Reprinted from American Drycleaner, The Industry's No. 1 Magazine (www.americandrycleaner.com)

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Saving Consumers’ Prized Possessions, Insurance Money And Operators’ Profits, The Sky’s The Limit for This Spinoff.

As long as people have given value to their possessions—be it a sentimental attachment or a more concrete, financial value— they have attempted to rescue them from destruction.

But never has the business of rescuing damaged possessions been as big as it is today. Restoration is no longer a matter of saving a cherished wedding gown or antique quilt—it’s about reclaiming any item still useful to the customer and cost-effective enough to rehabilitate for the insurer.

“It’s one of those niche markets people are starting to exploit,” says Anthony Berardi, executive director of North American Restoration Dry Cleaners (NARD), an association of independent restoration operators. “Fifteen or 20 years ago, nobody wanted to do this kind of thing. But because retail has been in a slump for a while, the option seems to be the golden egg.”

Long an offshoot of drycleaning, restoration has come into its own as the add-on that can easily eclipse the core business. “Our licensees had average annual growth of 25% over historical growth,” says Jim Nicholas, president of FRSTeam, a Hayward, Calif.-based franchiser of restoration services.

At least part of the growth is due to franchisers that help drycleaners sell, collect and complete restoration jobs. Since the Certified Restoration Drycleaning Network (CRDN) launched in 2002, insurer awareness has grown, making the business more lucrative for everyone involved.

 “We wound up completing 22,000 claims across the network last year,” says Wayne Wudyka, CRDN’s founder  and CEO. “We’ve created a tremendous amount of volume in the industry. I don’t know where the top is, to be honest with you.”

CRDN now covers 94% of U.S. markets and plans to take its concept worldwide; affiliates average $700,000 a year in sales. FRSTeam and Evans Garment Restoration affiliates overlap CRDN in many markets, alongside independent operators.

“Competition is good,” says longtime independent restoration cleaner and NARD member Bruce Gershon, of Kansas City-based Arrow Fabricare. “You need to have competition out there to keep you sharp and innovative.”

CREATING A MARKET. Restoration itself is an innovation of sorts, based on the discovery that it can save 80% to 85% over replacement costs on a typical insurance claim. The 20% a drycleaner keeps is money he wouldn’t see if an adjuster hasn’t heard of restoration; if they have (and more do every day), it’s like printing money.

Most of a contents claim is soft goods— clothing, bedding, drapes, rugs, furs, stuffed animals, etc. Consumers would often rather get them back than buy new, and restoration cleaners “can do suitcases, shoes, drapes, blinds [and] electronics,” Berardi says. “Not everyone has the same service, but for the most part, they’ll clean anything they can.”

Even though everything in a claim might be rescued, however, it rarely needs to be. “We evaluate a job like it was my house,” Nicholas says. “We could walk in, take everything and clean it, but there may be whole groups of things the homeowner doesn’t want back—like clothes the kids have grown out of. That money can be applied to another part of the claim.”

“We work with the client to avoid cleaning what we don’t have to,” Berardi adds. “A lot of our guys work with the Salvation Army and donate old clothes for the client. The goal is reducing the size of the claim and making the best use of the money.”

Arrow’s team once convinced an elderly couple to clean $10,000 worth of goods instead of $33,000 worth. “It doesn’t sound smart if you want to make a profit, but adjusters appreciate it,” Gershon says. “We give the tax-deduction receipt to the insured, and show the insurance companies how much we saved.”

BIG BUSINESS. Of course, not every operation can handle jobs of this size. It takes capacity to clean so many items, and storage space to hold jobs until disaster victims have someplace to put them. They also have to float clients the money.

“Alot of work has to be stored, and to add insult to injury, you have to wait to get paid,” Gershon says. “It’s expensive to send men and trucks out. If you’re starting out new, you’d better have deep pockets. You’re thrilled when you get the first $30,000 job, and then you have production problems. Everybody goes through growing pains.”

Arrow and other independents grew restoration divisions over decades, but most cleaners don’t have that luxury. One reason that the franchise organizations have taken off is that they can help avoid those pains.

Franchisers usually charge a startup fee, plus ongoing fees of approximately 6% to 8% of sales. In return, affiliates get salespeople and ad campaigns, protected territories, training in operations and management, and software and support.

They also get name recognition. “The brand name goes a long way,” says Terese Jung, operator of CRDN of Central & Western Iowa in Des Moines, the network’s only restoration-only affiliate. “It takes a lot to build a relationship, it’s true. But it pays off—a lot of adjusters see CRDN, and they’re relieved. It’s a trust factor.”

Independents must perform these functions on their own. “Franchises are great for people who want to learn an industry and need the structure,” Gershon says. “We have ways of competing with the franchises. We point out that we don’t have the costs of a franchise, and don’t pass them on to customers.”

Fortunately for independents, insurance adjusters often give disaster victims two or three providers to choose from. “My philosophy in building the restoration business is ‘Do a great job, and hopefully the insurance company will call you again,’” Gershon says. “Do a good job and do it at a fair price, and you’ll get more work.”

Restoration cleaners also need to be sensitive to the victims of a disaster even though they aren’t writing the checks. “Their lives are turned upside-down,” Gershon says. “We’ve been on fires where someone has passed away. You have to know how to handle people who’ve had something horrible happen in their lives.”

Now, getting more work will depend on growing awareness among contractors, insurers and the insured to make every household fire, flood or other disaster the job of a restoration drycleaner first. “We need to educate the insurance carriers to show what we can do,” Jung says. “We’re going to go after every job.”

 Written 9/18/07 by James Fenyohazi

 

2007 was an exciting year for both NARD and the entire fabric restoration industry as a whole.  We have seen the once mysterious world of fire and water restoration dry cleaning receive the spotlight of the industry.  We have witnessed the emergence of many new players and the decline of some of the once more powerful players.  We have experienced some growing pains as an organization.  However, we have learned from our mistakes and are headed full speed ahead with a plan that our members can stand behind.  We enter the 2008 fiscal year with a clear vision; a dream for the future and goals that we believe will lead us all into even greener pastures.  We have many unique and exciting opportunities awaiting us and as a group of like-minded entrepreneurs, we will definitely enjoy the journey.

 

Like never before, the world of fire and water restoration dry cleaning has seemingly become the focus of the dry cleaning world.  Our once arcane world of mystery and unheard of profit margins has become the desire of everyone in the industry.  Seemingly, overnight, restoration work became the flavor of the month.  “Diversify!” they shouted from the rooftops.  We have seen every soap company begin to market products for restoration.  The NCA is offering training classes on how to process fabric restoration work.  Kenny Slatten marketed a book on teaching dry cleaners how to get this elusive and profitable work.  Tailwind Systems has developed a tagging program for adding restoration work into your plant.  Countless articles appeared in trade publications promoting the benefits of diversification and the need for the average plant to begin doing restoration work.  So what does all of this mean?  You guessed it, increased competition and awareness.  As never before, we are seeing more competitors entering the market as they are lured in by soap salespersons, friends in cost groups, industry associations and franchises. 

 

          Many of us can remember a time when IARD and then APRD was the elite group of restoration cleaners.  These were the pioneers of the industry that had a huge advantage of being the first major players and having the ability of sharing information prior to the emergence of the internet.   

 

          NARD has used the fiscal year 2007 to really find itself in this ever-changing world of restoration.  We have decided that we were not content in simply being a cost group and that we were capable of much more.  We elected our first board and hired our first director to help us develop our vision and achieve our goals.  We learned some very valuable lessons about fiscal restraint and the need for all our members to be actively contributing to our goals.  We learned what will work, by experiencing what will not work.  We are hopefully much wiser and better prepared for the years ahead and the challenges we will face.  NARD played a major role in the collapse of APRD and the negotiations of First Team.  We went into 11^th hour in our First Team negotiations but in the end, all but one of our members decided they valued their independence more than the desire to contribute to a national franchise.  Through much prodding and probing and debate, I believe we have set a course that will lead all of our members to emerge from the ever-crowding fields of competition.

 

          We have decided to keep our informal, honest and sometimes unbridled spirit that we all enjoyed as a cost group as the backbone of our organization going forward.  We are steadfast in our independence and ability to take on all comers; have them be franchises, independents or other organizations.  We want to keep the benefits of a cost-group while exploring the potential of regional and national coverage.  We have positioned ourselves as the local market leaders and the trusted ally of the insurance industry through our ‘Scope of Loss’ marketing campaign.  We have played a major role in the development of Alacrity’s pilot program and the opening up of the once exclusive Contractor Connection.  Our members are receiving jobs that would not have been possible a year ago.  Our members are growing their businesses, some at extraordinary rates.  Our profitability and growth rates are dramatically better than any industry averages.  We have developed a plan that we believe will allow each member to exploit their local market with the assistance of bordering members, without having to pay royalties, franchise fees and being locked into a small territory.  We have members who have consolidated and focused exclusively on restoration.  We have members who have invested in state of the art facilities to process the influx of new work.  We have welcomed Anthony Berardi as our new Executive Director and he has his marching orders for the coming year.  Anthony has already demonstrated his eagerness to advance the organization in the short time he has been with us.

 

          As 2008 quickly approaches, NARD is poised to grow both organically and by developing new members in strategic markets.  We are steadfast in our desire to add the independent market leaders that will both benefit NARD and benefit from NARD.  We believe we will be able to attract elite members with our new industry presence instead of exclusively having to recruit then—as in the past.  We want to methodically add neighboring companies that will create a symbiotic relationship allowing the regional members to grow beyond their individual capacity.  We will only add the qualified member that meets our requirements and that we feel will live up to our standards.  As our organization grows, we will explore creating regional associations within NARD that will retain the cost-group structure and exploit region-marketing opportunities.  If national coverage were to occur naturally, we would welcome that day, but we have no intention of pursuing national coverage simply for that end.  As a group, we generate and share so many valuable ideas and experience that we are all raising our level through a friendly form of competition within NARD.

 

It is my personal belief that the large independent fabric restoration company will always have an advantage over the region franchise licensee.  The state of the fabric restoration industry today reminds me so much of the restoration company industry toward the end of last century.  Franchise after franchise merged and people from other aspects of home service were lured in the ever-crowding field of restoration.  People quickly and blindly bought up franchise after franchise with increasingly smaller territories and growing requirements of which chemicals to buy and how to run their businesses.  When the smoke cleared in almost every market, the largest and best player was the independent player who resisted the temptations of the franchise and the sirens song of national leads and went at it alone.  We all have such extraordinary opportunities available to us.  We can; pursue work from any source, freely develop a large geographic area, open satellite offices to expand our area, pursue work from third party administrators such as Alacrity and Contractor Connection, and explore electronics cleaning and even contents cleaning.  We are limited only by our imaginations and our desire to grow our businesses.  It is the goal of NARD to help each individual member achieve his or her individual career goals within the framework and assistance of NARD.  NARD is a resource, a sounding board, an advisory board and a voice of reason and honest clarity.  I hope everyone can see the present value and the future potential in what we are developing with NARD.  I want to thank everyone for the opportunity and honor of serving as the first president and to thank all the members who dedicated their valuable time to advance our cause, especially the members of the inaugural board and those who assisted in the committees.  I implore all NARD members to get involved and contribute where and when they can.  Everyone has something they can offer if even only time and energy.  With the present framework, I truly believe we can experience exponential growth in terms of members, productivity, profitability and industry awareness.  A year from now I hope we can look back at this year and our humble beginnings with pride and satisfaction.