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Q&A: Industry Consolidation Impact (Part 2)

Discussion moves to suppliers/vendors, consolidation in markets served

CHICAGO — Consolidation.

It’s not a new phenomenon in the laundry/linen services industry, but it seems to be occurring more frequently. 

For example, in just the past couple years, Cintas acquired G&K Services, and AmeriPride Services merged with Aramark.

And it’s not just happening with laundry operations. Entities in markets that facilities service, such as hospitals and hotels, are merging and being acquired.

What is the effect of this consolidation, and what does it mean for the laundry/linen services industry?

American Laundry News contacted Bob Corfield, founder of the consulting firm Laundry Design Group; Linda Fairbanks, executive director of the Association for Linen Management (ALM); Joseph Ricci, president and CEO of TRSA, the association for linen, uniform and facility services; and Sam Spence, a consultant with TBR Associates, to learn more about what’s going on with consolidation in the laundry/linen services industry, and its impact.

Q. How is laundry consolidation impacting vendors and suppliers in the industry?

CORFIELD: With acquisition there is a focus on plant improvement, and the industry is very busy at the moment. The number of projects is considerable, across the country and across markets. 

Timelines to build and the cost of capital projects has risen, as has the cost of textiles. Price to build or retrofit laundry plants has risen with the level of automation operators are seeking to combat rising labor cost and labor availability in certain markets.

FAIRBANKS: We have seen vendors and suppliers reduce their workforce in preparation for a reduced number of buyers in the marketplace—and consolidations of distributorships to better serve their customers.

RICCI: To some degree, buying power has consolidated, leaving them with fewer ultimate decision-makers. On the other hand, more individuals on company management teams than ever have an impact on decision-making, including general managers and other plant-level management. As companies grow, their highest-ranking corporate executives rely more on other executives to evaluate purchasing options. 

The greatest impact on our industry’s suppliers from consolidation was probably felt prior to this decade by suppliers of uniforms when more of the larger regional operators who didn’t manufacture their own uniforms were acquired by national/international operators who do.

Q. As has been mentioned, consolidation is also taking place in markets (i.e., hotels, healthcare, etc.). What have you observed in the laundry/linen services industry as mergers and purchases have taken place?

CORFIELD: When service and quality are not met, end users begin seeking to build OPLs or self-serve plants again. The problem for customers of the service and linen companies alike is talent. The industry is challenged with low wages and a lack of talent to operate automated plants at a level to sustain cost or service. The cost to build plants has risen dramatically and the experience to run them is not readily available

FAIRBANKS: A heightened focus on efficiencies and need for uniform industry measures to better gauge a laundry’s performance and to provide a tool to identify opportunities for improvement. 

RICCI: Market consolidation and the growth of chain restaurants has driven an increase in national accounts. We’ve seen laundry operators forming more alliances, especially in the healthcare and uniform sectors, to provide greater national coverage. 

Market consolidation is also driving industry consolidation and investment in the hospitality and out-patient medical, such as surgery centers, medical offices and long-term care facilities.

SPENCE: A few things come to mind when thinking about healthcare system consolidation. Ultimately, it means fewer opportunities for smaller one- or two-plant operators. As these systems grow and the local community hospital becomes a thing of the past, large multi-state linen services will be the only real options.

It is worth noting that consolidation is still a bit of a regional occurrence at this point. Some parts of the country are dominated by one or two large health systems, while other parts are still serviced by more regional health systems. I do believe that consolidation is going to continue, and if it has not affected your area yet, it will. 

A couple of years ago I attended a “state of the system” meeting at one of the few independent community hospitals left in my area. Chatting with the presenter after the meeting, he indicated that consolidation is going to continue and to expect to see the regional two- or three-hospital systems affiliating with the larger multi-state operations.

One strategy many local laundries pursued in the past was to focus more on retail medical, such as clinics, surgery centers and family practices. More recently, we are seeing even these types of facilities acquired by the big health systems. It can be difficult to even find an independent, non-affiliated family physician in many areas. These offices now tend to get their laundry under the same contract that serves the entire system.

I do think that opportunity still exists for the local providers in personal care and skilled nursing. These types of facilities remain largely independent. The sales process can sometimes be difficult here, as it often entails convincing facility administration to close their on-premises laundries.

Miss part 1 about the effect on operations, quality? Click HERE to read it. And check back Tuesday for the conclusion with a look at the major issues for laundry/linen services.

People who appeared in this article

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Mergers and acquisitions, along with activity by private equity firms, are changing the laundry/linen services landscape. (Image licensed by Ingram Publishing)

Have a question or comment? E-mail our editor Matt Poe at [email protected].