National Clothesline
Zoots’ 20-year run ends in bankruptcy
Once high-flying and aggressively expanding, Zoots Cleaners came crashing down in January when it
filed Chapter 7 bankruptcy.
The sudden closure left creditors, customers and their clothes hanging while employees were left
wondering what happened to their paychecks.
The company was founded in 1998 by Todd Krasnow and Tom Stemberg, creators of Staples office
supply stores, and expanded steadily along the East Coast and as far west as Ohio, initially raising $20
million in capital through private individuals and $38 million in institutional financing.
The company made its mark with what at the time were cutting-edge and innovative ideas that since
have been widely adopted in the industry. Its free-standing stores were open seven days a week with
24-hour pickup and drop-off available through secure personal lockers using personalized, bar-coded
garment bags. Drive through drop-off and pick-up were also available at its stores.
Within a year of its founding, the company had established eight stores in Massachusetts and
Connecticut, all served by a central cleaning plant, which the company called a cleaning laboratory. In
1999, Zoots purchased Widmer’s of Cincinnati, OH, with its eight drycleaning locations, a 33,000 sq. ft.
central cleaning facility and 15 drycleaning and pick-up and delivery routes in the Cincinnati area.
By 2004, the company had 54 retail drycleaning locations with 150 pickup and delivery routes in
Massachusetts, Connecticut, New Hampshire, New Jersey and Virginia.
At that time, Zoots CEO Jim McManus said the company would continue to expand through new site
development and aquisitions. Zoots purchased and integrated more than a half dozen large home
delivery routes in southern Connecticut and northern New Jersey and a large retail drop store in the
Boston area. More delivery route and retail store acquisitions were scheduled in northern New Jersey
and southern Connecticut as well as new store openings in the Virginia Beach, VA, area.
At its height, the company had 78 retail stores and more than 115 delivery routes in eight states.
Services expanded to include carpet cleaning, water restoration, smoke and fire restoration and
garment cleaning for premium hotels, military bases and sporting venues.
But after finally turning a profit in 2006, the company foundered on the rocky shoals of the recession
in 2008. In 2007 Zoots set out to raise $16 million to infuse the business with more capital to open
more stores and pay off debts. But halfway through the fundraiser, McManus and Zoots’ chief financial
officer left for other jobs. The bank lending Zoots money then cut its line of credit because it did not
have enough cash to pay debts coming due, forcing the business to sell off its assets.
“We had the chief executive and chief financial officer abruptly leave to take other jobs as credit
problems across the industry happened,” Krasnow, a co-founder and former chairman of Zoots told the
Boston Globe at the time. “It forced the company’s hand to sell off the business. We’re all very
frustrated because there was so much time and money that had gone into the business, and it had
finally turned a corner.”
California-based U.S. Dry Cleaning Corp. acquired some former Zoots properties and continues to
operate stores under the Zoots banner. A note posted in the company’s website said, “We've received
numerous calls from customers inquiring about the Zoots bankruptcy and store closures… U.S. Dry
Cleaning Services Inc. and its stores, including those stores under the Zoots brand located in
Massachusetts, are unaffiliated with the “Zoots” that is the subject of these media reports, and all of
our stores are open for business as usual. Customers are welcome to pick up and drop off their clothes
during our normal business hours.”
The website lists eight locations in Virginia.
Two Zoots managers picked up the pieces of much of the Massachusetts operation. Rick Simoneau
and Trish O’Leary purchased the rights to the company and moved its headquarters to Brockton, MA,
where the company already had a 50,000-sq.-ft. production plant. Seven Massachusetts stores were
closed, but all 350 local jobs were saved, including 200 in Brockton; 17 stores and 30 delivery routes
in Massachusetts and Rhode Island were retained.
Krasnow told the Boston Business Journal that the sell-off was “disappointing personally.”
He said in the early days the company grew too quickly, but had offset that early growth with a
slower pace of expansion. The company had become cash-flow positive and in a better financial
environment probably would have been able to attract new funding.
In a 2010 interview with the New York Times, Krasnow said, “We underestimated what made it a
truly challenging business. Even if you did a really good job, there are plenty of problems.”
Krasnow said he would get calls from investors or recent business school graduates who believed
they had found a way to make a killing in drycleaning.
“People think it is easier to do it better,” he said. “And it’s very, very difficult.”
After buying the New England portion of the company, Simoneau and O’Leary, the new owners, said
Zoots wasn’t “unsuccessful” and that the company had collapsed for internal reasons, not because it
was unprofitable.
As employees of the original Zoots, they said they were able to pick the locations and pieces that
were profitable and kept those.
That kept the slimmed-down company going until the bankruptcy filing on January 18 that led to
closure of 18 locations across the state and left customers wondering where their clothes were and
employees asking what happened to their paychecks. The filing by Sort LLC, Zoots’ parent company,
listed estimated assets at less than $50,000 and liabilities between $1 million and $10 million owed to
an estimated 200 to 300 creditors.
“Please be patient as plans are being made to get your garments back to you,” the company wrote
in a statement posted on its Facebook page. “You will get further information via e-mail and notices…
posted at our stores.”
Zoots reopened its store locations for one day on Feb. 2 so customers could retrieve garments. But
by mid-February, the company was still trying to reunite customers with their garments and had
scheduled three days at its Brockton facility when customers could come retrieve their garments.
When employees might get paid is still not clear. Employees said the closure was abrupt. In some
cases they were told to shut down operations even while clothes were still in the machines or were
cleaned and waiting to be pressed.
A few days later, they found that paychecks that were automatically deposited to their accounts had
been pulled back and they were surprised to find that money that was in their personal accounts on
Friday was gone the next week.
After receiving numerous complaints from Zoots employees about unpaid wages, the office of
Massachusetts Attorney General Maura Healey is now looking into the issue and is in contact with
Zoots’ attorney and the bankruptcy trustee.