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Higher Wages and Higher Profits: Finding a Balance

According to an article recently published in the American Drycleaner online magazine, due to new local ordinances raising minimum wages, dry cleaners in Chicagoland are tasked with figuring out how to maintain their profit margins while balancing them with a higher minimum wage. As reported, dry cleaners across the nation are soon to face this same challenge.

The dry cleaning industry has never been known as a field that brings in significant income for its workers. However, soon enough dry cleaners who are currently paying wages below the newly mandated minimum wage may find themselves facing a reality check when the new wage regulations take effect. So what are their options?

Raise Prices

Perhaps the most obvious solution for dry cleaners that find themselves spending a significantly higher wage to their workers would be to raise the prices for customers, thus maintaining their profit margin and ensuring that they are able to cover overhead costs such as rent, real estate taxes, initial capital investments in equipment, equipment maintenance, and marketing. However, raising customer prices could backfire and cause the cleaner to lose business, so how can this be combated?

Improve Employee Productivity

According to the American Drycleaner article, very few drycleaners put focus on measuring and improving employee productivity, let alone asking themselves how they can improve this. By putting efforts towards employee training and improving morale, drycleaners may find that they quickly learn who their strongest, most motivated workers are. While they will still have to pay these workers a higher wage, they will be able to eliminate workers who cannot maintain that productivity. Less staff means less of a payout for labor, which accounts for more than 40% of a dry cleaner’s total operating costs.

Accept Lower Profit Margins

The only option left other than raising customer prices or improving employee productivity would be to simply accept lower profit margins. When the alternatives are considered, however, this doesn’t seem like the ideal solution. And in fact, many drycleaner operations are not able to do this and may find their business suffering as a result. Overall, better employee productivity will have an immediate impact on a dry cleaner’s bottom line.

At Irving Weber Associates, Inc. we understand what it takes to run a successful Dry Cleaner business, including investing in a comprehensive FabriCare Insurance Program to ensure that you are financially protected against legal claims. For more information regarding our products and services, please contact us today at 855.764.7406.