When construction activity declined during the recession, demand for HVAC services fell.
Los Angeles, CA (PRWEB) September 28, 2012
The HVAC Service Franchises industry is highly dependent on activity in the downstream construction sector. Many HVAC (heating, ventilation and air conditioning) systems are installed at the time of building. As a result, industry demand fell when construction activity declined over the five years to 2012. “After the bursting of the housing bubble, the value of nonresidential and residential construction plummeted, pushing industry revenue down between 2008 and 2010,” says IBISWorld industry analyst Nikoleta Panteva. “Furthermore, demand for maintenance and upgrades waned as well, due to declining corporate profit and per capita disposable income.” As a result, industry revenue has declined at an estimated average annual rate of 3.6% between 2007 and 2012. As downstream activity picks up during 2012, industry revenue is expected to jump 8.0% to $1.9 billion. However, the solid performance during the current year will not bring the industry to its prerecessionary levels. Revenue is expected to remain below its 2007 level of $2.1 billion and industry profit will account for a lower share of revenue than in 2007.
The industry's franchise model allows franchisees to use the franchisor's brand name to compete better against other HVAC service operators. In return, aspiring franchisees must apply to be part of a franchise and pay royalty fees upfront and annually. “This model often benefits the franchisees because it allows for training and branding beyond what an individual service operator can do,” adds Panteva. The HVAC Service Franchises industry is extremely fragmented, with a low level of market share concentration and no major companies. More firms are expected to enter the market as the construction sector improves, but most of these operators will be small companies and nonemployers that exited the industry during the Great Recession.
The five years to 2017 promise to be more fruitful for HVAC service operators. Construction activity is forecast to increase in both residential and nonresidential markets. Corporate profit and per capita disposable income will also enable business and homeowners to upgrade their existing HVAC systems. The federal and state governments will continue to incentivize the move toward more energy-efficient systems via tax credits, supporting industry growth. IBISWorld anticipates revenue to rise over the next five years; profitability is also slated to rise as the value of individual services increases. For more information, visit IBISWorld’s HVAC Service Franchises in the US industry report page.
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IBISWorld industry Report Key Topics
This industry operates franchised businesses that provide heating, ventilation and air-conditioning services to both residential and commercial customers. Reports in our Business Franchise collection focus solely on the operation of franchised outlets and exclude non-franchise data. They show the total number of franchise outlets, total franchise revenue and the average profit margin earned by franchisees. Our reports also highlight the largest franchisors by market share.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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