Midwestern cities like Cleveland, Ohio have been particularly hard hit by the recession. Since opening for business in 2009, Cleveland’s Evergreen Cooperative Laundry has offered much-needed jobs, as well as job training. On top of higher-than-average wages and free healthcare, worker/owners also earn equity in the company.
The Intuit Small Business Blog talked to Jim Anderson, CEO of Evergreen Cooperative Laundry, about why the Coop works and how they found their niche.
Anderson: In 2006, a study was conducted in the University Circle area by the Democracy Collaborative. The notion was that there had been tens of millions of dollars spent on training the underserved community and at the end of the training, there weren’t many jobs to be had. Why don’t we change that model and create companies that workers could own? First jobs, then training. One idea surfaced to build a laundry to serve the healthcare industry and wash their room linens.
We started in 2008 in the middle of the worst financial crisis in the last decade or so. Financing took forever but we finally got it put together. Financing amounted to about $5.8 million. That money was going to be used to purchase equipment to be installed in the laundry, to fund losses to break even, and to pay professional fees like professional accountants. The laundry got built and started up in October of 2009. We’ve since refined our niche to focus on nursing homes for a couple of reasons.
Why nursing homes instead of hospitals?
Ninety-five percent of nursing homes do their own linen with an on-premise laundry. But as the nursing home reimbursements are defunded for Medicaid, they need to cut costs. We feel because of our energy efficiency and our cost structure, we can save them considerable funds each year. That’s proven to be true.
Also, people who do room linen for hospitals already have very large footprints. The big guys control the market so they keep the price very low. Since they are so big, their model is to own their own linen and rent the linen to the hospital so linens can go anywhere. But nursing homes traditionally own all their own linen, and you have the danger of getting customer A’s mixed up with customer B’s. We have a process that identifies every customer’s linen as it goes through the process.
What are the advantages of using the coop model?
Like any employee-owner enterprise, when workers are engaged in managing the business, research demonstrates that they outperform competitors whether on quality, productivity, or on time service. The workers own it, they get paid above market, and have healthcare at no charge. We focus on low turnover. We have healthcare at no charge vs. having employees pay $70 or $80 a month for healthcare.
How has the organization weathered the recession? Has it helped the community through a period of financial upheaval?
Pretty well. We’ve had a couple of setbacks but we worked through it. It’s too early to speak to the effect on the community at large, but employees are making $12 an hour, and after about eight years, they’re going to have an account with equity, which they can’t get anywhere else. They’ve invested here, they’re engaged, and they’re involved.