidation by Blockbuster Entertainment.
Business Model
Using a traditional consolidation model, UDRY is able to take advantage of economies of scale and improve margins through the following:
- Centralized management, which eliminates administrative duplication.
- Better equipment utilization.
- Operating efficiencies.
- Access to the capital markets.
- Increased purchasing power.
The company divides operations into its Centralized Processing Facility (“CPF” or “hub”) on one hand and beautiful customer friendly storefronts on the other hand to make imminent sense. Just as the hub on a wheel has a center to provide balance to the structure and a common destination for the numerous spokes, the Company’s operating model parallels the strength of this design. Its CPF, which are environmentally green, cost efficient, and employee friendly complete all the processing, rapidly and without waste, and the garments are then transported to numerous retail storefronts (“spoke”) where the consumer simply sees the finished product.
Investment Highlights
Its management and the board of directors bring many years of retail and corporate experience. Its experienced team has proven capable of managing aggressive retail consolidations. The executive management team lead by Robert Lee (considered the “King of Dry Cleaning”) is a continuous team that worked in previous ventures before with successful track record (e.g. they built top 10 Video chain in the U.S. together.)
The Company has clean capital structure of common stock and convertible preferred stocks with fixed prices and no “overhang”.
The Company currently has 82 stores and reliable revenue from 5 major chains that have been in operations ranging from 20 years to 40 years. Beside the Company has developed its pipeline of potential acquisitions (in addition to its owned stores) to have an optimal fit for its refranchising model.
Its re-franchising model is considered second-to-none in the country with simple operation and low competition via existing 3 factories that have been built for Centralized Processing with “Hub & Spokes”. The Hub is the factory that provides superior cleaning services for Spokes which are its franchisees. The Hub & Spokes model removes the production of labor from our franchisees which allows them to focus entirely on customer service and building revenue.
Its business model is a “One Stop Shop” model for the Garment Care industry. This model creates franchisees that are customer service experts simply focusing on national re-franchising expansion. The notable absence of a national brand provides a wide open opportunity for U.S. Dry Cleaning to become America’s brand.
