The founders of 2ULaundry came back to the studio to chat about a pivot, managing during a crisis, how their board of directors helped them react to COVID, and the future of laundry.
Listen on Apple
Listen on Spotify
Watch on YouTube
Ep #56 2U Laundry
Please Note: The Defiance Ventures podcast is designed for audio consumption. If you are able, we strongly encourage you to listen to the audio, which includes tonality and emphasis that’s not on the page. Transcripts are generated using speech recognition software and may contain errors. Please check the corresponding audio before quoting in print.
John E.: I have started an exited multiple companies. I am an avid investor in early stage companies. I advise some of the hottest startups and I’ve worked with many of the top tech companies across numerous industries. I’m a software developer by trade, but I also have an MBA from Duke university. I seek out companies who defy conventional wisdom to drive innovation in any industry. And in this podcast, I interview the founders of those companies for you.
Hello folks! One of the podcast I’ve got with me today, the founders of two U laundry, Dan DeCristo and Alex mayor’s neck. The two hardest names in the world, but pronounce, I interviewed back in 2019 and it was one of the resources I got the most and the best feedback on people really like him and especially like the company.
And I’m trying to revisit some of my more popular guests who had to pivot dramatically during COVID. So I’m really excited to do this one. Um, Dan, I realized that it is your wife’s birthday. Um, as they say, happy wife, happy life. So we’ll try to keep you here too late. So thank you for giving us some of your time and thank you to your wife as well.
Alex S.: Absolutely. Great.
John E.: So for the listener, those who don’t know, can you give the quick history on to you laundry, the progress you made going into March, 2020 and talk about what the original vision might’ve been.
Alex S.: Yeah. How, how quick do you want take your time? It’s
John E.: only Dan’s marriage
Alex S.: at stake. Dan knows all too.
Well, this could be 15 minutes. It could be five minutes. I’ll try to do it. I’ll try to
John E.: do, take your time because your story is awesome. And again, the more people that can hear it the better, because it’s a really good
Alex S.: story, I think. Yeah, absolutely. So we. Yeah, we, we always get asked this question. Why, why did you guys get into laundry?
Did you have some sort of traumatic experience as a kid? You get stuck in the dryer and, you know, thankfully it was, it was none of that. Um, Dan and I both grew up together in Redwing Minnesota. Uh, it’s a small town, um, just South of Minneapolis. And I ended up at, uh, wake forest for my undergrad. And my dad had always taught me front-load the job work as much as you can try to find ways to make extra money.
Um, and so when I went to wake, I worked for another student run startup called wake wash on campus, and they were, uh, door to door, laundry and dry cleaning delivery business for students there. Um, and I fell in love with the model. I thought I could scale the Duke chapel Hill, Vanderbilt, you name it. And so when they were going with a small private ACC is a lot of fluid, a lot of affluent families, you know, parents that are worried about their kids going off for the first time.
Um, so, you know, I wanted to buy it and I had, I think, three grand saved up. And which, you know, is not nearly enough. So I convinced tailors to clear their savings account with me. Um, we bought it from them our sophomore year and then ended up learning more doing that than any class I had taken out wake, um, just loved the experience, but then when it came to, you know, graduate, my partners wanted to go do investment banking, marketing, and I don’t want to be the guy that held them back from, from selling it.
So we ended up selling it for about 10 times what we bought it for helped pay for, you know, a lot of our way through school learned, again, more than any class I’d taken there, thought my hands were clean of the laundry and dry cleaning business. Um, and moved down to Charlotte, North Carolina to do consulting at Ernst and young.
Um, and while I was there, I saw two companies on the West coast to wash U and rinse, uh, raised a combined $30 million to go up to the $40 billion laundry and dry cleaning industry with what I felt were the wrong models. And that’s when I, I called Dan up and he’d, he’d been doing sales and marketing at startups in Minneapolis.
So I knew. Not only was he one of my best friends from growing up, but he has a complimentary skillset to me, sales and marketing background. I was more finance and ops. Um, you know, he knew what it took to be involved in a startup. It’s, you know, it’s, it’s a ton of sacrifice for maybe not the same benefits that you would at a fortune 500 company.
Um, you gotta be scrappy. You gotta just have to have that kind of risk-taking mindset. And so when I told him about it, he sure enough had that risk-taking mindset, um, broke the lease on his house, uh, broke up with his girlfriend at the time. Now his wife she’s said some come down and happily ever after full circle.
And so he, he, he packed up the car and move with two other or one other guy that we grew up with. Um, they drove 20 hours straight. I don’t think you guys stopped at all. Um, came down to Charlotte and we started to you in late 2015, and we say it’s January of 2016. And it was really, there were three kinds of reasons.
We were going to be different or three hypotheses that we wanted to go validate. One was. Instead of being the Uber for laundry, where we have 10 99 contractors, you know, going from, uh, you know, your house to the facility, to my house, to facility, and really this kind of like acute impulse decision, like ride sharing or food delivery where, you know, if you’re hungry, you need the food.
Now, if you need to get somewhere, you need the ride. Now they were trying to treat laundry the same way when in reality. So when you say they does
John E.: this mean wash U and rents, we’re taking more of the, more of
Alex S.: the success and said, Hey, let’s go raise money, different vertical. This’ll be great. Um, but laundry doesn’t act like ride sharing or free delivery.
It’s a chronic recurring pain point. You know, everyone’s got their laundry day it’s Sunday or Saturday, or, you know, some day of the week and they do it over and over. And so our thought was why don’t we build a solution that fits that, that behavior, not one that mirrors another successful startup. And so that was the first thought is we’ll be the FedEx of the ups for, for laundry.
Instead of the Uber will have static. No scheduled routes with branded and branded vehicles with W2 employees instead of 10 99. And that’s how we’ll do it. We’ll get, you know, efficiency back for what we have to pay in taxes and benefits and whatnot. Um, the second, interesting
John E.: you say that because Maggie who introduced us in the beginning and is also coming back to do a repeat podcasts here next Wednesday.
Um, so I think she took a very similar approach. I don’t want to be the Uber of dog walking. I want full-time employees. I want them to be loyal or, you know, well compensated, uh, ma maybe they’re not full-time employees. Maybe they’re 10 99, but they’re, they’re working for her. It’s not just randomly you go find a dog Walker off the street.
Alex S.: I think that control gives you, especially in businesses like dog-walking or laundry, or it’s so personal, whereas, you know, ride sharing it’s you really just have a, an immediate need and you want it filled. Whereas this is it’s your dog. People look at it as their kids. They’re for babies. They want someone they can trust.
Um, same with laundry. It’s the first big decision. I think we all make everyday whether it’s conscious or not. What am I going to wear today? What do I look the best in and feel the best in, you know, and really represent who I am as a, as an individual. And so quality has to be at the forefront. That was our second hypothesis was we can’t outsource all the cleaning because that would be like Apple outsourcing its design.
Its its its core competency. It’s what made them, who they are. And for us we wanted quality to be what makes us who we are and people remember when they use our service. Um, so quality was the second piece. How do we vertically integrate our own more of the supply chain over time? And then the last one was instead of targeting New York, Chicago, LA, and maybe getting a false positive of, Hey, it works.
There’s, you know, tens of millions of people live here. It’s great. But then in Charlotte it doesn’t work and it’s a smaller opportunity than you thought our thought was. If you proved in Charlotte, this can work in 30, 40 other us cities. Awesome.
John E.: And so, so you talk about the three hypotheses and what did you want to turn the company into?
What, where did, where, where in your mind was the five or 10 year plan to take the company at that time? Yeah,
Alex S.: so when our Dean and I had early conversations, I mean, I think, and especially him sacrificing as much as he did to come down and move to Charlotte was, Hey, this isn’t going to be a lifestyle business.
We want to make this as big as we possibly can, as quickly as we possibly can, with the goal of selling it, taking it public, you know, really building a, a household brand around laundry and dry cleaning. It didn’t exist before, you know, it’s such a highly fragmented industry. It’s massive. Um, and there wasn’t a clear winner and a tide, you know, as the most recognizable, but that’s a detergent there wasn’t an actual physical retail business or delivery business that had made a name for itself, um, at that point.
And so we wanted to set out to go and do that for the first time.
John E.: That’s great. And so in Charlotte, you know, some along the way, obviously you’re. Your trucks have become ubiquitous part of the Charlotte scene in general, you see them driving around. How many, how many trucks do you do you have in Charlotte?
Alex S.: We have a fleet of about 14 vehicles here in Charlotte now. Um, and it, it varies, you know, given days of the week, some days are more popular, popular than others. Um, and so you’ll see more of a sea of pink out there, but we actually, we actually had a, uh, a VC from Raleigh come visit and he’s like, texted us.
And there’s a sea of pink. I’m just driving through in Charlotte. This is incredible. And like you said, immediately sticks out. You can’t miss him. Yep, absolutely.
John E.: Um, so you guys going into, into March because I want to talk about as COVID starts to hit, but you also had opened in Raleigh in Atlanta, is that correct?
Yep. Yeah. Delivery services, but you didn’t have an you in Charlotte, you had the laundry room, correct. Um, so that’s a very successful retail operation that you decided to open up. Is there any more commentary you want to give on that pre COVID or,
Alex S.: yeah, so I think, you know, as we set out to build this nationally recognized brand, we realized, especially with those three hypotheses, we didn’t have to control our own destiny, which was part of it.
That was the supply chain. Um, and we need to validate that we can scale to other markets. So we went through Techstars, it’s a top three accelerator program. They’re the only one that had a program in a city that we wanted to launch launch in that was immediately close to us. So we use Techstars in 2017 to help raise a seed round.
Um, and then also launch our second market of Atlanta. Our thought was, Hey, we need to go validate that this is not just a one hit wonder in Charlotte, um, launched Atlanta at the tail. End of it. Dan moved down to Atlanta. So moving again within a year or two, um, And then in Charlotte, we started to have multiple facilities that we were going into with our own team to clean.
And that just wasn’t working as well. You have these very sporadic owners. They’re not as professionalized as the dry cleaning operators. Um, and that’s when Electrolux $18 billion appliance company North American headquarters is here in Charlotte said, Hey, we love what you guys are doing. Um, we’ll, de-risk it for you.
And we’ll help you build your first facility. We’ll finance a hundred percent of the equipment and we could, you know, we could de-risk it that way. So we built that store a completely new endeavor for us. It was a walk-in retail laundromat open seven days a week that we would then bolt on or to you pick up and delivery volume on top of, and that was, you know, that was a big inflection point for us because margins improved significantly quality control, improved significantly.
We realized, Hey, there’s a model here where we can go build multiple of these partner with Electrolux. Layer two on top of it. And that’s, that’s how we scale. So
John E.: just to make sure everybody’s clear, that’s listening, they, you all, you’re, you’re doing the work for your delivery services, but families are coming in and washing their clothes, just like inside of any other retail location.
Alex S.: right. And one thing that when I think like any aspirational set of founders or startup employees that they want to build something that was better than there was, you know, that that was there previously. And so we put a ton of time and thought into the design of the store, what are the many amenities we’d offer?
How do we make this, an experience that mirrors what our two year customers are getting, but for a completely different demographic that might not have access to to you because it’s not as affordable. And you know, one of the stories that we share a lot now, especially as it, and we’ll get to the franchising.
When we first opened, someone came up to us, just sobbing and tears hugging us. Um, and the first year they’d taken it back and you’re like, Hey, what’s going on? Why are you, why are you grabbing onto me? And. She was just like, no one ever builds anything nice for us. And that was, I think, one of the most rewarding pieces of feedback that we’ve ever received.
And she was right. We didn’t intend to, we didn’t realize that, Hey, the lower income population are treated like second class citizens or taking public transportation and the businesses might not be as well. Captain, all we did was provide a children’s play area, free wifi things that, you know, I think any person in 2019 would like to have at a place that they go to.
Um, and it made a difference. They noticed it literally brought someone to tears and they appreciate it that much. So yeah. Well hopefully
John E.: the banks take notice and cause they notoriously, uh, the banking services available to lower income families are abysmal and it’s part of what reinforces the cycle of poverty.
So I think this is a great, a great story for entrepreneurs out there. You can make money servicing with the right level of customer support and customer touch and thoughtfulness about your offering. You, you, it can be a very lucrative business for sure.
Alex S.: Absolutely.
John E.: So you have a business predicated on saving people time by delivering clean, folded laundry so that they can look nice for work when they go into the office.
And, uh, and, and they don’t have time at home. So, um, walk me through the discussions you two were having, as you watch the lockdowns being announced. How, how does that unfold from the very, even the first time you heard about COVID maybe it was the night that Tom Hanks announced he had COVID maybe it was when NBA canceled that same season, that same night, everybody has a different moment where they realized, Oh shit, this is something I have to deal with.
What was that for you guys?
Dan D.: I, I reflect on this quite a bit, cause this is, I mean, building a startup. The first, what was it? Three and a half years of it. I mean, it’s a roller coaster. It doesn’t stop. Uh, and then you add the COVID element to it. And, um, we were just starting to hit like this new stride and energy, which was, which was tough to like sit back and even believe this COVID thing was happening.
Um, we just had raised that series a, we were going down this massive, uh, plans for expansion, just re lawn doubled our service area in Atlanta, launched Raleigh, um, March was on pace to be the biggest month ever, uh, for our business. And, and, uh, I don’t even remember what point it was. I think it was Trump, uh, on, on camera speaking and, uh, talking about the, the, the level of detail here of, of the, the impact.
And, um, it was, uh, it was tough to even decide digest going like, okay, we’re spending all this money on acquisition. It’s working, uh, we’re gearing up for expansion. And now we have to make some very, very tough decisions. And, and so it was even tough to just to sit back and think, Oh wow, what’s about to come.
Um, and, and that’s when we started asking ourselves, what do we, what do we do? We need to talk to the board. There’s no playbook for this. How do we even navigate this without causing, uh, chaos or, uh, internally? And that’s where it really, we had to step up as leaders to make sure that, uh, we were effectively communicating that to everybody.
And, uh, so I think that was the, the biggest part of us challenging the challenge us as, uh, as leaders in the business, you’re
Alex S.: lucky to have
John E.: the board, um, a board that can challenge you that way. And I think that’s very instructive. This is why you have a board because, and why you have advisors and why you have investors, because there are people who you guys are both smart, very, very smart business people.
Um, but it’s always good to have other smart people around who care. What, what, what are some specific. Things are tactical things that the board challenged guys with during that time,
Alex S.: I reflect back on it and share with others. I think it was one of the more impressive experiences that I’ve ever had. So they, the board called this me and was my answer to that same question you just asked was our board called a meeting.
And it was either late February, early March. It was still pretty early on. There was a few cases in Washington state, um, and they called the meeting and said, Hey guys, this is going to get a lot worse before it gets better. Um, you should go ahead and shut anything down. That’s not profitable. It’s going to be a cash game for the next year or two until this gets figured out.
And we see what the world looks like. That is so painful
John E.: to contemplate. When you’ve just put all this energy, you’ve just moved your partner down, down to Atlanta. Uh, not just, but you know, he’s, he’s
Alex S.: relocated to Atlanta and your team down there. We launched another market. Um, and so they’re saying, you know, shut anything down.
It’s not profitable. And, you know, to your point, it was, well, wait, what do you mean? We just launched Raleigh a month ago and it’s, it’s, it’s crushing the goals that we had for it. And land is going well, things are, as Dan mentioned, we’re hitting this stride. And so Dan and I admittedly left that meeting, you know, maybe are they being alarmist maybe?
And like, I started to have those like, kind of that like devil on your shoulder creep in and be like, Hey, maybe, maybe they’re wrong. But then, you know, we, you know, we, we talk seriously amongst ourselves and we have a board for a reason. You know, one of our board members started Pamlico capital in town, another as the CEO of a top five marketing agency in the country.
Another is a CFO and president of Spanx. And so collectively, this is this group of incredibly intelligent people, way smarter than Dan and I were way more experienced than Dan and I. And so you have to look yourself in the mirror and say, am I, is the devil on my shoulder really like, worth not listening to the advice that, um, they have, you know, let’s say the wrong.
You make this decision tree, right? Like they give you this advice to shut it down. You don’t listen and they’re right. You’ve lost all the Goodwill that you have with your board. You listened to them and they’re right. You’ve made a good decision. You, you saved the company time and money, et cetera. Um, and you know, of the other two of those four options in total, that one really presented itself as the one that made the most sense if they’re wrong and we shut it down, we can always turn it back on that.
We have a lot of the customer base there that will understand. And you had a
John E.: healthy balance sheet at this point because you were coming out of array is where you didn’t over deploy your capital.
Alex S.: And that’s the thing
Dan D.: we had to look at those as is fortunate opportunities for us to unfortunately, have to take that step back.
But we have some of the things working for us to persevere power through and give us a new. Sort of a breadth of energy to reinvent ourselves and think, okay, this is, we need to look at this as just another challenge to overcome and an opportunity, an opportunity. Um, and I think we, we did just that after really reflecting back on it.
Um, although it was probably the, one of the hardest things to hear, um, and feeling like you take these steps back after just taking three steps forward, which is tough in a startup. Um, and so I think we, we, we did that well and, and now it’s time to execute it.
John E.: Yeah. So, so in full disclosure, I invested in you guys back in 2019.
And so, so I’m copied on the investor communications and you sent out a note and reading it, you know, there’s, there’s some alarming talk in there just about, Hey, we’re shutting, shutting these growth avenues down. We’re just in survival mode. It is it’s alarming because even as an investor, you’re, you’re picturing, you know, the, the, you know, Alex and Dan ringing the bell
Alex S.: on NASDAQ,
John E.: right?
And now all of us, no, we are in a fight for our survival and we are going to do whatever we have to do to maximize the value of this thing, even. And I remember, I think you had word and correct me if I’m wrong. It was, if we have to shut down in Charlotte, that’s fine. We’ll, we’ll keep the money in the bank.
And when things come back, we’ll, we’ll, we’ll, we’ll come, you know, we’ll, we’ll come, uh, come back and revisit things, which is, it’s just a mindset that, that I think you have to have. And it’s a Testament to the board. And to you guys is as business people and leaders, um, th that you were willing to take that stance because it’s not the same thing as what you’re thinking three months earlier, six months earlier, when you’re thinking, how do I get to 30 cities?
It’s just a very different mindset. So as. As an investor that made me feel very good reading it. Um, can you tell me how did other investors react when, when they get that note?
Alex S.: Yeah, so yeah, I wasn’t sure what to expect. I didn’t expect. I think that was one of the things that I was personally nervous about was, you know, what kind of backlash, if any are we going to get?
Um, and when we talked to the board, after we made the decision preserve cash, you know, they gave us something a few weeks to, to line certain things down. And then we talked again, we were talking pretty frequently at this time. Um, and they said, all right, now that you’ve, you know, you’ve winded the things down that needed to be winded down, take the next month or so to really think about what’s the next move and consider everything.
And they challenged us, you know, do you pivot into a completely different vertical? Do you return capital? Do you mean everything was on the table at that point? Um, you know, especially that conversation around, do we, do we sell, you know, what we have left as a value for, you know, for pennies on the dollar and then return capital, or do we reinvent ourselves or do we stay the course and just hunker down?
Um, and that exercise in and of itself was incredibly valuable, but also tough that you’re starting to look at these things and you have to be objective about it. You have a fiduciary responsibility to investors, your team, the board, um, and. But you’re still so emotionally attached to this thing. And so it is hard to try to separate the two and make a sound decision, but you have to do it.
It’s what we signed up for. And
John E.: I think this is very instructive. We shouldn’t wait for a crisis as entrepreneurs to force this type of thinking. It’s something we should constantly be doing. I don’t know if you guys know Garth molten and Salagen, but they had, they created a company called other screen.
They made, they built a fantastic team. They put there, they ruined and raised money from investors, a VC in Austin. And, uh, and they, they had a realization that we miss the Mark, like they, and they had that. They, they did what you guys just described, but they are both very successful serial entrepreneurs.
And they, they do that. They did that exercise regularly. And I think it is something we should ask. What, what are we doing? Should we be in this business? Should, and their decision was to return capital. And I think they. If anything, it increased, it increased their aura in the eyes of everybody in the entrepreneurial and the investment community, because they made the mature decision, which was to, to, to return capital.
And I think it’s good. We should be considering those options. You guys obviously made a different decision. So what was the, what was the decision that you guys came to coming out of that exercise? So when
Alex S.: we, when we kind of narrowed it down to the next, you know, the two or three options that we have in front of us, we presented those to the board.
Um, one was to return capital one was, you know, Hey, we, there’s something here in this real estate asset that we have, our laundromat has grown 20% throughout the pandemic and throughout COVID when most retail businesses are down 15 to 25% on average. I mean, all these retail businesses, restaurants, shops, et cetera, but ours is, people are flocking to it’s growing it’s.
So it’s validation that it’s pandemic proof, recession, proof, laundromats have been a good place to, you know, to park cash for awhile. Um, could we, is there a world where we start to franchise package? What we’ve learned, building this location, the relationships we have a little Electrolux, the technology we have, and then the kicker being all this volume that we could bring to these laundromats by way of our two U pickup and delivery service.
So the analogy is, you know, you know, could we sell McDonald’s or Chick-fil-A franchises, and then to you be the door dash or Uber eats or Postmates equivalent in this vertical, could we do something similar? Um, and so we shared that with the board, um, they said, Hey, returning capital is going to be, you know, people, aren’t a, lock-in some sort of loss.
We, you guys are clearly passionate about it. You guys, aren’t sitting here saying, Hey, we’re ready to, you know, hang up the Jersey and do something else. And yeah, you guys are passionate. Go back to Ian. Why you guys are still passionate, passionate about it. If there’s anyone that’s going to figure out this space, it’s going to be you guys.
And, you know, we have, you have our full, you know, Support and in every, you know, in everything that you guys want to go and do next. So if you believe there’s an opportunity here, which it sounds like there is, we should go after franchising. Um, and so that’s when we made the decision to do it, share it with the investors.
And that’s when I was, you know, I wasn’t sure if I was going to get emails or calls saying, Hey, why didn’t you return capital? And our lead investor called a week later, said, Hey, he started the call with, Hey Alex, I know this. Isn’t what you want to hear. And I was like, Oh, great. Here comes the return capital comment.
And we’re going to have to reconsider that. And he said, what a blessing? It’s like, I don’t know if I’d go that far, but his point, his point was that he’s like, I think this is actually a much more scalable model than you first pitched us. We’re all incredibly excited about the opportunity to have you going out and building these, this system of real estate.
You know, assets essentially that are going to fuel the growth of two U and not only now, are you constrained to come, you know, constrained by cities that only to you at work Nashville, Austin, Dallas. Now you can build these locations in Winston, Salem, Gastonia, um, and you’re also servicing the whole spectrum.
Now you’ve got this lower income, um, demographic that benefits and thrives from the retail locations or building, um, you know, college kids as well. And in college cities that these could work in, but then you also have the more fluent family who was using the, to use service. And you’re now pairing and marrying both together have control of your own destiny that someone else is essentially gonna, um, help finance the growth of, because these franchisees will own them and partake in that, that revenue share of a revenue stream that we weren’t planning on growing ourselves.
Yeah. So, so it sounds
John E.: like pivoting to this model. If anything, you think that you can scale faster by, by doing this?
Alex S.: Yeah, because as we were in Atlanta and Raleigh, we were realizing we’re going into other people’s laundry mats and they were having the same issue, even though it’s our own team using these assets.
The laundromats are difficult to work with. They want you in there at weird hours. Um, they’re not laid out and designed for our purpose. Whereas our store here in Charlotte is very thoughtful and intentional about why it was built, the way it was the square footage, the layout, the machine mix, et cetera.
And you don’t get that unless you’re building it yourself. And so as we started to do it in Atlanta, you realize these, these aren’t cheap, equipment’s expensive. If you’re going to own the land, it’s even more expensive. And even if you’re not going to own the land, it’s, it’s, it’s an expensive build. Um, and so is there a way that we can, we don’t want to raise venture capital to finance real estate.
We’re not big enough to be bankable, to take on all sorts of debt. So eventually we’re going to hit this plateau anyway, through the SBA that we just can’t build more of these on our own anyway. And so franchising presents itself as a good opportunity to give up a portion of the business that we had no intention of, you know, really getting into from the beginning.
It’s kind of a means to an end for the two year business. Um, and so really presented this awesome solution that benefits everyone to you gets what it needs to scale and grow pretty efficiently. Um, the franchisees are all able to make money and put their, you know, their dollars into a good investment.
That’s fairly safe, pretty passive. Um, and then our investors and our employees get to benefit from the value that’s created between pairing the two together.
John E.: That’s awesome. And the store is really cool. I’ve toured it with, um, an investor that I, I think I introduced you to, but, um, and the closest thing I can compare it to is what CarMax did for used car sales, right?
You go into a CarMax and there’s way more inventory than any other used car. Um, any other used car, lot that you would go on to? Um, the process is transparent. There’s just a lot of benefits to, um, to, to, to, to the way they thought about how retail should work in CarMax. CarMax is a former client of mine, and it was interesting because as a rule, they will not, um, hire salespeople who have any history in cars because, and they may have changed their mind as they got to massive scale.
But that was one of the real early tenants is that car retailing is fundamentally broken. And if you’re part of. The existing animal. You’re part of the problem. Um, when you look for franchisees and I want to talk in a little bit more depth later, but, um, but I’m curious, are you going to look for people who have operated laundromats before?
Because the experience is so completely different? I can’t imagine that knowing much about laundromats is really all that helpful to running one of your stores.
Alex S.: Yeah.
Dan D.: Uh, right now, as I’m owning and running the internal sort of sales process of identifying these owners, uh, it’s, it’s clear that we’re now enabling a new type of owner to come in and operate who hasn’t really been educated on this model, but is looking to.
Diversify outside of, uh, uh, other income streams, whether it’s the stock market or, uh, another type of franchise business. Um, this is, uh, uh, through the pandemic, we’re able to kind of check the boxes on this as an essential business to the, to, to our economy. Now, um, it’s a semi absentee model that doesn’t require you to spend 20, 30, 40 hours of your time a week on it.
Uh, and it’s an exciting return. Uh, if you look at the fundamentals, the fundamentals of the business. And so we’ve been, we’re now enabling a new type of owner to come in and, and invest in leverage our expertise, our operational playbooks, uh, something that we’re incredibly confident, confident in, uh, and supporting these franchisees and, and, uh, it, it ultimately is a win-win when you’re bringing these types of sophisticated investors in using our operational excellence, marrying the two together.
Uh, and you kind of create this backbone that now too, you can scale on top of. And so, so that’s been industry and interesting, uh, compared to a lot of other laundromat owners that we’ve interacted with along the way who are more narrow minded, they don’t want to make change. They don’t want innovation, they don’t want to use technology.
Um, they don’t want to make their business harder to run. Uh, when in reality, you may, you may have this learning curve of making it a little bit harder, but over time, it’s going to become easier as you adopt, uh, our processes technology. Uh, so, well, the other
Alex S.: thing that you didn’t
John E.: that you didn’t mention, but I assume has to be a big deal.
This I recall from earlier conversations with Alex, that you guys, the relationship with Electrolux is hard to overstate the importance of that, because they’re, they’re giving you data on where you, I mean, laundry room, they helped you figure out the exact location to go to. Right. And I can’t imagine.
That any franchisee going out on their own or any laundromat owner gets access to that, that kind of data. And they get that automatically by working with, with you
Dan D.: guys. Yep. Yeah. I mean, it’s part of the value we’re going to add in, in their relationships is, I mean, our aspirations and our vision is to, uh, be a national brand, be the first national brand.
And, and with that, I mean, we’re, we’re establishing those long-term relationships. We’re, we’re selling that vision. We’re betting on that vision. And, and, uh, through that, you’re making these connections that ultimately, uh, add a ton of value to these, these operators. And, and you can, uh, pass that on and just add that additional value as you, as you scale, almost like an agency does, uh, um, bringing on and, and sort of maximizing their economies of
Alex S.: scale.
So out of
John E.: curiosity, because you, you mentioned you may be opening up in smaller cities that you may not have considered before because you have a great franchisee. Do you think that that means, does that simplify your expansion plans for the delivery business? Cause it’s, Hey. We’ve got this retail franchisee here.
Who’s doing really well that, you know, the delivery business, we feel comfortable that we can build a delivery. Obviously it’s a different demographic, but does that help you in the process of figuring out where to open up the delivery service next?
Dan D.: We, yes. Yes and no. Um, I mean, our hypothesis right now is to identify these potential owners who, uh, want to open and build multiple locations that may want to benefit from the exclusive relationship that we have, uh, with two U and laundry lab, our franchise model, uh, where we’re looking for an owner in Raleigh who wants to open up three of them who, uh, we can leverage all three of their locations at scale.
Uh, opening up that market. Um, and so I think it excites those types of individuals. The two opportunities that we have are, are, are somewhat different where an owner can come in and, and just run a day-to-day laundry mat, be very hands-off semi-absentee. Uh, but that the person that wants to maximize their, their investment and may want to spend a little bit more time in the business can take advantage of that pickup and delivery model.
There’ll be a little bit more hands-on I have to hire a few more employees. So I think it, it clearly kind of delineates the two opportunities when you’re, when you’re looking for that alignment of that investor who wants to pick up and delivery as well. Um, but it it’ll be interesting to learn over the next 12 months.
Alex S.: that is
John E.: interesting. So when you, when you look at how you monitor, do you give a percentage of the volume for the nine? If this is proprietary, please don’t, don’t feel obligated to tell me, but. Somehow you’ve got to incentivize them then because they’ve got to hire more staff or did they just get a percentage of the earnings on, on that?
Did they get some ownership and in the, in the delivery service, how did, how do you guys think about incentivize incentivizing that behavior? So
Alex S.: laundromats, you know, they’re, they’re making money on people coming in and putting quarters in swiping their cards, vending over the counter sales. And then they also have over the counter wash, dry fold.
So if you live near a laundromat, you could come in, drop your bag of sheets and gym clothes off, and they’ll do it for a dollar, a pound. And so all that we’re really doing is going to them and saying, Hey, we’ll bring you thousands of these over the counter wash, dry folders. You even have to go out and get them.
You don’t have to deal with a hundred different people. It’s one, one brand to you coming to you with a, a van or two full of these, these clothes, and just need to process them. And so it really, the incentive for them is. Do I want a laundromat that has 17 to 13% utilization on the equipment that I spent 700 grand on, or do I want 20 to 30% utilization on that, that same equipment.
Um, and I think the majority of you know, of investors and of franchisees are going to say, Hey, I want a more utilized laundromat because it’s going to be more profit, more cashflow, more money in my pocket. Um, otherwise these assets are just going to sit here and not be, not be used. So it’s really a, an asset utilization play.
And, um, our belief is that most will understand that and say, Hey, I’ll hire the, you know, the, the store manager or the other four to six frontline employees to, to process this volume. So if
John E.: you were running, um, laundry room as a laundry lab and you’re, you were a franchisee and maybe you already, it sounds like you may be already think of it that way.
And that that’s Dan’s role in this, uh, one of his roles in this. Um, but if you were to, to think of it that way, what percentage of the business of. The laundry room is the delivery service here in Charlotte.
Alex S.: Yeah, the first location that we built, a little atypical because it is 6,300 square feet. The franchise model, the locations will be anywhere from 2,500 on the very low end, up to 4,000 square feet on the high end.
And so they’re really purpose built for maximizing the cashflow for that franchisee. Um, the reason we have that extra 22,000 to 2,500 square feet at the laundry room is we’re trying to do, we were, you know, the initial thought was, we’ll do the entire city of Charlotte’s laundry here. Um, and so they’ll be less of a footprint, but there’ll be able to handle still a fourth of what we do here in Charlotte today.
So instead of doing $2.2 million in the back door for via to you, there’ll be the added an additional 300 K to 500 K in revenue, um, to their, to their franchise. Okay.
John E.: That, that makes a lot of sense, actually. So. Um, do you think having your app, you know, the th the delivery service that whole service strengthens the customer experience in the store, or are they two different, two different experiences in two different channels is
Alex S.: to two very different experiences because the people going into the laundromat, traditionally, aren’t using the pickup and delivery.
They probably live within a one to three mile square radius of the physical location. Um, so the only,
John E.: maybe they do some mobile payment processing, but they’re really not interacting with the app at all.
Alex S.: Okay. We’re working on some cool stuff now for the franchisee experience. So for the laundry lab brand, the retail brick and mortar brand, um, the franchisees are going to benefit from a suite of tools that show them machine utilization and they can quickly change prices.
Um, and it’ll eventually permeate into the customer experience where they’re using a mobile app. Right now, we have one that’s, you know, it’s basically a, uh, off the shelf version that Electrolux is built with, uh, You know, in partnership with another company, laundry Luxe, that, that, that we’re getting access to, that our customers are getting access to, but we want to come in and eventually have this suite that’s integrated and, um, you know, proprietary from the launch lab experience.
Dan D.: I think the thing I’m talked about there as though it’s still at the end of the day, it’s a, it’s a tool that allow, that provides convenience to the customer. Um, when you’re talking about getting your laundry done, whether you’re the, the, the, the lower end or the higher end end of the spectrum, I mean, uh, the tool still functions the ability to add convenience and convenience matters to both of those types of customers in a different way.
And, and, uh, I think that’s what we’re really excited about bringing sort of the innovation to both of those spaces. Cause it’s, it’s, it’s, it’s newer for the laundromat customer. Um, they’re, they’re used to going in and pumping quarters and, but now they have the ability. Uh, I believe even our app takes EBT and, and, uh, a lot of other things.
Yeah, that’s interesting. Yeah. Um, so it enables them to, uh, uh, maximize their, their cashflow in, in, in convenience. And, uh, what we find a lot of our laundromat customers doing the technology of that their mobile app allows for notifications when their washer’s done or their dryer’s done. So we, we find a lot of our customers will come in and start a wash, go run their errands, get a notification, come back, go run another errand.
And, and it’s just that convenience.
Alex S.: I like their dog ever to skip town. I could,
John E.: no, it it’s interesting. There was a story that, um, that Alex told me at, at some point he showed me 150 pound, um, uh, washing machine, which I knew nothing about the poundage of washing machines. But after you told me, I noticed any.
Laundromat. I always look and they always have it listed. We have 30, 40, 50, and 60, but nothing approaching 150. And I think also you guys worked with Electrolux to re-engineer the foundation, so that this thing could spend 50% faster. And you were thinking strict. I think you were thinking strictly at the time about, well, if we need to pump volume through here, we’re going to want these bigger machines and we’re going to want them to spend faster, which saves a bunch of time.
And I think you were surprised Alex, that you had customers using those machines. It turns out everybody no matter their income level wants to save time. And, uh, and so I think that’s a great example of where the, the delivery business enables a co uh, uh, uh, a scale and a scope that, that you probably might not be able to achieve without the delivery business that actually benefits the retail customers as well.
Alex S.: I mean, absolutely. The machines spin faster, so it means less time in the dryer. And so they’re in and out of there and, you know, 50 minutes instead of an hour and a half, and at the end of the day, people don’t want to sit in a laundromat or anywhere that’s not their home or their friend’s place or wherever they want to be spending their time.
They don’t want to sit in a laundry mat for an hour and a half. Yeah. Well then from an owner
Dan D.: perspective, I mean, you’re, you’re saving on utilities and you’re getting more customers using the machines. If one customer is taking up those two machines for 50 minutes, I mean, you’re, you’re adding more customers, the ability to leverage those machines and maximize revenue, which is a benefits, both customer and owner.
John E.: That’s great. Do you think at some point other. Sophisticated laundromat owners start to pick up on this and start to adopt some of your practices or do they have just such a good business. That’s shooting fish in a barrel that they don’t feel the need to try some of these innovations
Alex S.: you get a, and I think this was exciting about the space in general is the majority is very much, this is how it’s always, but this is how it’s always been done.
This is what we do. We’re not changing the formula works. Leave us alone with your innovation. Uh, which mean to entrepreneurs is, Hey, this is right for disruption. There’s this kind of legacy way of thinking. And then the ones that are more progressive and, you know, wanting to adapt and learn, you know, if there was a pickup and delivery offering, I think that is the topic that’s talked about the most is I’ve already maximized revenue for this one to three mile square radius from my store.
How do I go out and get more of it? And they want to do pickup and delivery for gyms, Airbnbs, yoga studios, you know, dentist’s offices, et cetera. Um, but they’re not sure how do I staff it? How do I, you know, how do I even do the routing? I mean, we, when we first started it, wasn’t because we weren’t. You know, technical in nature, but we, there weren’t tools for us to go do this.
So we we’re doing it in MapQuest and made a spreadsheet that automated the pickup routes based on your day and most laundromat owners, aren’t going to go find a Routific or a this off the shelf software. Cause they’re, they’re not, they’re not used to using tools like that. And so they’re, they have no idea where to start.
It’s our thought is these tools that we’re building that are built for the laundromat industry, they’re going to want to either license this, they’re going to want to convert to a laundry lab franchise just to get access to these things. Um, and that’s an exciting opportunity for, for us as well.
John E.: So what did you learn about each other in a time of crisis that surprised you?
I’ll ask you first, Dan, not to put you on the spot, but what did you learn about Alex that surprised you during this time of crisis?
Dan D.: Um, that he I’m going to Pat them on the back here and boost his ego, but I think that he’s just he’s meant to be a leader. Um, he. I mean, I learn a lot from Alex, always have, uh, he’s always pushing me to be my best.
And, um, I think he looked at, he always looks at this a little bit more practically and, um, a little bit more emotional when it comes to these, some of these harder decisions. And, and so I think he really challenged me to level up as a leader during that time. And it just gave me more confidence in him that I’m, I’m gonna, I’m gonna level up, I’m going to be there right alongside him and, um, go through these tough decisions with him.
Um, and, and ultimately be a better leader at the end of it. Um, cause I think if you break down what, we’re, what we’re really here for, what keeps us motivated. And I mean, it’s meeting people like yourself. I mean, we’ve been able to surround ourselves with awesome, awesome people who have gotten us to be where we are.
And we don’t take that for granted. And, uh, I know we both want to be incredible leaders one day, whether it’s we get that, that stamp here or the next thing and the next thing and. And so that just really, uh, solidified confidence, more confidence in, in being there right alongside of Alex. And during a time that no one has experienced before.
And all that we could do is take the, the feedback and the recommendations from people who have been through like similar things, uh, but spin it in our, into our own and, and, uh, communicate that, uh, effectively, internally. And, and I think we did a really good job with that. If you were to ask our, our employees and yes, we had to make tough decisions, but, um, everybody understood why, um, they were logical.
Um, and, and so
John E.: it’s interesting that you point that out because I think character is most often, um, you know, we, we shine a light on character when we go through bad times. It’s very easy to be a good vendor when times are good and everybody’s making orders, but it’s when. It’s when something breaks that you really understand the character of a person or a company.
And, and I always tell, um, the people that I work with when things are bad, I’m like, this is how we shine. We make it right in a bad time. And it sounds like, I think you could say the same thing about leadership qualities. It’s easy to be a good leader when times are good. It’s not, I mean, I don’t want to discount how important it is to be a good leader when it’s good, but it really, really matters a lot when times are bad.
It’s just a, and I think that’s when you learn the most about people. So that’s interesting that you saw that in Alex. Um, now you gotta follow that one up, Alex. I’m interested to see how
Alex S.: you’re going to try to top that. I don’t know if it was anything that I was surprised by. I think it was maybe a continuation of something that I was originally surprised by when we first started and that was after I’d sold way quash.
I’d tried to do. You know, what does now to you with someone else out of you? Why? So someone that’s with people that were smarter than both Dan and I have a work ethic, have all that. And as soon as you know, one school, cause we were trying to go after universities instead of cities. When we, the second iteration, when we tried it and we had one school saying no, and those people were, I don’t know if this, I don’t know if this is kind of work.
We just one, no. Are you kidding? You know what I mean? Like one customer that doesn’t work for him, you’re done you’re out after like we’d spent a lot of time talking about it, working on it and was like one school said no, and you’re out. And you know, Dan, on the other hand was originally helping us build a website and then got more and more attached to it.
You know, like the idea and was willing to do all the things that I shared at the beginning of the call, quit his job, pack up his life and moved down here. And so. That didn’t stop. When the pandemic happened, we had to make these hard decisions. It wasn’t, I don’t know if I can do this. I got to, I just moved down to Atlanta.
I’m done. I’m doing the next thing. It was, it was, you know, like you said, you probably got a little bit more emotional. I got emotional about it. It was tough. Um, but it was very quickly. All right. Yeah, I can, I can move again. Back from Atlanta to Charlotte who now has his now wife is down there. He’s had her move like four times and it wasn’t.
Nope, I’m done. I’m out. I give up, I quit. It was always, it was tough, but we’re going to figure it out and it’s like just that loyalty and willing to persevere. And so I guess I wasn’t surprised, I guess I continue to be surprised by it. Eventually everyone has their limit and I wasn’t sure when that was going to hit and it didn’t hit.
And, and that’s the kind of person that, that Dan is, is, Hey, I’m going to figure this out. We’re going to either take the ship to the promised land or we’re going to go down and sink in with it. And we’re not going to give up on it or give up on each other. So I’m smiling as
John E.: you tell this story, because in.
As we were growing level, Chris and I would we’d pull up after something really shitty happened because let’s be honest, that happens all the time. Something bad happens to your business. And every time we’d sit down before we’ve had a chance to debrief on it, like we’ve, we’ve sent the email, Hey, this is what’s going on.
We got to deal with it. Let’s sit down and have a meeting. And one are here. I would both, um, just Quip, like let’s just shut down. We’re done. We can’t overcome it. It is funny to think it was a running joke for us because there’s so many things that could make you shut down, but you don’t. And when, when you hear about somebody, I think that’s the difference between a founder and an employee is that the employee will give up much earlier than, than a founder will.
Um, so that’s interesting that, that, that you were able to appreciate that because your second go around, you know, you, you, you saw that firsthand. And that, to me, what’s interesting is that you still need people who are. Top performing motivated high work ethic employees. And I think that’s a hard part as a leader is to be able to separate the two and say, well, Alex and Dan are putting up with a whole bunch of bullshit employees don’t necessarily put up with the same level of bullshit that founders will, but it doesn’t mean that they can’t be employees.
It just means they can’t be a founder. And I, and I think that’s something that I I’ve struggled with in businesses is you it’s so refreshing when you see the founder mentality. And so
Alex S.: it, you can’t let it
John E.: crush your soul, but it always does. I’m like, why is this person thinking this way, this isn’t, but it tells you they’re not a founder.
They’re not a partner. They’re not, they’re not, uh, they don’t have skin in the game. The way that, that the partner does.
Alex S.: I think that was awesome to experience too. And it’s cliche, but you know, people say lead by example. And I think when him and I did put our heads together and you know, behind closed doors, of course we be emotional.
This is tough. This is hard. What do we do? No one’s ever faced this. And you almost want to find these reasons to. No discount what’s going on. Hey, it’s the environment around me. But then you realize at the end of the day, we’re in control of our destiny and we have a team that’s looking up to us and looking for guidance.
And so we needed to come out. We needed to be as strong as we can and, and, but also vulnerable and, and allow them to be empathetic to what’s going on. And that’s exactly what happened. It was amazing to me to see the team rally at a time that, you know, we’re having to make layoffs or I’m gonna shut markets down.
The world’s like, you know, people are freaking out. I mean, I mean, this has been going on for over a year now. Like, and the team was immediately ready to go. We believe in the, you know, the vision that as we always have, and we believe in the direction that we’re going, and this is just a different way to get there.
It’s the same end. Um, and so that’s been, that was awesome to experience too, just to see those employees, as you mentioned, who might not have as much skin in the game, say, I believe in these guys, I believe in what they’re telling me. Um, because we believe that and, and, and that’s, what’s important is to be authentic and, and.
To be transparent and vulnerable, especially at times that are, are tricky like this,
Dan D.: we had to do just spin it and not even really spin it. Cause it is what it is. It was, it was, it was just another challenge that we had to turn into an opportunity. And I, I think we were fortunate enough to quickly, I think quickly make that, uh, decision and communicated effectively.
And, and like Alex had, I mean, everybody was bought in, it was, it was sort of the same vision, just a different means to get there. And, but it made sense. And so I think that just built up more confidence in, in that smaller team and, um, looking back on it, I mean, that’s what I’m most excited about is what’s been the most fun in this whole thing is, is that is like that really early days of grinding with those small, uh, small team and everyone’s wearing multiple hats and.
We’re back at that level. And yes, I want to get back to, uh, being big and multi a hundred million dollar company and we will get there. Uh, but this is just that really exciting opportunity to kind of build, build up what was exciting in the early days. Again.
John E.: That’s great. Um, and you guys will get there. I can tell already who knows how long it is, but hopefully with the vaccine and, uh, and, and some of the more promising numbers that are coming out, it’s, uh, you know, the, the macro environment moves in the direction that you need to go.
Um, just out of curiosity, did you guys go after any PPP money? Cause you had a pretty significant payroll at, at, at the time of, of COVID
Alex S.: we did. So we, you know, through the investor network again, through the founder network here in Charlotte and beyond, I mean, people are always sharing. Really helpful information.
And we were fortunate enough to benefit from both rounds of PPP. We’ve always done the R and D tax credit. We’ve always, you know, we’re now we’re doing the, the ERC credits. I mean every bit of relief out there, I think you’d be foolish. You’re doing a disservice to your employees or investors yourself. If you don’t go take advantage of the, you know, the packages that are out there to help for this exact reason, whether it’s a pandemic or it’s a R D tax credit, that’s, you know, that’s existed for awhile.
Um, you have to take advantage of it. I agree. I
John E.: agree for sure. Um, what about operating the store during the lockdown? What extra precautions did you have to take to keep the thing operating or did your operations have to change as a result of the pandemic?
Alex S.: Yes. I mean, I would want to use this opportunity as a time to, to, to gas, sewing up a little bit back Miller, this guy on our team.
He. Yeah, I think it was even in February, he was like, Hey, we need to, this is doomsday. We need to order masks and hand sanitizer. And I remember me and our head of operations at the time were okay. Yeah. Like we need to get some of this stuff and you know, we, we allocated a budget to it and got it. And then I’m sure enough, you know, months later people are storming Walmarts and Amazon sold out and all of this, this know PPE is gone.
He got you to buy toilet
John E.: paper too. Hopefully
Alex S.: he checked all the boxes and got it. And so thankfully you mean from the beginning we were doing social distancing before. That was a term that, you know, the CDC even put out, he was back, was on, Hey, we should have folding spaced out by you Bay have one in between people.
And so he was like, yeah, the godfather of, of making sure that the place was safe and we didn’t miss a beat again, we grew throughout the whole thing. I think a lot of that can be attributed to his foresight, making this experience. Um, what we’ve always tried to do at the laundry room as, as make it an elevated customer centric experience.
And I think that’s part of the reason why the laundry room grew instead of declined, is that people recognize they actually care about me. This isn’t about squeezing every penny they can out of me, like a lot of the other laundromat owners. This is, Hey, if your stuff’s in the washer and you’re waiting, wait in your car, or the benches outside, we want to try and be safe and not, you know, cause there’s people in there there’s a lot of people waiting and congregating.
And at the time people didn’t know, you know, they knew what they didn’t know and they weren’t sure. Is this going to spread by me sitting and standing here? Or is this not? And so we tried to take the approach of let’s just be safe and people, I think appreciate. Yeah, it
Dan D.: was just another way to differentiate ourselves.
I mean, laundry, laundry mounts are, I mean, it’s a competitive market. There’s. 35,000 laundromats across the Yukon street,
Alex S.: right across the street from another.
Dan D.: And it was a, it was just, yeah, a way for us to differentiate ourselves and show that we were there to build an experience for our customers. And we gave out, we decided to give out free masks and sanitizer where, where others either didn’t have it or would charge for it.
And, and we just wanted to set that bar high to, to differentiate ourselves and ultimately knowing that it would benefit us from a business perspective and it did. And now we’re fortunate that laundromats were deemed an essential business. And so we were able to remain open and, and adhere to a lot of those guidelines and then quickly get back to, uh, business and, and setting that, setting that standard.
And, and, and now I think that’s ultimately, what’s going to help differentiate us in, in a franchising world and seeing the success that we had during the pandemic. Uh, but also, um, How we, we implement those, those processes very quickly and others can benefit from kind of following those same things.
John E.: So I imagine because it’s not just the customers that benefit from those policies, but I’ve got to imagine that your employees see that cause it’s stressful.
You’re being told to go work in a laundromat and you’re or a grocery store or any other, um, essential, uh, um, work category. Can you maybe speak to how much that helped the uncertainty for your employees? The, the policies that they’re seeing, or is it more about the leadership or is it a combination of everything?
Alex S.: You know, I think it was a combination of all of the above. One of the first things we did was we opted to pay our frontline employees more that were at the laundromat, working with customers, um, you know, being around dirty clothes, all these germs. We didn’t know how long it lasted on clothes, on metal, on plastics at the time.
And we know, we know a lot more now. We wanted to pay them more to incentive, you know, to, to incentivize them, but also reward them for taking that, that additional risk. Um, they knew about the policies that we’re implementing. Um, they knew that we had a plan in the event that there was a positive case at the facility.
So you had no positive cases at the facility. Eventually did again, we put our policy in place. We had someone come out and clean and, you know, were shut down for a few days. And I think just knowing that we were even thinking about it and considering them, and it wasn’t just reaction, it wasn’t a reactive measure.
It wasn’t a, ah, we don’t care. We’ll figure it out. If it happens kind of thing. We did have these proactive plans in place. And I think, uh, I’d like to think, I want to, I want to go ask them now in hindsight. Hey, did you appreciate that? Or was it, you know, how did you, how did you feel about it? But no, one’s left.
No, one’s quit. I feel like they value it. I feel like they appreciated it. Um, and it was just, it felt like it was the right thing to do.
Dan D.: The other thing, I think we did. That we found an opportunity on is just education, like watching consumer behavior change and educating our frontline workers on ultimately the importance of their job.
I mean, we were, yes, it’s a, it’s a luxury service, but we were finding more and more healthcare workers using our service because they didn’t have time to do their laundry. And so you’re still saving the sanitization component and ultimately came in, um, the, the temperature of the dryers, uh, actually killed it.
It operated at such a high temperature that it would kill those viruses. And so you weren’t exposed to those. And so there’s a lot of educational components, not only our process and how it helped save people time. Um, but just even giving those people their time so they could go fight this, this, this craziness and, and, uh, uh, um, understand how that they are going to, uh, change their new norm.
Whether it’s a teacher who has to now do virtual learning or teaching, and they don’t have as much time. And so using that as an educational component as well, to reiterate how important the vision still was, uh, to why we were there cleaning people’s clothes.
John E.: It’s interesting. Cause it’s, it’s, it’s kind of reframing your purpose.
You’re you’re able to reframe because there it is. It’s, it’s very true that, Hey, these, this has become a very important service for a very important, uh, group of people that, that that’s an awesome lesson. And I think that again, COVID created an opportunity to do that, but it’s something we can all do in our businesses all the time.
And we shouldn’t wait for a crisis to do these types of things and figure out what is the right way to frame. The mission for my employees, because what it sounds like is you’ve created you, you were able to articulate a mission for your employees, that they could take some pride in, Hey, we’re, we’re helping this economy in this new norm or whatever this is that we’re dealing with.
We’re helping people to cope with it. And that, that that’s great. So, and, and I know that we’re getting, um, coming up on an hour here, so I want to be careful with your time. I’ve only got a couple more things I’d like to ask you guys, if you were to quantify it as a percentage. And again, I don’t want to get into any proprietary details, but how much would you say your business has recovered from the COVID hit?
Are you better than where you were? Or are you back to where you were? You know, w H how do you think about quantifying
Alex S.: that yes, a laundry, the at-home pickup and delivery laundries back to above pre COVID levels so that that’s continued to grow and thrive, which was honestly shocking. We thought people being home, you know, they can throw a load in while they’re working, and it turns out these families.
And they’re now playing babysitter and, and, you know, meal prepper and work, and they’re working there. So now they’re wearing three or four hats in the day. Yeah. Mom, school teacher, homeschool teacher, all the above. And so they’re looking for as much help as they ever have, by the way, if we don’t
John E.: as a society, appreciate our teachers after this, we never will.
Alex S.: And so that’s exactly it is people wanted that help more than ever. And so we’ve seen a laundry continue to be outsourced. Our retail business has grown. As I mentioned in, you know, 20 plus percent, the dry cleaning is really been the drag on our businesses. It was, you know, half of our, our revenue and that’s down, you know, at one point it was down 70% people.
Aren’t going into the office. They’re not wearing blouses dresses, suits, um, and that’s returned to not normal, but it’s still down 30, 30%, 30, 40%. And I don’t think that’s going to come back until offices start opening up again. And people are going back. And even then, who knows, are there any long lasting implications of people who are just like.
CPA firms that are all in jeans now because they’re all used to it. And it turns out we don’t have to, but. I don’t know. I see people on zoom calls, wearing button downs and slacks. So I I’ve hoped that once you get back into an office, there’s gonna be peer pressure and people are gonna get back into dressing up a little.
John E.: I mean, I think people have an innate need to dress up and look nicely. So we’ll, we’ll figure out an excuse either way. I suspect it was a nice break.
Alex S.: I saw this tweet. Yeah. I forget who it was from, but they were saying, Hey, for the people that think that the world isn’t going to get returned back to exactly where it was here’s what’s going to happen is you’re going to have an investment bank or a bank trying to win a deal.
And everyone’s going to think you can do it remote. Cause that’s what we’ve been used to for the last year and a half. And then one day some sharp up and coming, banker’s going to get on a plane and fly to that client and meet them in person and wear a suit and shake their hand. And they’re going to win the deal because they did that.
And then everyone’s going to follow suit. I agree. I read that. I was like, okay. Yeah, I think we’re, we’re we’re going to be fine. Cause that makes sense. I mean, nothing can replace the face to face, face to face human interaction. I mean, being here now talking to you is way better than us on three separate computers, trying to talk through it.
John E.: Oh, yeah. D um, I mean, I’ve had to do a lot more zoom interviews and hands down the ones where you’re in phase, you know, in person. Uh there’s. There’s just no comparison to it, for sure. Um, so hopefully that does come back. So how much further do you think your business recovers in 2021? I mean, do you, do you think that this is a big year for you guys, or is it more just set the stage for 2022 to be a big return to growth
Alex S.: mode?
More of the latter? I think this year has really, you know, Dan kind of brought it up earlier, is that to you in Charlotte is doing just about as well as it ever has done. It’s this new pivot into franchising. We’re almost complete garage floor start up again. And I think the success of that is really going to be what it’s going to be.
What dictates the answer to that question is if franchising takes off and there’s product market fit, I think there’s an opportunity to be bigger than we’ve ever been this year. If it’s a slower burn and it takes us here to build foundation. The next year is the year that franchising really pops and I’ll say it would be, it’d be next year.
John E.: Awesome. So we’ve kind of hit on this, but one of the things I realized during the process watching you guys is that you, you know, you, you’d raised a nice chunk of money. Um, you started to deploy carefully looking to create options and optionality and opportunities. And when, when the crisis hit you quickly cut off that, that small spend already.
Um, and obviously that has served you well. Um, it it’s easy to imagine how bad it would have gotten if you hadn’t raised the cash or if you deployed it quickly, relying on that next round of funding that a lot of entrepreneurs tend to, and probably the folks at wash U and spin we’re constantly, depending on, um, I, I think it’s a good lesson for an entrepreneur during any time we, we counsel a lot of companies that we talk to on don’t focus on raising a $20 million round and then chasing hockey, stick growth, build a business incrementally, raise more money than you need, spend less money than you raise and, and, and build a fundamentally good business.
And, and, and don’t get stuck on a course of action when things change and need to be able to kind of, you know, have your head on a swivel and, and respond to facts on the ground. I think that’s advice I would give a startup at any at any point, but I think it gets amplified during a crisis. Um, what other lessons did you guys learn other than kind of that whole overarching theme of let’s let’s raise more money than we might need.
Let’s deploy it more slowly than we think we should. Um, and, and be very in the end, very conservative with, with, with the cash, obviously that served me well, but what other things did you learn? Through this process. Were there other things beyond those kinds of basic business principles,
Alex S.: maybe being an opportunist? Yeah, I think
Dan D.: that’s going back to that. We kind of talked about it earlier is just you, you can’t ever get comfortable and. I think that’s why founders and entrepreneurs are wired a little bit differently as you you’re unlike
Alex S.: being uncomfortable. Yeah,
Dan D.: exactly. Yeah. And once you get comfortable be like this something’s wrong.
Yeah. Something’s wrong. And we ask ourselves like, what is wrong? Why, why am I feeling like this? And, and uh, I think we I’ve become a lot more uncomfortable with being comfortable. And, and, uh, I think that’s just like all a big lesson. You need to continue. You, you just can’t get complacent because then that’s when you just start settling and things start winding down.
And, um, that’s why we’re wired a little bit differently. We want to feel uncomfortable. We want to be pressured into a corner and find our way out of it. And, and, uh, this was the ultimate corner to get sort of pressured into at least for, for now. Um, and so, uh, that, that was a huge, huge lesson that like that more than ever, that continue to be uncomfortable.
That’s when you’re going to learn the most. I mean, I can’t. Even think of an opportunity where we’ve a, we were able to learn more than we were just dealing with a lot of this and pivoting and tough decisions and new new opportunities and communicating new leadership, et cetera. Um, so I think that’s, that’s a major, major.
John E.: Yeah. I think there’s a lot to be said for operating in that productive discomfort zone. You don’t want to be too uncomfortable, but I think people generally. Thrive when there’s just enough discomfort to where you have to innovate. You have to think you have to dig in and, uh, and run with it. Well, look, guys, this has been great.
I really appreciate you joining me today. I look forward to our next conversation, whatever that may be. Um, hopefully it’s not how Dan got in trouble
Alex S.: for
Dan D.: part three.
Alex S.: All right, guys.
John E.: Cheers. Keep up the good fight. Love what you guys are
Alex S.: doing. Thanks for. Thanks for that.