Recent additions to the franchise networkAs an essential service, the commercial cleaning sector is weathering the recession well.

However, chairman of leading commercial cleaning franchise Jani-King, Ian Thomas, reveals developments in the industry are benefiting businesses with franchise networks.

Growth and consolidation

As companies increasingly pare back to their core competencies and outsource non-core areas, commercial cleaning is seeing growth in the top end, ‘blue chip’ segment of the market.

The commercial benefit to the client of outsourcing is a reduced direct headcount and the potential cost savings of using an external supplier who can provide a service more efficiently because it is their core business.

This is recognised by the procurement/buying departments of companies employing central purchasing.

The selection of cleaning contractors is taken out of the remit of operations or field-based management and centralised behind a disciplined tendering process.

The overall impact of this trend, coupled with legislation drivers, has been an acceleration of growth in the contract cleaning market.

According to a Keynote marketing report, the market is growing at 10.7% compound annual growth and is forecast to hit £6bn by 2010.

There has been considerable consolidation in the industry.

91% of the £6bn market is controlled by about 125 cleaning companies.

There are over 10,000 VAT-registered cleaning companies in the UK so 91% per cent of the industry is concentrated in the hands of just 1.25% of companies.

Many small independent ‘mom & pop’ type cleaning operators seen in the Yellow Pages are being forced out of business as they’re unable to compete with larger national or regional operators.

Primary areas of growth

Overall Jani-King’s UK turnover grew 49% last year.

This has predominantly been driven by contract wins among ‘blue chip’ companies in a competitive tendering environment and an extension of contracts with more sites where Jani-King is already a preferred supplier.

Examples include: Odeon Cinemas, where Jani-King now services 85 of 112 locations, and H&M Hennes, where Jani-King successfully restructured the service-level agreement with the customer to create cost savings entailing no margin erosion to Jani-King and its franchise owners.

This type of win/win negotiation, requiring flexibility from both supplier and customer, is central to the industry’s future.

It’s simply bad practice for a customer to demand cost savings in the tough recessionary environment without being flexible enough for the supplier to retain a commercially viable profitmargin.

Without this type of negotiation the customer can force suppliers into agreeing unviable contracts which ultimately drive them out of business or force them to start operating illegally (by paying staff below statutory minimum wage levels).

Driving awareness of this issue among customers is critical and major-brand customers serviced by Jani-King such as Next, Premier Inn and Ten-Pin Bowling Alleys have proved sensitive to the importance of achieving a ‘workable contract’.

The examples of Next, Odeon and Premier Inn are particularly relevant.

All three are extremely well run companies and recognise that a specialist external/outsourced cleaning contractor offers quality and cost benefits verses in house models.

Consolidating more volume into the hands of fewer external cleaning suppliers maximises the benefits, as it gives the supplier more scale, which in turn can be passed on to the customer in the form of cost efficiencies.