THE U.S. COMMERCIAL & RESIDENTIAL CLEANING SERVICES INDUSTRY

(A Competitive, Economic, and Operational Analysis)

January 1999

Table of Contents Page

Introduction - Study Scope, Sources Used, Methodology 1-4

Industry Nature & Definition

* Description of the industry's major segments, services provided, SIC code 5

Executive Overview of Major Findings ($250) 7-33

* Highlights & key findings of all report chapters: analysis of major trends/issues affecting the

industry, outlooks for educational, educational, gov't., other sectors, 1992 vs. 1987 key

operating ratios (single/multi-unit firms, top 50 mkt. share, etc.), industry size/growth

rates for 1989-2003 forecast, profile/size of residential "maid" services mkt. segment, profile/size of the carpet cleaning mkt. segment (1986-2003), list of top competitors ( franchises, non-franchise firms), discussions of: consolidation, contractor alliances, customer outsourcing, worker pay & turnover, robotic cleaning equip., competing in-house cleaning depts., profit margins, "total service" concept., outlooks by major brokerage firms.

The Outlook For Office Space and Commercial Construction ($100) 34-43

* Summary & discussion of commercial/office construction activity and indicators: value of construction contracts 1980-95 (F.W.Dodge), 1997-98 commercial office vacancy rates in

major metro areas/nationwide, amount of existing commercial floor space by U.S. and by region

(1986, 1989, 1992), share of space by type activity (retail, education, healthcare, etc. - 1989, 1992)

Tables: 40

* No. of bldgs. and percent of total floor space by type activity (education, health care, lodging,

retail, offices, warehouses, etc.), by region - 1992.

* Commercial bldgs. and workers, selected bldg. characteristics, by floor space - 1992 41

* Office bldgs. - vacancy rates & supply status for major cities: 1980-1994 42

* Commercial office space: inventory & vacancy rates for the largest metro areas - 1994. 43

Contract Cleaner Trends & Operating Ratios ($150) 44-51

* Summary and analysis of 1991-1998 Contract Cleaner Statistical Surveys by Cleaning

Management Institute: competitive bids, use of franchising, customer mix, sources of new business, mix of areas/sites cleaned, worker productivity (by region), turnover, cleaning worker starting hourly wages (U.S., by region), worker productivity, cleaning prices per sq. ft. (by type area, by major cities, for janitorial vs. carpet and maid service), Marketdata evaluation of the data, identification of trends (tables: surface areas cleaned % by kind, % of time spent by task, avg. annual expenses for different size janitorial services).

Industry Size, Growth, Market Segments ($150) 52-58

* Discussion/analysis of 2-tiered mkt. structure (large contractors vs. small independents, and

franchise organizations vs. non-franchise cleaners), estd. share by top 15 firms in the industry

* Industry size estimates; rationale for estimates by varying sources, historical values - Marketdata's 1989-2003 forecast, factors affecting recent growth

* 2003 forecast & outlook: Marketdata projections, key factors affecting future growth

* Discussion of why the industry is recession-resistant, effects of last recession

Tables:

* Total industry potential (1989-2003), for contract and in-house cleaners - Marketdata 54

estimates

* Share of total receipts by disinfecting/pest control and "all other" (janitorial) building cleaning

& maintenance services (1985-1997) - Census Bureau data 55

* Total industry receipts, major segment receipts, annual % change (1983 - 1997) - Census Bureau 56

The Commercial Cleaning Franchise Organizations ($300) 59-87* Summary - how many exist? - Entrepreneur magazine Franchise 500 ranking, 1999 vs. 1996, description: how cleaning franchises work and differ, services typically provided by parent, master franchises, avg. franchise fees/royalties/start-up costs in 1998 59

(continued) Page

* The industry's leading franchisers: parent co. vs. systemwide revenues, 1995 avg. estimated annual

receipts, difficulties estimating revenues due to full-time vs. part-time workers; franchise invest-

ment pkgs. sold; Marketdata estimated gross income per franchise for: ServiceMaster, Coverall,

Jani-King, Tower, Clean Net, O.P.E.N., Profile of ServiceMaster - why/how it differs from the rest

in work they do; accounts 62

* Marketdata estimates of no. of franchises, systemwide revenues, parent franchiser revenues for 1998 64

* List of other large non-franchise contractors, estd. 1998 revenues (ABM, ISS, Temco, Building One,

Arcade, Laro, HGO, Triangle, Pedus, etc.). 65

Profiles of Leading Commercial Cleaning Franchisers

(For each company below: discussion & analysis of services offered, divisions, franchise packages offered/cost, performance; markets served; financial analysis (sales, net profits); history & recent developments; number of franchises; marketing strategies)

* ABM Industries 65

* Building One Services Corp. 67

* CleanNet USA 67

* Coverall North America 68

* ISS (International Service System) 69

* Jani-King International 72

* O.P.E.N. Cleaning Systems 74

* ServiceMaster Ltd. 75

* Swisher International 80

* Tower Cleaning Systems 81

Address List of The Industry's Leading Competitors

* Name/address list of all major industry competitors - classified by franchise vs. non-franchise companies, estd. or actual 1998 revenues when available 82-85

Tables:

* The major commercial cleaning franchises - no. of franchises operated (1993-1998) - 9 firms 86

* The major commercial cleaning franchises, by initial franchise fee, start-up costs, royalty

rates, top 10 franchises, 10-company avg. - 1999 87

(continued)

Page

The Carpet Cleaning Niche Market ($250) 88-101

* Nature of the business, evolution of the industry, how carpet cleaning services operate, services

performed, franchises vs. independents,

* List of top 7 carpet cleaning franchisers, phone, no. of franchises, franchise fees, royalties, start-up

costs

* Historical size/growth of the industry: comparison of Census data (receipts of carpet cleaning

services from 1986-1996) vs. Marketdata estimates of true size of the segment (1986-2003F)

* Discussion/analysis of how market potential derived, avg. annual sales per service, 2003 forecast and outlook for the sector, effect of recessions

* Carpet cleaner contractor operating ratios: highlights of CMM's Contract Cleaner Surveys (avg.

charge for a cleaning, yrs. in business, Tables: avg. gross sales 1993-98, avg. area cleaned, no. of workers, avg. annual expenses by type, avg. carpet cleaning price by range (1995-97), carpet cleaning

as a share of office cleaning man-hr. allocation, what areas contractors clean/carpet vs. other surfaces % distribution 1993-98, customer complaints by area 1993-98

The Residential Cleaning Market Segment ($150) 102-09

* Summary: nature & estd.1998 size of the market, estd. sales per franchise vs. commercial cleaning

services, list of 8 top franchise companies in the business (estd./actual 1998 revenues); differences in

franchises vs. independent maids, reasons why demand is booming (tax laws, 2-worker households, etc.)

* End-user household demographics: results of Mediamark Research survey: major target age groups and usage of professional cleaning services

* List of residential cleaning services: (The Maids Intl., Maid Brigade; Merry Maids, Molly Maid, Cottage Care, Swisher Maids, Mini Maid, Home Cleaning Centers of America).

* Franchise issues and costs (franchise fees, royalty rates).

* Table: Residential cleaning franchises, by territory size and franchise fee

Economic Structure & Operating Performance of the Industry ($250) 110-68

Total Industry Analysis - Discussion/Text 110-27

* Explanation of how to interpret Census data, how the data is arranged/classified by SIC code,

and major market segments.

* Summary & analysis: no. of cleaning establishments in U.S. and for leading states; no. of firms; industry size; avg. receipts per office by top states; mkt. share top 50 firms ratios; summary findings of 1992 Census

re: legal form of organization, firms & estabs. by sales size (in receipts & employment); single/multi-unit operations.

* Summary statistics: 1992 vs. 1987 - no. of estabs; total industry vs. disinfecting/pest control, other services;

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annual receipts; payroll costs; no. of workers; payroll per employee; receipts per employee, receipts per

establishment.

* Geographic analysis - share of national receipts, avg. receipts per estab., by state, top states' ranking

* Financial health of the industry: composite income statement & balance sheet ratios, profitability trends,

by size of cleaning contractor (janitorial svc. vs. pest control - 1991-1998 data)

Operating Ratios Tables:

Total Industry- All Types of Commercial Cleaning Contractors Aggregated

* Total cleaning industry firms, by legal form of organization -corporations, sole proprietorships,

partnerships: 1992 & 1987, (no. of firms, receipts, payroll as % receipts, no. of employees). 128

* Single vs. multi-unit operations, by size (statistics as above) 1992 & 1987. 130

* Concentration Ratios: ratios for top 4, 8, 20, 50 largest firms 1992 & 1987. 132

* Total Commercial Cleaning Firms, by receipts size (under $100,000 to $100 + mill.);

(no. of firms, estabs., receipts, payroll, avg. receipts per firm) 1992 & 1987. 133

* Receipts & avg. receipts per establishment, by state - 1992. 135

* Receipts & avg. receipts per establishment, by state - 1987. 137

* No of estabs. & receipts, by 180+ major cities - 1992. 139

Note: same type economic tables are repeated in two separate chapters, data for: disinfecting & pest control services, , and "all other" (janitorial) cleaning & maintenance services.

Janitorial Services - (Building Cleaning & Maintenance Services Other than Pest Control or

Window Cleaning)

* Janitorial service firms, by legal form of organization - corporate, sole proprietorships, partnerships:

1992 & 1987, (no. of firms, receipts, payroll as % receipts, no. of employees). 142

* Single vs. multi-unit operations, by size (statistics as above) 1992 & 1987. 144

* Concentration Ratios : ratios by top 4, 8, 20, 50 largest firms 1992 & 1987. 146

* Janitorial service firms, by receipts size (under $100,000 to $100 + mill.); (no. of firms, estabs., receipts, payroll, avg. receipts per firm) 1992 & 1987. 147

* Receipts & avg. receipts per establishment, by state - 1992. 149

* Receipts & avg. receipts per establishment, by state - 1987. 151

* Composite balance sheet & income statement: 1991-98, bldg. cleaning services, by size of company 153

Disinfecting & Pest Control Services

* Disinfecting & pest control firms, by legal form of organization - corporate, 155

sole proprietorships,

partnerships: 1992 & 1987, (no. of firms, receipts, payroll as % receipts, no. of employees) 155

* Single vs. multi-unit operations, by size (statistics as above) 1992 & 1987. 157

* Concentration Ratios : ratios by top 4, 8, 20, 50 largest firms 1992 & 1987. 159

* Disinfecting & pest control firms, by receipts size (under $100,000 to 162

$100+ mill.) (no. of firms, estabs., receipts, payroll, avg. receipts per firm)

1992 & 1987.

* Receipts & avg. receipts per establishment, by state - 1992. 162

* Receipts & avg. receipts per establishment, by state - 1987. 164

* Composite balance sheet & income statement: 1991-1998, disinfecting & 166

pest control services, by size of company.

Reference Directory of Industry Information Sources

* Addresses, phones, contacts at major industry trade associations, trade journals, 167

consulting firms