Page 40 - Forbes - USA (March 2020)

Star Laundry Cont. tract hotels while maintaining profitability. “Our
I selling point is quality,” he says. “That’s why we
38
HOW TO PLAY IT
S by William Baldwin
R that scour dirt with 180-degree water and bright-
U Much in vogue are
E en colors with hydrogen peroxide and six to 11
N businesses with
E “moats”—the resis-
R tance to competi-
P
E “I didn’t want my father’s tion that comes,
R for example, from
T name to be tarnished,” says Yaakoub Hijazi, pres- technology or a
N winner-take-all
E ident of Paterson, New Jersey–based Star Laun-
network. But guess
• dry. When his father, Youssef, died in 2011, four
what has been as
N months after being diagnosed with lung can- hot on Wall Street
A
I cer, Hijazi was a 19-year-old student at Montclair as Alphabet?
R Laundry. Cintas,
A State University. He soon learned that his dad’s $4 which rents and
R
T million (sales) commercial laundry and dry-clean- cleans uniforms,
N ing business was on the brink of collapse. “When has seen its shares
O climb 14-fold from
C you go bankrupt, your name is destroyed,” he says. their recession
So Hijazi, now 27, ditched school to rescue Star low 11 years ago.
Cintas is now
Laundry. “I threw my textbook out, which was a richly priced, with
little overboard,” he says. “I told my mother there an enterprise
is no way I can go back.” value (debt plus
market value of
Since then, Hijazi, who is on this year’s Forbes common, minus
30 Under 30 in Manufacturing & Industry, has cash) equal to 4.5
not only protected his father’s legacy; he’s built the times revenue.
More affordable is
business into a powerhouse in the tight-knit world UniFirst, which is
of hotel launderers in New York. Today, Star Laun- in the same line of
work and has an
dry cleans sheets and towels for more than 100 of enterprise value
the city’s roughly 800 hotels, including the Con- only two times rev- in 2012, then talked his way into other hotels, in-
rad New York and the W Times Square. Based on enue. Sometimes
the mundane
Forbes’ estimates, it handles as much as 40% of the makes you more
laundry generated by the city’s hotels, bringing in money than the
some $70 million a year in revenue. Add in Hijazi’s magnificent.
other ventures, including real estate in New Jersey William Baldwin
is Forbes’ Invest-
and linen manufacturing in Benin, Africa, and his ment Strategies
group’s annual revenue is closer to $120 million. columnist.
Laundry is a cutthroat business, priced at 30
cents to 45 cents per pound in New York. Price
cutting to gain market share is rampant. Stum-
bles abound. Prestige Industries, once Hijazi’s big-
gest competitor, filed for Chapter 11 bankruptcy in
2017, and its assets were subsequently bought by
a private-equity firm that owns laundry firm Pure-
Tex Solutions. “The entire market is fighting over
the same 200 hotels,” says Sang Cho, CEO of Pres-
tige until 2012, who founded Cooperative Laundry
in 2018. “We’ve heard some of our competitors bid-
ding below 27 or 28 cents a pound, which is crazy.”
Hijazi, who owns 100% of Star, wooed custom-
ers by being personally on call starting at 3:30 a.m.
and setting rates in the mid-to-upper range to at-
F O R B E S . C O M
have no salesmen.”
On a November visit to the Paterson headquar-
ters, Hijazi showed off one of his four giant tunnel
washers. The dirty linens arrive in 800-pound bins
labeled “Star Laundry Baba Joe 1948–2011” for his
dad. Next, 135-pound loads pass through modules
other chemicals. Separate compartments in the
tunnel and computer coding allow multiple hotels’
linens to be washed at the same time.
Though Hijazi grew up 20 minutes from the
plant, in Montclair Heights, he never intended to
work there. “He didn’t even want me in it,” Hijazi
says of his father, who came from Lebanon at 17
and opened restaurants, including Star Deli, be-
fore moving into the laundry business. He later
moved that from Brooklyn to New Jersey, where
labor costs were lower and union rules more lax.
When Hijazi took over, he got hit with a lot.
“And when you’re 19 years old, people are not go-
ing to listen to what you say,” he recalls. The com-
pany faced a cash crunch, sewer liens, tax liens
and fines from the federal Occupational Safe-
ty and Health Administration. Hijazi borrowed
$300,000 to pay off everything, ditched the mid-
dling dry-cleaning business and hired an OSHA
consultant to address the safety issues.
Calling on hotels, he used his youth as a selling
point. He signed on the DoubleTree on Lexington
cluding the Westin Times Square: “Hotels realized
they were cutting costs and getting crap service.”
Don Fraser, a longtime hotel executive then
running the Park Central and WestHouse hotels,
hired Star in 2016 to handle their nearly 5 million
pounds of laundry a year. “He was—I don’t want
to say picky, but he was very selective [about] his
hotels,” Fraser says. Though located in New Jersey,
Hijazi focused on large and luxury hotels in Man-
hattan, where occupancy rates are high and steady.
That helped insulate him from pricing pressures
and let him create delivery-route efficiencies.
The long hours take a toll. Hijazi is in talks to sell
Star Laundry. He declines to discuss details, but
Forbes estimates the business could be worth at least
$150 million. “The biggest fear,” he says, “is selling
what my father started. It’s an emotional fear.” F
FI NAL THO U G HT
“I TRUST MY DOCTOR WITH MY PATRICK WELSH FOR FORBES
LIFE, BUT NOT MY DIRTY LAUNDRY.”
—Ada Palmer
M A R C H 2 0 2 0