CLEAN WASH LAUNDROMAT

By Mildred S. Melendres, former Asst. Professor at UP College of Business Administration

MS. Giesel Reyes, the proprietor of Clean Wash Laundromat (CWL), re-read the recently received fax from Hair Cuts, a well-established chain of beauty parlors. Hair Cuts is proposing a business deal with Ms. Reyes wherein Hair Cuts will avail of the wash, dry and fold service of CWL at 15% off the regular price. The service will cover a period of four months from June to September, which are peak months CWL and will entail 60 kg per week or 240 kg per month of laundry.

CWL was established two years ago with an initial investment of P800,000. Located near two prominent universities and several residential condominiums, CWL caters mostly to students who live in dormitories and to residents of condominiums. It offers three basic services: wash, dry and fold; pressing and dry-cleaning. Except for dry cleaning services, all services are done in-house. Dry cleaning is subcontracted to Dry Cleaning Experts (DCE) and is offered at a 15% mark-up.

CWL operates seven days a week from 7am to 9pm. It has 5 washing machines, 5 dryers, and 3 flat irons. A washing machine and a dryer can handle a maximum of 15 loads of 3-kg laundry per day (1 load = 3 kg). CWL offers next day pick-up service. Upon the request of the customer, CWL can arrange a same day pick-up or the customer can wait in the shop at no extra cost.

Requirements:

Should Ms. Reyes accept the proposal of Hair Cuts? What quantitative and qualitative factors should Ms. Reyes consider?

Would your answer differ if the average number of loads per month for the period covered are as follows:

June 2170 July 2190 August 2200 September 2180

Exhibit 1. Prices Wash, dry, fold

PhP 35/kg

Pressing: Long sleeves Dress Slacks	PhP 20 45 20
Dry cleaning: Barong Blazer Dress Blouse Trousers Skirts	75 150 120 90 90 60

Exhibit 2. Average number of loads per month (1 load=3kg)

January February March April May June July August September October November December

1960 1820 1680 1680 1540 2080 2160 2170 2150 1960 2100 1960

Exhibit 3. Electric bills (in pesos)

January February March April May June July August September October November December

PhP 17,208 16,746 16,284 16,284 15,822 17,604 17,868 17,901 17,835 17,208 17,670 17,208

Exhibit 4. Other costs

Rent Salary

Telephone Detergent Water LPG Leasehold improvement signage

30,000/month 1,060/day x 30 days = 31,800/month

1,400/month Average of 76.8/load Average of 0.50/load Average of 4.50/load 100,000 30,000

Depreciation (Washing machine and dryer costs on average P50,000 each)

4,166/month

CWL leases its space from Space Realty for a period of 10 years. The signage has an estimated useful life of 10 years.