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CHAPTER I
INTRODUCTION
Background of the Study The coin operated laundry industry has been growing fast along with the increasing population density especially among urban areas. A Laundromat is a business with washing machines and dryers that anyone can use to do laundry. Machines are operated by customers and require payment in coins. Laundromats usually feature one or two walls of washing machines and dryers. They allow those without access to a home washing machine or those who don’t have enough time to do wash large loads of laundry. This business is lucrative, which practically runs itself. Given the right location with an attractive market, this business can be very profitable and rewarding. Central Mindanao University is a good location for any type of business that can cater the needs of its people, particularly the students. Given the number of college, senior high, and high school students staying inside or near the campus, a service business, like a laundry business, can serve the demand of the target consumers. A feasibility study can best determine of this business is viable or not.
Statement of the Problem This study will be conducted to determine of opening a laundry business in Central Mindanao University is feasible and viable. Specifically, the following problems will be addressed: a. Market potential of the business; b. Customer profile of the target market of the business, such as market population size, customer spending patterns, average household income, and other relevant demographic data; c. Competitiveness of the business; and d. Determination of the total investment needed to start the business. Significance of the Study Many students of Central Mindanao University don’t have access to washing machines in their boarding houses or apartments. Most of them ought to do laundry by themselves, by hand. Some students avail laundry service offered by some establishments inside the university, which usually takes a day or two to be done. A large number of students in the university participates in an organization or two which conducts activities every now and then. Extracurricular activities of students demand most of their time in addition to heavy academic load and studying programs. Despite the strict time and schedule of studying, extracurricular activities, and working for some, most students, if not all, still must wash clothes by hand themselves, which really takes time, energy, and negatively affect’s students’ life. This is a great opportunity for a laundry business that offers convenience for students, to save time and energy, at their money’s worth. Besides students, there are also young professionals working in the university and staying at dormitories and boarding houses who have the same need to save time and energy. Some households in the university who also prefer to avail laundry services for convenience.
feasibility, technical feasibility, and financial feasibility of the business to answer the questions laid down as the objectives of the study. The marketing feasibility analysis will cover the general business condition, competitive condition, target market, relevant demographic data, business strategies and promotions. The service feasibility analysis will determine the desirability of the product or service to be offered to the target market, the extent to which a product or service appeals to the target customers. Service feasibility will also discuss the customer’s interest in the service such as the buying intentions, pricing, and sales. The organizational feasibility analysis will discuss the form of business, organizational structure, personnel qualifications, personnel functions and responsibilities and legal requirements of the proposed business The technical feasibility will identify the materials, labor, physical location, technology, and other important logistics on how the business will run. In addition, it targets to determine the durability and future benefits through the effective utilization of available resources administered by the business. Financial feasibility analysis will determine the capitalization, sources of funds, projected total sales, expenses, financial position, cash flows, the return on investment, and ratio analyses. This area will discuss if the business will be profitable or not.
CHAPTER II
REVIEW OF RELATED LITERATURE
Coin Laundry Business According to Mazza, et. al the coin laundries are a basic-needed business. People regularly needs things to be washed to be clean. It is also a low risk business since the customer are the one doing the service for themselves. There are very few employees involved, a maximum of two people per shift. There is also a very little retail inventory and none of them will be wasted. These inventories include soap, bleach, fabric conditioner, etc. coin laundries are an all cash business and there are no accounts receivable, and it is an excellent absentee owner business. Laundry Industry in the Philippines Based on the final results of the 2012 Census of the Philippine Business and Industry, laundry services topped second in establishments engaged in other services activities. At the regional level, National Capital Region had the most number of establishments with 3,861 followed by CALABARZON with 1695 establishments, while Central Luzon had 918 establishments. The laundry services have help employ 9,362 people in National Capital Region alone. The industry also paid a total compensation of PHP1.1 billion in the year 2012. According to Rodriguez (2014), Now a day, not only in Manila has laundry shop for workers who are so busy, they can’t wash their clothes at their own hands. Laundry shop was well known nowadays even in Cavite for those persons who are so busy and there’s no time to wash their cloths even the students are at
The service is popularly known as laundromat in the United States and launderette in the United Kingdom. (Memidex 2013.) Laundromat is an alternative word for self-service laundry in the US. The first laundromat was established in 1934 in Texas. Most laundromats in the US are fully automated without the attention of staffs at the stores and coin-operated. Operating almost 24 hours per day and 7 days per week, laundromats in the US help the customers be more flexible with their washing and drying time schedule. (Brannen 2010.) Launderette is another alternative word for self-service laundry which is popularly used in the UK. The first launderette in the UK was found in London by
- The same as in the US, the most of launderette in the UK are fully automated and coin-operated without the appearance of staffs at the stores. Recently, launderette industry in the UK has been affected a bit negatively due to the increases in utilities and renting costs and the decrease in domestic washing machine price. However, the demand for self-service laundry are still high enough to bring attractive profits for investors thanks to the large number of households having beddings, which are over domestic machine capacity, and the climb in the number of tourists over years. (Yasmeen 2010.) Laundry Shop Studies in Mindanao The research by Aparece, et.al at Butuan city concluded that the market study determined the demand for service through research on the residents on the area from Brgy. Sikatuna, Tandang Sora and Humabon. The study conducted revealed the demand for the service and enabled to come up with an
efficient marketing program that will support the viability of the business in its first stages of operation and expected to last in the long run. Generally, the laundry shop is seen to be feasible upon studying its location, market demand and the factors affecting the market. It is recommended that an extensive study for other aspects of the business feasibility is conducted and the execution of the marketing program developed accords to what really satisfies the market. Another Research in Olongapo City by Jesus (2008), the project wants to catch the interest of the consumers especially the consumers of Olongapo City. It provides service such as washing, pressing, ironing and folding customer clothes and garments. The business has potential for high growth, it will spend five years setting up business financial stability and increasing market share. It also offers high quality service. Definition of Terms Laundry- Washing of clothing and linens. The material that is being washed and iron Washing Machine- machine to wash laundry, such as clothing and sheets Laundry Shop- place where clothes are washed and iron Laundromat- a facility where clothes are washed and dried without much personalized professional help
interviewees. This is to gather qualitative data of the feasibility of the self-service laundry business. The interviews will be done with five prospective customers and will be excluded from quantitative survey. Interviews will be given to three people having experience in the service sector. Interviews will be done personally. Observation may take place in natural settings and may involve the researcher taking lengthy and descriptive notes of what’s happening. When environment is researched, it can provide valuable background information that may inform other aspects of research. Observational research method will be used to conduct the site and competition research. Competitors will be identified and observational research will be conducted at the competitor’s shop location. Information such as location accessibility and pricing will be collected. A questionnaire will be used to collect data for the quantitative survey. The questionnaire was created for the sole purpose of gathering data for this study. The questions are constructed with regard to objectives of the research. The data are expected to be gathered from questions covered in the survey questionnaire: Demographic profile Target’s laundry routines Target’s perception and awareness Target’s pricing references Target’s buying intentions. The questionnaire also includes a blank portion for the respondent’s comments and suggestions. Target Group and Data Collection Method According to the objective of the study, the target location of the laundry business will be in Central Mindanao University, thus, making the students of Central Mindanao University the primary target group of the study. The survey questionnaire will be disseminated around the university campus targeting those students residing in boarding houses and dormitories. Survey questionnaires will
be given to different locations such as College Park, Sampaguita, Motorpool, Duplex, and boarding houses near the University Market. The survey questionnaires spread out to Mahogany Residence Hall, Lawaan Student Village, Sunrise Residence Hall, Cattleya Residence Hall, Rose Residence Hall, and Gardenia Residence Hall. Some survey questionnaires were also given to staff and faculty of the university who are also a target group of the study. Survey questionnaires, interviews, and observations will be the source of primary data. Secondary data gathering will be done through library research, with books, articles, newspapers, and other source materials. Another way to be used by proponents in gathering secondary data is through the World Wide Web, searches include feasibility studies of other schools, journals, and online magazines. Sampling Procedure and Sampling Technique The proponents prepared survey questionnaires which are composed of series of relevant questions to extract data needed for the study. It was then disseminated to the respondent for them to answer. The proponents used stratified random sampling to gather information from the target market. n =
Where: n = Number of needed respondents N = Number of respondents who qualify in the area of study (population) e = Margin of Error
b. Target Market Service Feasibility A. Service Desirability This is to verify if the proposed product/service is actually desirable and serves market’s need or not. In this portion, concept test is said to be a useful tool to affirm product/service desirability through interviews and survey questionnaires. B. Service Demand This involves the estimation of market demand for the output(s) of the proposed project. It involves i. Identification and analysis of demand determinants ii. Estimation of past and present demand iii. Projection of future demand Organizational Feasibility A. Form of Business Organization The laundry lounge business will be a partnership. A Partnership is where two or more people bind themselves to contribute money, property or industry into a common fund with the intention of dividing the profit among themselves. The partnership consists of 4 (four) partners: 3 (three) of them as capitalist and one of them as an industrial-capitalist partner who were tasked to manage the business. B. Organizational Structure The entity has three (3) capitalist partners and one (1) industrial- capitalist partner who Is in charge of the oversight of the whole business operations. Under the industrial-capitalist partner is the associate who aids in the management of the business of the operations. Under the associate
manager are the two attendants who are entrusted in facilitating the business operation on a day to day basis. C. Personnel Qualification Certain qualifications must be attained in order that the personnel maybe qualified for the specific position. In general, the applicants must have character and integrity as a person. They should possess the skills and knowledge requirements needed for the job they are supposed to be assigned. They should be flexible, physically fit, healthy, and can handle work under pressure. The e are the specific qualifications for each position. D. Legal Requirements The government imposes rules, policies, specifications and standards to formally organize and starting up a business. These regulations must be upheld and compliance of these standards is a must. Regulatory compliance shows that the business is aware of these relevant laws and regulations and is taking the necessary steps to comply it. The business requirements necessary for the business to legally operate are business cedula, Barangay Clearance, Police Clearance, Zoning Clearance, Health/Sanitary Clearance, Solid Waste Clearance, Fire Safety Clearance, and the lease contract. Technical Feasibility A. Product and Service Description The laundry lounge laundry services is a facility where clothes are washed and dried by the customers themselves using equipped washing and drying machines. The laundry lounge also includes a study area, Wi- Fi, and a television set to give the customers a more meaningful waiting
Financial Feasibility A. Mode of Financing Thirty-five per cent (35%) of the capital requirement will be financed by the partners. The partners will also equally contribute cash for the business. Additional capital requirement will also be equally contributed by each partner. Sixty-five (65%) of the capital requirements will be financed through loan from Landbank of the Philippines with a stated interest rate of 12% payable annually and the principal in five equal installments to be paid at the end of every year. B. Capital Requirements The business would require enough capital to finance the lease requirement, equipment and supplies requirement, salary of the attendants, and the day-to-day operations of the business. C. Financial Statements The financial statements provide information about the financial position, financial performance, and cash flows of the business that are useful to the management and other users of the information. The financial reports are prepared at least annually. A. Statement of Financial Position The Statement of Financial Position shows the three elements comprising the financial position of the business: Assets, Liabilities, and Owner’s Equity. The statement on financial position can be used to evaluate the liquidity, solvency, and the need of the business for additional financing. B. Statement of Financial Performance The Statement of Financial Performance shows the results of the operations of the business. The financial performance of the business is measured in terms of level of income earned by the entity through
effective and efficient utilization of its resources. The statement presents the income, expenses, gains, losses, and net income or loss recognized during the period. C. Statement of Cash Flows The Statement of Cash Flows summarizes the operating, investing, and financing activities of the business. It provides the information about the cash receipts and disbursements of the business during the period. D. Financial Measures and Analysis Financial tools such as financial ratios are used to evaluate the financial statements. These ratios will help determine the feasibility of the laundry lounge business through evaluation of the overall financial condition of the proposed business. These ratios can also be compared to the industry average to help formulate policies that will lead to improved business performance. The business’ ratios can also be analyzed over time to see it the financial situation is getting better or worse. This is also called trend analysis. These are the ratios that will be used in determining the feasibility of the subject of the study. A. Asset Management Ratio Asset management ratios measure how effectively the firm is managing its assets. Fixed Assets Turnover Ratio. The laundry lounge business operates mainly through providing service. The assets of the business primarily consist of the equipment and machine used for the operations. Fixed assets turnover ratio is the ratio of sales to net fixed assets. It measures how effectively the firm uses its plant and equipmepnt. Fixed Assets Turnover Ratio = Sales Net ¿ assets ¿
CHAPTER III
DATA ANALYSIS
In this part, data is analyzed in different ways depending on data’s nature. On the one hand, data gained from interviews is efficiently integrated to show interviewees’ point of view regarding laundry lounge. On the other hand, data obtained by questionnaire is illustrated through various charts and tables and then translated into meaningful information. Interviews As mentioned earlier, there are ten people including seven prospective customers and three business people joining in the interviews. Conducting structured interviews, the same questions, which had already been prepared before, were applied to all ten interviewees. Interviews with prospective customers Despite some worries towards the new concept – laundry lounge - as they have never used before, all interviewees expressed their interests in the services that a laundry lounge offers. “What an innovative idea!” is the first respond by Shia (2017) right after reading the concept statement. For her, laundry lounge is a new concept which is interesting as students can have breakfast, lunch or some drinks during the time waiting for the clothes to be washed and dried. Moreover, a laundry lounge with free Wi-Fi provides a convenient place where “students can comfortably surf the Internet for their personal purposes”. Waiting room with different types of books and magazines also helps to make customers’ waiting time not meaningless. Now, there are some self-service laundry stores in major cities which seem to be more convenient than washing by hand at home but still, students must spend time just sitting there and waiting for their clothes to be washed and dried. Besides, a big screen TV can be mounted on the wall in the laundry space. There are many students who do not want to go anywhere else except sitting in
front of the washing machine to have a look at their clothes so watching some interesting TV programs during waiting time would be nice. Although laundry lounge sounds quite strange to CMUan students, it is indeed a realistic idea, which helps to deal with students’ problems in washing and drying. Shia pointed out that “The laundry lounge can effectively solve the weaknesses of a self-service laundry with such extra services that bring meaningful waiting time.” Interviews with students taking business related course Accomplishing much experience in the service sector, three business students gave valuable opinions regarding the business concept – laundry lounge. All of them agreed that it is realistic, innovative and has a huge potential in CMU. Laundry lounge with extra services including cafeteria, waiting room, free Wi-Fi would be interesting and helpful for many students as they do not have to spend time washing and drying clothes by hand themselves after a hard-studying day (Arlyn 2017). Opening a laundry lounge in CMU is a new and innovative idea which has never been done before by any other business. This creates an advantage for the start-up as a pioneer in operating a laundry lounge. (Christian, 2015.) Nevertheless, it is worth concerning that CMUan are familiar with washing and drying clothes by hand themselves. It is indeed not easy to change the habit of someone, so it is important to make the students understand and recognize the huge benefits that a laundry lounge can bring to them. (Jayrel 2015) Regarding target customers, Arlyn (2015) believed that “not only students are an attractive segment, businesses such as University Food and Lodging Services, HE Hostel and rent-cloth stores are also the segments that have much potential”. These businesses need to maintain a very good hygiene condition so a large number of tablecloths in restaurants, bedsheets and linens in hotels and clothes in rent-cloth stores are washed and dried regularly.
