Case Study - Michael Petrov

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Traditional Case - Michael Petrov

In a narrative format, discuss the key facts and critical issues presented in the case.

Michael Petrov was a 47 year-old safety inspector for the Metropolitan Transit Authority. He was a Ukrainian immigrant who came to America during the reconstruction of the Soviet Union known as Perestroika. Arriving in America during the latter part of 1991 with only $200 in his pocket, Michael knew he would have to struggle, but came to build a career. Struggle, he did, but it had begun to really pay off. Michael worked as a teacher in his homeland, but studied engineering and business, learned English, and obtained his U.S. citizenship in order to attain his goal. In 1992 Michael met and eventually married Natasha, a fellow immigrant from the area near Chechnya, Russia. Natasha had studied to be a pediatrician, but felt that she would be better served in the states as a computer analyst.

Together they worked hard and saved, purchasing a home in Levittown in Nassau County, New York, in 1995 and bringing Michael’s parents from Russia to live with them. They researched and studied various businesses as investments and decided to purchase a laundromat in Glen Cove about 20 minutes from their home, which they renamed Clean-Rite. In August of 2001 they refinanced their home and bought the business for $125,000, which included a 600 square feet facility and all of the equipment. The area had relatively low crime, several renters who would not have access to their own washers and dryers, and very little competition. The business had been established for 9 years and allowed them to learn the ropes. They added a drop-off service utilizing Michael’s 77 year-old father to deliver laundry to their customers. They employed three Hispanic women as employees, since the area was primarily Hispanic. The business prospered, and they decided to continue to grow.

After much investigation they decided to lease property in College Point, Queens, borrowed $400,000 utilizing their home and current business as collateral, and started another laundromat, named New Age, from scratch in April of 2005. The area was also relatively low in crime, was close to many renters, and although there was more competition, they were Asian and spoke relatively little English, while the residents in the area were Hispanic. In addition to washers and dryers, New Age’s 1,500 square foot facility provided vending machines with sodas, snacks, and laundry supplies. They also provided gaming machines, ATMs, 2 televisions for the customers, and a surveillance system for the security of their employees and the business. As immigrants, both Michael and Natasha understood the struggle to obtain a better life for themselves and their families, but they also loved their new country and wanted to improve the areas surrounding their businesses. Again, they hired three Hispanic women as employees for the laundromat.

While both laundromats were doing well, the profits at Clean-Rite had begun to level off. In 2006 the Petrov’s began to search for another location and were investigating the possibilities of opening another location. Initial research had caused them to select an area in Far Rockaway that was relatively equidistant from their home as the two other locations. In addition, this location housed a larger facility than both of their other laundromats together, 4,000 square feet. This was tempting as the size of the facility would support the use of smart card technology, which Michael had studied and desired to put in use. Also, the price was the same as the cost for the New Age facility. Although the proposition was attractive to the Petrov’s, there were many unanswered questions. These included the ability to obtain additional financing, the decision to continue ownership or to sell the Clean-Rite facility, and the capacity of Michael and Natasha to take on yet another business in addition to their current full-time jobs.

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