Consulting Services: Chris Mayer, Performance Matters, Plymouth, Minn.
2016 has been an eventful year for our industry for a number of reasons.
First, there have been several large national and regional acquisitions:
- G&K sale to Cintas (largest sale in the history of our industry)
- Arrow sale to UniFirst
- Coyne sale to multiple companies: Prudential and Cintas
Next, the unemployment rate and new workers in the labor force. Let’s face it, service turnover is a major issue within the industry. It’s harder to find strong route service rep candidates than ever before. This leaves many managers either running routes or training new hires on routes. It’s become a systemic problem with a number of theories.
Despite the anemic economic recovery, the unemployment rate is still low enough to cause a challenge for business owners to find qualified route service rep candidates.
Many companies are struggling with the younger workforce and their view of service jobs within the commercial laundry industry. Some people blame it on the new millennial overall work ethic. Regardless of the reason, I’ve heard over and over again how the new labor force worker does not find the route service rep job appealing once they’ve been in the position for a short period of time after hire.
The heavy-labor component is a concern, causing significant turnover within the first three to 12 months of an employee’s tenure.
Third, training. The informal initial training for new hires is not aligned with the new employee’s view of quality onboarding. Informal “tribal knowledge” handed down from previous trainers isn’t cutting it, and the younger workers are voting with their feet.
Finally, continued growth in the healthcare sector. Many laundry companies, especially regional independents, have a major focus on servicing this high-growth sector. It’s resulted in significant revenue gains.
What’s to come in 2017?
Leveraging growth within the existing customer base through an intense focus on facility product and service offerings. Customers are purchasing high-margin paper products, restroom services, gloves, can liners, cleaning chemicals and safety products today—just from someone else outside of our industry.
Companies are realizing that solving overall customer needs is simply providing good service. They’re also starting to make this a major priority, rather than these products/services only being a fringe offering outside of uniforms or linen. The commercial laundry industry has an under-optimized service opportunity with a captive audience, which happens to be its current customer base.
Cost pressure from healthcare increases and Department of Labor (DOL) regulations. The Department of Labor has released final overtime regulations, effective Dec. 1 (this ruling is now on hold due to a preliminary injunction that is being appealed), that increase the salary threshold for exemption from $455 per week to $913 per week. On an annual basis, this is a salary increase from $23,660 to $47,476 per year. Also, studies show that employers’ healthcare expenses are expected to rise by 5-6.5% in 2017.
Major 2016 acquisitions will impact 2017. We may see a slowdown in larger purchases of local independent commercial laundries. These national companies will need time to digest and integrate the new acquisitions into their overall structure. This may be a significant resource challenge, causing them to focus on integration rather than new venture opportunities.
Check back tomorrow for viewpoints from chemicals supply and textiles experts.