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Cleaning Up In Franchising
by Michael J. McDermott

Maid services and janitorial businesses consistently rank among the fastest-growing industries in the franchise arena. This is a trend that has held steady through several economic cycles and currently shows signs of intensifying over the next decade.

Behind the boom in cleaning franchises is a combination of several relevant factors. They include steady, if unspectacular, economic growth recently; greater demand for services of all types by aging baby boomers; the growth of outsourcing as a widely embraced strategy in the business world; the vast increase in the number of two-income households over the past 50 years; and a trend towards larger homes in today's real estate market.


Behind the boom in cleaning franchises is a combination of several relevant factors.

One of the most important challenges facing a potential franchisee is choosing a business that promises to have staying power for as long as you plan to continue operating it. Too often, the hot concept of the day turns out to be little more than a flash in the pan, and unwary franchisees who jumped on the bandwagon are left holding the bag.

There are no ironclad guarantees on what the future will hold, of course, but prospective franchisees should look at a number of factors when evaluating a business's likelihood of longevity.

These factors include current lifestyle and demographic trends, projected changes in those trends and reliable statistical projections on the business's outlook. Based on all those criteria, franchise cleaning services seem well-positioned to be standout business opportunities for many years to come.

Cleaning services are expected to be the second-biggest generator of new jobs through 2005, according to the U.S. Bureau of Labor Statistics (BLS). The agency looks at both commercial and residential cleaning services in formulating its projections, but it credits growth in the home cleaning sector fueled by increased demand for convenience, the rising number of multiple-income households, growth in the number of women working outside the home and record-high levels of disposable income as primary reasons for that expected high level of new job creation.

Maid services are growing at an annual rate of about 7%, a pace projected to hold steady at least through the end of 2007, according to research done by the U.S. Commerce Department, BLS and Mediamark Research Inc. Several analysts expect the pace of growth to increase from 2010 onward, fueled by burgeoning demand for cleaning services by baby boomers of retirement age.

Existing demand for maid services is tremendous. The Commerce Department estimates that 85% of all two-income households in the U.S. already rely on an outside service to clean their homes. In some markets, maid services actually maintain a waiting list of anxious prospective customers. The BLS expects the cleaning industry to be the second-largest creator of new jobs in the early part of the 21st century.


Reasonable hours make the maid service business attractive to some franchisees.


VAST, GROWING DEMAND

With consumers placing more value on their free time-and many struggling with less and less of it to spare-demand for maid services is vast and growing. Working couples with adult children, single professionals, retired couples and young couples with or without children are all well represented in the maid service industry customer base.

Franchise fees for maid services average between $14,000 and $15,000, and average total investment is less than $50,000, putting this franchise opportunity within reach for many aspiring entrepreneurs. Ongoing royalties are most often in the 5%-6% range.

What makes maid services such an appealing franchise opportunity for many people is the ready availability of customers, the relative simplicity of starting up the business, the significant potential for growth, and the high level of support offered by the best franchise companies in this niche.

"One of the best things about owning a maid service franchise is that the hours are reasonable, especially compared to something like a retail operation," says a Maryland-based franchisee who has been in business for 10 years.

"Most people want their homes cleaned while they are at work," she explains. "That means we usually work just five days a week, eight or nine hours a day. There are not too many business opportunities available today offering those kinds of hours."


Franchise cleaning service businesses have a longer average life span than independents.

Once the province of the rich and famous, cleaning services are now viewed as an essential household budget item by consumers ranging from working single mothers to dual-income middle-class families to empty-nesters and retirees.


OLDER CONSUMERS KEY

Overall demand for household cleaning services is projected to grow by 7.4% for the period 2000 to 2006, according to research and projections compiled by Mediamark Research Inc., TGE Demographics Inc. and BLS. The greatest increase in demand will come from households in the 45-to-54 age group (up 15.7%) and those in the 55-to-64 age group (up 26.5%).

Historically, many consumers have opted for informal arrangements with self-employed maids and house cleaners. Such independent operators are sometimes less expensive than professional cleaning services and may be more flexible in areas such as the types of tasks they are willing to perform and adjusting their hours to accommodate a family's schedule. Many householders have developed strong personal relationships with these workers over the years.

However, BLS is predicting a sharp decline in the number of such self-employed independents over the next several years. One reason for that is the stiff penalties that can be imposed on consumers who fail to report wages paid to domestic help to the Internal Revenue Service and to pay the required employer's share of Social Security taxes on those wages.

"Stricter enforcement of those regulations is prompting more households to turn to professional cleaning services, including maid services, as an alternative," says an economist for BLS. "As a result, we have seen an 18% increase in the number of maids, cleaners and janitors employed by those businesses between 2001 and 2005."

There is also a lot of anecdotal and some statistical evidence that today's consumers are more comfortable hiring a professional cleaning service than a solo operator. Solid growth in the number of franchise companies, franchise outlets and franchise revenues in the cleaning services industry is strong evidence of that trend.

One aspect of franchise cleaning services that appeals to many consumers is the continuity and reliability they represent. Industry research indicates that the average life span of the typical mom-and-pop cleaning business is just 18 months.

What's more, when independent operators are unable to keep an appointment for personal or other reasons, there generally is no back-up plan in place, and customers are left with the unattractive options of putting up with a dirty house or cleaning it themselves.

Many established cleaning franchises, in contrast, have been in business for many years. They have the management and personnel to make sure that their customers' cleaning schedules are met no matter what the circumstances.

"Today's consumers are well educated and aware of the potential liabilities they open themselves up to when they grant access to their homes to a non-professional service worker," says an executive at one leading maid service franchise.

Like most franchise companies in the cleaning industry, this one is licensed, bonded and insured, which relieves the householder of many concerns. Should an employee of the franchise suffer an injury in a customer's home, the franchise's insurance will cover it. Bonding employees also provides a level of protection against theft and other illegal activities.

As might be expected, households with married couples where both spouses work are among the biggest consumers of cleaning services. In fact they are 22% more likely than the general population to use such services.

Members of such households tend to have a busy schedule, which gives them a strong incentive to use a cleaning service, and higher than average incomes, which gives them the means to pay for it.


NEW LIFESTYLES

Another heavy user group of home cleaning services is households with married couples where one spouse works and the other is retired. In this case the reasons for the higher usage rate probably have more to do with sociological factors than busy schedules.

Typically, such a household includes an older retired husband and a younger working wife. The retired spouse may have the time available to do the housework but simply refuses. However, with his pension and the wife's salary, household income is high enough to afford using an outside service.

Somewhat surprisingly, the group more likely than any other to use a home cleaning service is households with married couples and adult children living at home. These households are 34% more likely than average to use a maid or other professional cleaning service.

Demographers speculate that the primary reason for this is the fact that such households tend to be headed by wage-earners in their prime earning-power years. Thus, they are better-positioned financially to afford cleaning services than the population at large.


Demographics and changing lifestyles are fueling strong demand for maid services.

While research indicates that about 11% of all U.S. households currently use a professional maid or cleaning service, some polls suggest that the overall market may be much larger. One survey that questioned consumers about their use of all types of paid help to perform household cleaning chores showed a much higher percentage of use, up to 25% of all households.

Just how big is the market for professional cleaning services? Because of the large number of independent and undocumented operators in this industry, its size is the subject of some speculation.

However, some experts estimate the nationwide commercial cleaning industry's sales at almost $70 billion a year, while the maid service industry is projected to be approaching $30 billion in annual sales.

One aspect of the commercial and residential cleaning industry that is particularly attractive to entrepreneurs is its relative ease of entry. No companies truly dominate the industry, according to Building Service Contractors Association International (BSCAI). Rather, it is populated by more than 56,000 small businesses, including some 17,000 commercial cleaning franchises and about 2,500 residential cleaning franchises.

"This is a comparatively low-tech business, characterized by easy of entry," says a spokeswoman for BSCAI. "Competition is strong, which helps hold down the cost to consumers and businesses who use the services, but total sales have been growing between 6% and 11% annually since 1994. Employee wages tend to be low, which keeps costs down for franchisees but also makes high turnover rates an issue."


The growth of outsourcing has been a boon for commercial cleaning service franchises.

The directory section of The Franchise Handbook lists more than 100 residential and commercial cleaning franchises under the headings "Maid Services" and "Maintenance - Cleaning." The choices present a great diversity among attributes such as size, cost and level of support provided.

Initial franchise fees range from as little as $4,000 to upwards of $50,000. Start-up capital requirements can run anywhere from just a few thousand dollars to more than $100,000. Naturally, with such a wide range of financial criteria, prospective franchisees need to do a thorough job of investigating just what they are going to get for their investment.


SPECIALTY AREAS

Along with commercial janitorial services for stores and other businesses, a number of specialized businesses are included in the maintenance and cleaning category, such as carpet and upholstery cleaning and dyeing, rest room sanitation services, air duct cleaning, interior and exterior restoration services, swimming pool cleaning and repair, water damage restoration and even acoustical ceiling tile cleaning.

While many of the decisions involved in choosing a specific cleaning franchise are unique to that particular industry, the same advantages inherent in all types of franchise businesses still apply. Some of those advantages, says veteran franchise attorney Erwin Keup, author of "The Franchise Bible," include:

  • The power of group advertising.
  • The freedom of owning your own business and making day-to-day decisions on your own, balanced by the guidance offered by the franchisor's experience.
  • The benefit of identification with the franchisor's service marks, trademarks, proprietary information, patents and designs.
  • The systematic initial and ongoing training most franchisors provide.
  • The lower risk of failure a franchise provides in comparison to an independent business start-up.
  • The access to additional assistance in areas that can include finance, accounting, management, etc., that most franchisors offer their franchisees.
  • Owning a franchise in the professional cleaning services industry has a lot to offer, but before you take the plunge you need to conduct an honest evaluation of your own prospects of success as a franchisee. Keup suggests starting by answering the following questions:

  • Will your franchise be taking a considerable amount of your time away from your family? If so, how do you feel about that? Is your family enthused about the franchise? Will you enjoy working with them if they will be employees?
  • Do you enjoy working with others?
  • Do you have the background or character traits necessary to succeed in business ownership?
  • Do you have the necessary capital resources, and can you make the financial sacrifices required?

  • Residential and commercial cleaning service franchises are accessible to many people.

  • Are you emotionally prepared to work the long, hard hours required?
  • That last point is a key one, and it applies to all new business start-ups, franchise or independent. While franchising offers a number of advantages and greater support resources than going it alone, when all is said and done, it is still the business owner's commitment and willingness to work hard that spells the difference between failure and success.

    Every year, hundreds of new franchisees make the choice to start "cleaning up" with residential and commercial cleaning franchises. There is plenty of room for more in this fast-growing industry.

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