An ageing population, and high and dual-income households, are helping to drive the demand for residential cleaning services, reports analysis company IbisWorld*.
In Australia, the two most dominant corporations have embraced the trend for business service operators to bundle their offers under a single multi-service contract, and this has boosted revenue and profit.
So can the franchise companies compete?
“The franchised cleaning operators segment is rising steadily and providing increased competition to existing major players,” the report indicates.
One bundling benefit for franchisees is when their franchisor signs on national, multi-site clients, allowing them to service major businesses on a local level.
Franchised companies have made inroads into the residential cleaning market, either offering general or niche services, and can boost their profits by focusing on the provision of good quality cleaning. “Franchisors can also offer clients assurance on meeting cleaning requirements and standards,” the report highlights.
“Franchising lowers associated business management and operation training costs, as such costs become part of the purchased package of services.”
And the franchise businesses are expected to contribute significantly to the industry revenue growth as they expand into commercial and office cleaning services.
IbisWorld estimates franchised operations account for 10 percent of industry revenue [2013-14].
Revenue projections for the industry** over 2013-14 are $4.3 billion, an increase of 2.3 percent for the year. Steady growth over the next five years is expected to be about 1.5 percent per year, reaching $4.7 billion in 2018-19. While growth is lower than in previous five years thanks to competition and a maturing sector, office cleaning services are expected to rise.
Outsourcing household tasks such as cleaning result from busier work and home lives, and the industry will benefit from this.
ARE CLEANING BUSINESSES MAKING A PROFIT?
According to IbisWorld, this year profit is expected to account for 7.1 percent of industry revenue. The next five years are expected to see only modest profit growth despite higher demand for the services because of price competition and labour costs. The data analysis business is predicting industry profit will reach just 7.4 percent of revenue.
Technological innovation is likely to be minimal, reports IbisWorld, and overall the labour-intensity of the sector will continue.
WHAT ARE THE PROS TO THE SECTOR?
- low entry level
- no regulations
- no training or license required
- low level of volatility.
WHAT ARE THE CONS TO THE SECTOR?
- high staff turnover
- labour intensive
POCKETS OF POTENTIAL
Industrial cleaning, washroom services, residential cleaning, cleaning aged-care homes, government, hospitals.
WHO IS IN THE INDUSTRY?
IbisWorld has highlighted the following cleaning companies:
AMC Cleaning Group has an estimated market share of 11 percent and more than 600 franchisees. It’s a privately owned commercial cleaning company with reported revenue in 20122 of $41.7 million. IbisWorld suggests growth into New Zealand and acquisitions into related areas such as hygiene services are part of the expansion plan.
Cleaning Wizard has an estimated market share of 0.4 percent and 50 franchisees. It services industrial and commercial premises with a focus on floor cleaning.
Jani-King has an estimated market share of 0.6 percent. The US based company has nearly 900 franchisees across Australia and New Zealand, with a 2012-13 revenue of $26.6 million.
*Commercial Cleaning Services in Australia December 2013
**including industrial cleaning services, building interiors, residential, street and road, washroom and exterior building and window cleaning
Images: Jani-King
In The cleaning sector: industry report [part two], we will showcase some of the franchise brands in the cleaning arena and find out what they make of the industry trends.