Arway Talks Dollars and Sense of New Plant Construction

With their usual exceptional candor, Arway Linen and Uniform completed Nov. 30 their hosting of a 2023 TRSA three-part series of virtual roundtables on laundry plant construction and renovation. Company executives shared details about their sales, revenue growth projections, costs of acquiring and equipping their new building, financing, projected labor savings and more.

Roundtable participants shared their experience, too, with planning and executing production capacity expansion. The idea exchange focused on Arway’s planned 2024 move into a building a mile away from their current location, where the investment is projected to save the restaurant linen service company $200,000 per month in labor and utilities.

In their current location, Arway has exceeded their current production capacity for 10+ years. The next-generation owners committed to relocating and expanding when they were convinced that growth would be nearly impossible in the current location. Production would have to be reduced 30% to maintain margins. Expenses were rising too quickly for price increases to outrun them.

“We decided to really dig into an expansion project and all of our planning started during COVID,” said partner Mario Stagliano. “We did countless laundry tours, researched market data, searched for buildings, chatted with other owner/operators, business plans. You name it, we did it. We determined that we were going to bounce back from COVID, there was enough growth potential in the market, and our ideas and plans were strong enough to move forward with an expansion project.”

Joining Stagliano in hosting the TRSA roundtable series was Mark Harad-Oaks, operations director, and Steve Curtis, sales director. Other aspects of the relocation they revealed:

Financing. The $26-millon project accommodates more than five-fold growth in current revenues. The business qualified for a funding amount and structure rare for an organization of its size. Commitments with the Small Business Administration (SBA) and Arway’s bank were signed in March. The package includes SBA “Green” loans providing more support than this program normally would. SBA told Arway this structure makes the company the first company in SBA history (in any industry) to exceed the Green limits and roll in a 7A loan.

Equipment. “Some items were a no brainer, some items were a tough decision and some items are actually still up in the air, to be honest,” Stagliano said. “Pricing wasn’t really a determining factor. We asked ourselves what we needed and we figured out how to fit it into the financing.”

Operating cost reduction. Utility and labor savings will pay down debt service. Utilities are forecast to be half of what Arway pays now. Staff is expected to be reduced by half. “The best part is, as we grow revenues, we do not need to add FTEs at the rate we always had to at the baseline facility. Our debt service is a fixed cost so as we grow it will get easier to support.”

Need for more skilled labor. “We will look to hold accountability to standards a little tighter than we do now,” said Harad-Oaks, “and we will keep production FTEs accordingly.” Jobs should be easier considering initial excess capacity rather than falling 30% behind. “We have some strategic plans we will look to implement to ensure we have the right team,” Harad-Oaks added.