The janitorial industry is constantly changing, due to predictable forces such as striving for a competitive advantage, simply trying to make a profit, and government regulations. In 2008 the recession hit the industry work harder causing Building Service Contractor (BSC) to work harder for less. Then 2018 brought unique challenges from our government of Ontario with unprecedented increases in the minimum wage of 22%, plus many other requirements for employers (Known as Bill 148, Bill 47 has since removed the next planned phase and modified employer requirements). Many companies are still trying to remain competitive and make a living.
Many companies spend uncalculated time and money going from cleaning company to cleaning company because they didn’t do their research but loved the low price they were given. The old saying you get what you pay for is never truer than in a labor industry like contract cleaning. If you aren’t careful you won’t even get that. The lens of evaluating these models should be based on two driving factors: Math and Human nature. If you don’t get the math right with a contract then human nature will kick in and make it right by cutting corners. Usually ending in disaster.
(Note: the comments are about the structure, not about the owner’s ability to execute. Certain structures have a natural bend to these Pros and Cons.)
To help you make sense of it all let me break down 5 unique business models I see in the Contract cleaning market today:
Tradition Business: Simply structured as you would expect. Contracts are signed and cleaners are employed, trained, equipped, and managed with a predictable number of hours and results. The structure’s success simply depends on normal business principles. How good you hire, pay, and management systems in place. Stakeholders identify their market and work towards building a company they are proud to own.
Pros
- Legal and ethical operations
- Training tends to be high and hands-on
- Quality and consistency higher than industry norms
- More controls as they have direct employees
- Cost depends on the target market (high end or low end). However, these do tend to be higher as all legal employment costs need to be covered
- Systems and inspections tend to be in place
- Sustainable operation
Cons
- All employment cost is assumed and therefore costs are passed to the client
- Legal and ethical operations cost money so often when compared to other models they appear to be not as financially competitive.
Traditional modified: In addition to the traditional model, subcontracting is introduced. The government allows subcontracting in a limited way. Some companies utilize this to simply bill the customer and take a cut. Others utilize it as a method of payment which enables the cleaners to have the benefits of being self-employed and the company saves employment costs and stays more competitive. This model is totally legitimate but can often be abused causing the contractors and their customers a big problem if not done correctly and legally. Simply follow the rules or else.
Pro’s
- Cost competitive
- Motivated cleaners to be efficient
- Can be done Legal and Ethically
- A good system can produce good results
Con’s
- Some loss of controls if not done correctly
- Liability is high if not done correctly
- Can be abused for low pay even below minimum wage
- Often used for non-legal workers
- Accident or injury can result in legal issues for the company and clients if not done legitimately
Mom and Pop: Still operating as a traditional business but often with family only. This model is often very competitive for smaller locations but not for midsize buildings. Quality is still based on who you hire. If a small operation is contracted, they can be deemed an employee of the client by WSIB. Often challenged by the true regulations required for a proper business (WSIB, WHIMIS regulations, government-mandated policy, etc.). You the customer become the quality inspector due to not having supervisors most often. Again, you get what you paid for. Ensure those working in your location are legal and insured or you can become liable.
Pro’s
- Smaller locations are very cost-competitive
- Deal directly with the owner for concerns
- Quality and Consistency can be good
- Often but not always Legal
Con’s
- No management of quality you are the quality inspector
- Lack of fill-in for sickness or holidays. Consistency issues
- Often not up to date on legalities of running a business
- You could be responsible for accidents or incidents
- Often not up to date on best practices and procedures
Franchise Operation: This had a lot of traditional business values when done correctly. A traditional franchise tends to assign areas of operating and educate on systems and training. A good franchise will have some benefit from a name that will send customers their way helping them with marketing. Many franchise owners I believe seek to run a good operation but have one major competitive disadvantage, they have to pay head office, often 10 plus percent. In the last 10-15 years there has been such a force to be competitive that simply sending 10 plus percent to head office causes challenges in keeping quality staff due to additional financial burdens. In my experience, effective traditional franchises (in the Janitorial industry) are under attack due to prolonged competitive market forces. They are viable legally and ethically but will struggle financially and to produce quality consistent results.
Pro’s
- Set up to operate Legally and Ethically
- Strong Systems and training
- Generally, well educated in best practices and procedures
- Quality and Consistence can be good
Con’s
- Some loss of controls as directed by head office
- Payment made to head office makes operations challenging
- Often higher billing rate to offset operation cost.
- Head office is not always knowledgeable of local challenges
- Quality and Consistency can be a concern due to lower payments to front line workers
Winning Bids, Selling Contracts (new franchising): This model has been around for a long time but I am seeing a new spin on it. They call it a franchise. Essentially this model isn’t in the contract cleaning business (not where they make their money). They profit from SELLING contracts. Essentially a $1000 contract is sold for anywhere $3-4000 if you have the money. One large company resulted in several law suites regarding this practice. A new spin is a contract that bills $1000 a month and the new franchisee get to purchase it for 15% per month for 3 years ($5400) Plus as a franchise, they pay a fee of 5-10% and an admin fee of 5-10%, plus all kinds of additional fees. If the client isn’t happy (6 months, a year later) then the company just resells the same contract to another luck franchisee. So, who buys these lucky franchises? The desperate, believing they are purchasing a dream of self-employment. New to Canada, individuals that are unemployed or even illegal workers because no SIN number is required, or it is for a family member that can’t work legally. These models are the most profitable in our industry because the money comes from the front-line worker. Normally working for less than minimum wage These companies often are the cheapest billing in the industry because they get paid simply to get the work not to work the account. Remember you get what you pay for. Desperate people in your office after hours. I don’t think we have seen the end to this being legally challenged in any way.
Pro’s
- Cheap Cleaning
Con’s
- Desperate people in your office
- Often Language barriers
- Little or no supervision, no controls
- Initially motivated but often ends with a steady decline
- Little training or process
- Maybe Legal? Very Unethical
- Often cheap cleaning solutions affect indoor air quality
- No best practices
There you have it 5 contract cleaning business models. Again, the comments made are made regarding the structure of the organization which usually reflects the intention and integrity of the organization. You have a right to ask questions of the company you are trusting to bring into your company after hours with keys and codes. If you have no idea of what type of company, you have in your office you haven’t done your homework. If you are the purchaser for your company then it is your responsibility to protect the corporation. I hope this article will help you to choose wisely.