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Joint Venture Warrants a Long, Hard Look (Part 4 of 4)

Another institution in our area is proposing a joint venture on a new laundry facility to serve both of our institutions and perhaps some smaller outside accounts. Where should I begin in identifying the pros and cons of such a venture, and how can I estimate the impact that a joint facility could have on my overall operation?HOTEL/MOTEL LAUNDERING & LINEN SUPPLY: Bill Kartsonis is chairman of Superior Linen Supply Co., Kansas City, Mo. He's certified as a Master Hotel Supplier by the American Hotel & Lodging Association (AH&LA). His company warehouses and distributes linens and uniforms in addition to washing and renting them.
Where you begin depends upon your perspective. Let’s face it. Your first concern is, “How is this going to affect my job? Am I going to have the same income? Will I still be the head of the new laundry?” If you’re a privately owned laundry, you’re saying, “Here we go again.”
In recent years, when hotel companies have compared the cost and benefits of such a proposal against those of using a commercial laundry, they’ve decided not to make the investment in new physical plants for laundry.
In truth, many joint ventures are about someone building an empire as much as they are about serving the customers.
Where will the new facility be located? Will construction of the new facility free up space where the laundry is currently located? Can this space be used to produce revenue for the hotel, such as by creating conference rooms?
Is labor available at the location of the new facility? Will there be substantial energy savings? Are there alternate fuels available? Is adequate water and sewer available at fair cost?
What will the synergies be? Will all properties use virtually the same products? How long must we commit ourselves to the new operation? Is there a guaranteed cap to my costs? Something to assure the proposed savings?
Who’ll operate and own the facility? Who must bear the initial costs?
To arrive at a wise decision, you need lots of information and time to evaluate it.
Don’t overlook the most important element in operating a large laundry: management and supervision. While efficient equipment and a productive layout can make things better, no design and theory can negate the need for talented management. Workers still need to be trained, scheduled, coached and monitored. This is hard work, requiring commitment and oftentimes physical stamina.
And just think how many fewer human resource issues there are to deal with if you contract out the laundry.COMMERCIAL LAUNDERING: Richard Warren is the general manager of Institutional Services Corp., Conway, Ark., a commercial laundry that provides COG, rental and linen distribution services for healthcare clients. His experience also includes OPL and industrial laundering, linen supply, and leather/fur cleaning.
There are several levels of interest or territory in this question. This will be a commercial laundry. Are there other commercial operations in your area? It’s difficult to judge what their reaction might be, but there will be a reaction.
Do the two facilities in this new venture have equal expectations from the laundry service they now receive? If either facility is “in-house,” I doubt that the expectations are equal. This could easily raise the anxiety level. Will the two entities view themselves as owners, or customers? There’s a difference, and it will impact the laundry service.
Which facility will have its laundry processed first? When are the deliveries going to be made? Will the smaller outside accounts view this move as positive or negative? How will the decisions be made about equipment style and brand? Liquid or powder?
This is a merger, or marriage, and there may be considerable posturing. If a consultant is used, these questions will be addressed in some organized manner.
If there’s been an in-house operation, there will be some changes made. One of the biggest shocks is when the finished goods are weighed instead of estimated. Probably 90% of in-house laundries get their volume numbers by multiplying the washer loads by machine capacity. Any system will work as long as it’s consistent and answers questions to everyone’s satisfaction.
But now you will be charging for this work and you won’t be charging by the load. If your volume is off by 10-30%, and this is not uncommon, your real income will be dramatically different than estimated. Someone may have to explain to administration that there’s a difference.
Will you have enough labor to get the work out? Remember, you’ll now be contracted to get the job done. Some commercial accounts will require a performance bond. They have their reasons for making that requirement and will not be reluctant to enforce it should the occasion arise. Pricing your work may be a surprise, too. Are you going to be able to operate at a competitive price if your wages are above average?
Perhaps the biggest change for laundry management will be the constant pressure on production. You’ll need to exercise understanding with staff as those changes are implemented. You may lose some staff because of your change in direction.
But all is not negative. If we prepare for the negative issues, we will see positive results. Commercial laundry operations are exciting and can be quite enjoyable.

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