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Starch or No Starch?

It started out as another typical weekend. I was running errands around town before heading off to EMC World 2016 in Las Vegas. Ah, Vegas. My favorite place to visit — at least once monthly — for the past 20 years. But first, I had to make sure I was packed appropriately. Again.

So I headed off to our local dry cleaner to pick up my travel wardrobe — including the one business jacket that I actually own. That’s when I ran into Larry Walsh. Yup, Long Island is a very small island. And Larry and I run in similar circles — constantly seeing each other at super markets, movie theaters, concerts, political rallies… and our mutual dry cleaner.

On this particular Saturday the line at the dry cleaner was really long. So Larry and I made some small talk. I mentioned that I now pay a flat monthly fee — every month — to make sure my one business jacket is ready for travel every Monday. I really love the predictable model and the SLA (starch level assurances). If you’ve seen my business jacket you know how carefully I manage and maintain my attire. The only thing I take more seriously is proper beard grooming (twice daily; I’m Italian). But that’s a blog for another time.

You Don’t Say…

But that’s when Larry weighed in with a slightly different view. He thinks our mutual dry cleaner — and many like them — will struggle to maintain profits. After all, he noted, I keep coming back to the dry cleaner with big demands for spot removals, button replacements, and other margin-killer requests.

At first I thought Larry was just trying to stir some controversy. Gradually, he raised his voice. And I raised mine. Heck, maybe I raised my voice first. I don’t recall. I just knew this was a really important debate. Perhaps as big as the Pink Floyd vs. Rush debate that Larry and I had back in ’88. (Please don’t ask us about it; the settlement was confidential.)

But I digress. Back to the current story: The line of people at the dry cleaners started to listen in. Firemen. Police officers. Restaurant and hotel employees. All these folks from different walks of life. They had very little in common. Except for the fact that they all needed their uniforms cleaned and couldn’t decide which payment plan to embrace — one-time cleaning fees or monthly fees for unlimited dry cleaning. And besides, what’s a fair price for that monthly dry cleaning service?

I started to get the sense that this debate could last for years. Perhaps from 2008 to present day and beyond. Finally, one person in the line grew tired of our bickering, and asked Larry and me to leave the store. We realized our shouting was rather juvenile. We both apologized to the store owner and the patrons, and we left. (But please don’ call it an exit.)

That’s when Larry mentioned that we still needed to settle the overall debate. So we grabbed some lunch together at a local cafe. Larry ordered a la carte. I ordered the all-you-can-eat buffet and had about 20 servings… a bit less than my usual consumption at this particular locale.

And then it started again. Larry mentioned there was no freaking way the cafe could survive with customers like me coming in and consuming their inventory of finely prepared imitation crab meat, boneless chicken wings, and soft-serve ice cream.

Really Larry? Must everything be a debate? I dug in and expressed the opposite opinion just because it’s my natural response.

I told Larry that the cafe owners had surely examined their costs and developed a profitable pricing model. But Larry wouldn’t let the subject die. He called the manager over to our table and started quizzing him about their rent (cost per square foot), labor and other costs. He was treading into dangerous territory. After all, aren’t details like that best left unspoken? As the old saying goes: Where there’s mystery there’s margin.

Secret Cost Formulas… And That Jacket…

Larry poked and prodded and nearly got the manager to share the cafe’s current financials and three years of audited annual results. But that’s when my phone rang. It was my wife on the line… wondering why it had taken me four hours (so far) to pick up one jacket from the dry cleaners.

That’s when I realized: I never did pick up my jacket from the dry cleaners. But at least I knew it was clean and paid for. I apologized to Larry, left lunch and headed back to the dry cleaner to get my jacket. As usual, my threads looked great. And oh how I love their all-you-can-consume cleaning model.

It’s been about a week since that lengthy sit-down with Larry. And I gotta admit… I wonder if that dry cleaner is profitable. And I wonder if that cafe is profitable. I think both businesses can be profitable. Still: Larry, as usual, has raised some intriguing points.

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7 Comments

Comments

    Dave Cava:

    When am I going to be lucky enough to run into you two clowns in town? More important question… if Larry is really on LI then what’s he doing rooting for all those New England sports teams? I think we need to build a wall and deport those guys. Let’s go Yankees. Please… let’s go.

      Joe Panettieri:

      Hey Dave: Larry and I do meet privately but I’m not sure we’re allowed to meet publicly with other folks. We spend too much time debating just about everything. And discussions about sports and/or classic rock are off limits. Generally speaking I find political and ethical debates far more relaxing and less intense…
      -jp

    Jay McBain:

    I would have never guessed that two of the leading channel journalists/experts would live in the same ‘hood. Will the next story be about carpooling to JFK for industry shows?

    By the way, your comment section doesn’t have a “email me if someone replies” feature.

      Joe Panettieri:

      Hey Jay: Sorry about the feature/function gap. A few folks have requested that. We’ll be doing a few site enhancements “soon.”
      -jp

    Larry Walsh:

    Dave: Allow me to explain. I am a bit of a missionary here on Long Island. As a high-born Bostonian, it is my mission — nay, my solemn duty — to bring the light of New England sports righteousness to the heathen Jets and Giants, Mets and Yankees, Rangers and Islanders, Knicks and Nets fans in the tristate area. My Boston banners wave proudly Long Island.

    Greg VanDeWalker:

    OK, you had me at flat monthly fee. Your cafe example works because history has shown that by playing the law of large numbers the owner knows the median consumption level and prices accordingly. So let’s continue with your cafe example with one twist. What if I was able to make sure every person who came to my cafe ate a sandwich one hour before they showed up? They would all eat less at my restaurant. More efficient eaters… Less care and feeding, more profits for the owner. #HaaR

      Joe Panettieri:

      Hey Greg: Well, since you grabbed a chair in the cafe do you mind if I sit down and pick your brain?

      A few sources at EMC World told me that accounting standards/regulations around leasing are set to change. While this isn’t “hot” or “exclusive” news, it sounded like channel partners focused on recurring revenues should be aware of the accounting change.

      I believe the following quote from FASB is accurate and want to pick your brain about what it means for partners and their customers: “For public companies, the upcoming standard will be effective for fiscal years (and interim periods within those fiscal years) beginning after December 15, 2018; for private companies, the standard will be effective for annual periods beginning after December 15, 2019. Early adoption will be permitted for all companies and organizations upon issuance of the standard.”

      I’ll be in touch. 🙂
      -jp

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