Market Trends: Nov. 1999

ON-THE-JOB

Contractors who wait more than 24 hours to report any incident that could result in a workers’ compensation claim risk increasing the average cost of that claim by as much as 50 percent. Michael Lezynski, vice president, Acordia Northeast, Morristown, N.J., explained that the average cost for a claim filed less than 10 days after the incident occurs is $12,082, whereas the average cost of a claim filed more than 30 days after the incident occurs is $17,920. In addition, the likelihood of a claim leading to litigation jumps from 22 percent for claims filed within 10 days to 47 percent for claims filed after 30 days.

Lezynski also recommended contractors establish internal safety committees, safety incentive plans and a formal protocol for investigation of all accidents in order to control their workers’ compensation claims.

When U.S. Lawns was first featured in Lawn & Landscape (August 1994), it was the only company franchising landscape maintenance services in the country and it had 16 franchises in three states. Plans were to add six to 12 franchises annually from that point, but Tom Oyler, U.S. Lawns president and founder, was pulled away from the business as he managed and sold his other company, Oyler Bros. Company, to Environmental Industries, Calabasas, Calif.

Today, U.S. Lawns includes 42 franchises and four company stores in 14 states and is poised for significant growth now that it lies beneath the mega-umbrella of Environmental Industries. In addition, in Oyler, U.S. Lawns is directed by an entrepreneur in the truest sense of the word who sees the consolidation taking place in the industry as the perfect reason for a franchised landscape maintenance company.

"The biggest challenge in the industry today is for the independent owner-operator to find a way to compete with these new, massive companies and be able to generate the capital necessary to grow the business," noted Oyler. "Franchising is a model running parallel to consolidation, but franchisees can outperform the big companies because the franchisees can stay closer to their customers and to their businesses."

While landscape companies grow into multi-million dollar organizations, encumbering systems and bureaucratic policy can bog them down, Oyler explained. "That is why many of the owners of these companies are selling. They had become dinosaurs and they knew it," he said.

Franchises, on the other hand, retain the entrepreneurial spirit and the ability to constantly reengineer their businesses as the market demands.

U.S. Lawns enables Oyler to implement the practices he learned since opening his own landscape company, Oyler Bros. Company, in 1973 that grew to be one of the largest and most respected in Florida before being sold to Environmental Industries in 1990.

"For example, we don’t want franchisees to take jobs that require more than 15 minutes of drive time getting to or from the job," Oyler noted. "One of the lessons I learned trying to operate branches all over Florida with Oyler Brothers is that the route business is best served by the owner-operator because of the attention this person can give the customer. Plus, in the future, we don’t think the customer will be willing to pay for this driving time."

Oyler envisions three phases franchises grow through: a start-up phase; a growth phase and a maintenance phase.

"The start-up phase is when the franchise focuses on getting the operations side of things set up and doesn’t focus on premium accounts," Oyler explained. "The growth phase begins once the operations issues have been dealt with and we’re ready to go after premium accounts. This is the phase most independent owner-operators remain in.

"But the maintenance phase is the key to the franchises’ success because this is when we get margin aggressive and pursue the ideal customer," he continued, adding that the franchise will still grow the business during this phase. "This phase should yield a higher return on the business while less time is invested in the work."

Typically, U.S. Lawns franchises avoid primary markets where competition is more intense and they avoid larger contracts (more than $5,000 monthly) that are more competitive work and more damaging to lose.

Oyler’s plans for the future include expanding to 200-300 franchises by 2004 with plans to sell 36 to 40 in the next 12 months.

Obviously, there are no guarantees with any business, but Oyler currently has four franchisees that own multiple franchises and he’s looking to further develop this model of multiple unit operators with combined sales exceeding $2 million.

Oyler also explained that franchise fee is $29,000 with annual royalties between 3 percent and 4 percent, depending on the franchise’s annual sales volume. – Bob West

The areas listed to the below have been identified as the communities where heavy anti-pesticide activity has already taken place and is likely to continue at a high level during the year 2000, according to the Responsible Industry for a Sound Environment (RISE).

In addition, RISE has identified children’s health and water quality as the top two issues that anti-pesticide activists will focus on in the coming months.

Lawn and landscape industry supporters who are interested in helping to counter proponents of pesticide bans in these communities or other areas are encouraged to contact RISE at 202/872-3860.

MEMPHIS, TENN. – Cenex/Land O’Lakes Agronomy announced it will merge recently acquired Terra Professional Products and Land O’Lakes East Turf & Ornamental Products to form Resource One, a supplier of fertilizer, plant protection products, seed and services to the turf and ornamental industries.

The new venture will be headed up by Dr. Tom Perkins, vice president professional products. Perkins noted that developing a premiere distribution chain will be one of the group’s first orders of business.

"Our customers will have the products and services when and where they need them," Perkins noted.

Resource One plans to distribute its brands of fertilizer, seed and plant protection products in addition to products made available by other manufacturers.

SALEM, ORE. – The turf seed industry’s mighty consolidator, AgrBioTech, took a major step toward making its extensive acquisitions more manageable by dividing the company into two separate business units.

The first business unit, Independent Seeds, is a compilation of 13 acquired companies, including such well-known names as Burlingham Seeds, Seed Resource and Zajac Performance Seeds. This group will serve the turf and forage sector of the industry and will be headed up by John Zajac.

"Working closely with ABT research and production, Independent Seeds will be able to improve customer access to new products, streamline ordering procedures and more efficiently deliver products and services targeted to wholesale markets," noted Jerry Peterson, forage business manager for Independent Seeds.

The second business unit will focus on the retail and professional markets.

ABT also announced it would post a one-time, fourth-quarter loss between $35 million and $39 million due largely to restructuring costs, some of which have been mentioned above.

Encore Power Equipment named Barrett Marketing Group its Canadian distributor…Toro and Maruyama announced a four-year extension to the 1996 deal that has Maruyama manufacturing hand-held power equipment to be marketed under the Toro brand name…Melroe acquired Erskine Manufacturing and assets of E-Z Implements attachments…John Deere announced a 206,000-square-foot expansion of manufacturing facilities at its Augusta, Ga., manufacturing facility…Great Dane Power Equipment plans to open its new 70,000-square-foot production facility in Jeffersonville, Ind., in December…Bri-Mar Mfg. moved into a new, 19-acre facility in Chambersburg, Pa…Century Rain Aid acquired WaterWorks, a Columbia, S.C., irrigation distributorship…Redexim Charterhouse relocated to a larger location in Pittston Twp., Pa…R.M. Wade & Co. purchased Nibco’s micro-irrigation business…