The industry has been in a state of decline as construction rates have been slow to recover.
Los Angeles, CA (PRWEB) August 31, 2012
Although the Plumbing Service Franchises industry benefits from fairly stable demand from homes and businesses that need repair and maintenance of water delivery systems, the industry's performance is directly linked to building construction markets and consumer spending levels. Consequently, the recession and steep decline in construction activity curtailed industry expansion. Industry revenue is expected to decline at an average annual rate of 3.0% to $1.5 billion from 2007 to 2012.
In a highly fragmented industry where operators face intense competition within narrow, regional markets, plumbing franchises have been able to gain market share from independent plumbing operators due to higher advertising power and increased name recognition. Plumbing franchisees benefit from efficient operating systems, group buying power and vendor rebates that often allow them to operate more profitably than independent owners. During the recession, as demand conditions weakened, many independent plumbing businesses looked to gain a competitive edge by converting to franchises. In a difficult labor market, unemployed Americans also turned to plumbing franchising lured by the low overhead costs, which contributed to a rise in franchise units in 2009 and 2010. Nonetheless, as the recession curbed household income and construction activity across residential and commercial markets ground to a near halt, deteriorating demand conditions hindered industry revenue and profit. Revenue has been steadily declining each year since 2008 and is expected to drop another 1.4% in 2012. According to IBISWorld industry analyst Andrea Alegria, the industry is expected to return to growth in the five years to 2017 fueled by pent-up demand for new housing and renewed construction of commercial, industrial and institutional buildings. Following trends in population and economic growth, higher construction activity in the next five years will translate into more pipes, drains, sinks and toilets that need installation and repair. Housing starts are expected to increase significantly over the next five years, expanding the industry's pool of customers that may need assistance with clogged drains or broken pipes. Rising income levels will also motivate private investment in home remodeling projects, such as bathroom and kitchen renovations, stimulating demand for services.
The Plumbing Service Franchises industry is estimated to have a high level of concentration overall, with the top four companies making up 74.4% market share by revenue. Market share has increased over the past five years as some competitors left the industry during the recession, which increased profit margins for the remaining operators. “Many residential customers have contracted spending due to a decline in overall discretionary income; additionally, commercial customers have also put off industry-related services in order to cut back on expenses,” says Alegria. For these reasons, the industry has undergone cycles of franchise contractions, and further contractions in establishments are expected due to the slow economic recovery. For more information, visit IBISWorld’s Plumbing Service Franchises in the US industry report page.
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IBISWorld industry Report Key Topics
This industry operates franchised plumbing service companies. Industry firms (franchisees) receive branding, marketing, administrative support, training and other services for franchise, royalty and renewal fees to the franchisor.
IBISWorld’s Business Franchise reports provide data and analysis on industries made up of business franchises. Report titles are similar to our NAICS collection titles, but the reports in our Business Franchise collection focus solely on the operation of franchised outlets and exclude non-franchise data. Business Franchise reports show the total number of franchise outlets, total franchise revenue, average profit margin earned by franchisees, as well as key threats, opportunities and costs. Our reports highlight the largest franchisors by market share. Our reports highlight the largest franchisors by market share. The reports are vital for existing or potential franchisees looking to stay ahead of key industry trends and franchisors seeking to strengthen sales and marketing intelligence.
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