Next time you eat at a restaurant, please: Consider your napkin.
Clean linens don’t directly make money, like food or booze, and they can’t be written off as a one-time cost, like decor or equipment improvements. In fact, restaurant owners often think of linen service as a necessary evil, according to Arway Linen co-founder Keith Harad.
But the act of unwrapping your silverware and placing that fabric in your lap is what separates dining from, well, refueling. And linens — whether napkins, chef coats or bar mops — remain an integral part of nearly all dining establishments.
They’re also a good way to assess the state of the restaurant industry. Think you’ve noticed a Philly restaurant boom over the past two or three years? Check the stats:
In 2012, Arway handled approximately 400,000 napkins a week. This year, it will process more than half a million each week, a more than 25 percent jump.
Now, other companies provide linen services, so the Arway figures can’t be counted on to give an entirely complete picture. But Arway is one of the most widely-used throughout the region, serving more than 850 locations within a 70-mile radius of Philadelphia. It’s also the only one headquartered right here in the city.
“They’re gonna kill you”
When Harad and childhood best friend Hal Glestein founded the company in Northeast Philly in 1979, the Philadelphia dining scene was just starting to take off. Steve Poses, the city’s first serial fine-dining restaurateur, was only six years into his groundbreaking fusion spot, the Frog. Le Bec-Fin was still rocking its tiny, 30-seat space at 1312 Spruce. White Dog Cafe was but a glimmer in the back of Judy Wicks’ budding locavore mind.
The linen service landscape looked different, too.
Before Harad scored the first client for Arway — a Mediterranean bistro on Broad Street called Apropos — his sales pitch induced a warning.
“Please, don’t get into this business,” begged the restaurant’s two Israeli owners, who knew Harad was Jewish. “It’s all Mafia; they’re gonna kill you.”
But Harad wasn’t one to back down easily. He’d worked for a couple of years for one of the five companies that ran the linen game in the city, and knew that the younger generation wasn’t very interested in taking on their parents’ laundry operations. Plus, he and Glestein had always wanted to start a business together. They’d schemed about it ever since he starting living with Glestein’s family, who took him in at age 16, after his mother died and left him an orphan.
So onward they pushed, at first simply ferrying their couple of bales of aprons and towels back and forth to others’ washing machines. In 1985, they built their own laundry.
Doing it for the people
Arway’s first laundry took up a total of 3,500 square feet on a small Northeast Philadelphia street. Today, the company’s facility is more than 10 times the size — 40,000 square feet — but it’s still tucked right into the city grid, on the corner of a mostly residential block in Frankford.
“We’re here because my dad insists on it,” said 32-year-old Heather Harad, who joined her father’s company as sales manager almost a decade ago. “If you move to Jersey, they offer all kinds of incentives like tax breaks and things, but he’s loyal to this area.”
“We probably employ around 25 percent of the neighborhood,” Harad guessed.
Those workers, of which there are just over 100, are a lucky group. Arway offers great benefits — covering 100 percent of health care, for example — and pays well, too. It’s not that way at all laundry services.
Last year, workers at Delaware County-based Olympic Linen and Laundry Services filed a class action lawsuit alleging that the company regularly violated wage laws. Among the complaints: Workers were forced to work through breaks, and weren’t getting paid for overtime, effectively diluting the hourly wage below legal minimum.
The case is still in litigation, but the Harads certainly heard about it.
“Olympic reps would go after our accounts and tell chefs they could pay cash under the table so they could avoid taxes and get lower prices,” said Heather.
Cutthroat competition
The growth of the local restaurant scene has made the linen service industry here an intensely competitive field. Most of the old family companies on whose toes Harad wasn’t afraid of stepping were scooped up by national conglomerates, and are now run with cutthroat tactics.
“We hear about them going after our customers and saying their prices are 50 percent lower — that’s gotta be suspect,” observed Harad. “Ten percent lower, maybe, but half the price? No.”
If they’re not cutting costs by paying illegal wages, they’re just using creative billing to hide add-on fees, he continued. “Let’s say our bar mop costs 20 cents. They’ll list theirs at 10 cents, but what you don’t see is the delivery fee, the washing fee, the replacement fee…in the end, it probably costs you 25 cents.”
Luckily for Harad, most of his customers appreciate their personal relationship with the company and recognize the added value. This year, Arway is on target to pull in over $10 million in revenue.
The 2008 crash
Arway’s growth wasn’t without a few dips along the way. When the markets crashed in 2008 and threw the U.S. economy into a tizzy, the hospitality industry went through a major retraction. Although Philadelphia’s restaurant scene handled the downturn relatively well, without too many outright closures, business in general was slow everywhere.
“Our customers just weren’t paying their bills,” Harad remembered, “because people weren’t eating out as much.”
Margins in linen services are slim, averaging between 7 and 10 percent. When figures showed the company had taken a 10 percent year-over-year revenue hit, the profits were gone, and Harad and Glestein had to make a choice. They could sell out to one of those national corporations, who were eager to swoop in, or they could cash in their personal 401k and savings accounts, and put everything back into the business. The decision turned out to be easy.
“All these people who work for us, who’d been loyal for 20 or 30 years, they might not have had jobs if we closed up or sold,” Harad explained.
Changing trends
Linen rental prices have stayed stagnant for at least two decades, per Harad, who points to polyester as the industry’s salvation. Where a cotton napkin will be usable through 25 wash and dry cycles, a poly one is stays presentable through 250. It’s also much easier to dye — Arway now offers polyester napkins in 26 different colors.
Occasionally, a restaurant will still choose cotton. That’s the case at Volver, Jose Garces’ high-end atelier in the Kimmel Center, which tasks Arway with maintaining a special set of linens woven from Egyptian thread.
For restaurants who don’t want to pay the 2.5x cost for special cotton but also don’t want standard napkins, there’s a trendy new style. Arway calls it a “bistro napkin” — and if you’ve been out to dinner in the last 24 months, you’ve almost definitely used one. Instead of being smooth and colored, these napkins are similar to the dish towels that hang off your stove at home: large, white rectangles with a stubbly texture and a colored stripe down one side.
Bistro-style napkins now make up close to 10 percent of Arway’s total. The company started stocking them around three years ago, after sales reps noticed several chefs and restaurant owners — especially those running BYOBs — start using kitchen towels as napkins to dress up tables bereft of tablecloths and give their dining rooms a more “rustic” look.
Tablecloths have been going out of style around the country, but Harad has noticed it’s more pronounced in Philadelphia than elsewhere.
“If you go to New York, to Florida, to Atlantic City — tablecloths are still prominent,” he said. “But we have so many BYOBs here, and they all invest money in tables and just go with napkins instead.”
Parking ticket hell
Another Philadelphia quirk that affects Arway’s business: The Philadelphia Parking Authority. Parking tickets are the biggest line-item expense on the company’s books — in 2014, it shelled out $75,000 in fines.
Efforts to curb those fees have been mostly unsuccessful. Even when Harad made the decision to send out Center City trucks with two drivers, so that one could watch the vehicle while the other made the delivery, the PPA somehow kept on ticketing.
“They know the routes! They sit and watch, and somehow still find a way,” said Heather Harad. “It would be one thing if the money from the tickets would go into making our city better, or improving our schools, but it doesn’t.”
“The city is really tough to deal with in general,” she continued. “But my dad loves it here. It’s where he built his way up from nothing into all this — it’s where he found the American dream.”
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** This post was updated to reflect the fact that Arway processes more than half a million napkins per week, not per year, as originally published.
