American Home Shield 2006 Annual Report Download - page 8

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provided these services in 7 states and the District of Columbia through 20 company-owned locations and had no international
operations.
MARKETING AND DISTRIBUTION
ServiceMaster markets its services primarily through yellow pages advertisements, direct mail, television and radio advertising,
print advertisements, door-to-door solicitation and telemarketing. Additionally, American Home Shield markets its home service
contracts through participating real estate brokerage offices in conjunction with the resale of single-family residences and through
financial institutions and insurance agencies.
HEADQUARTER FUNCTIONS
The Business Support Center coordinates administration of payroll, benefits, risk management, travel and certain procurement
services for ServiceMaster's internal operations. Various administrative support departments also provide personnel,
communications, marketing, government and public relations, administrative, accounting, financial, tax, human resources,
information technology and legal services. The Business Support Center is headquartered in Downers Grove, Illinois and has
additional personnel located in Memphis, Tennessee.
PATENTS, TRADEMARKS AND LICENSES
ServiceMaster holds various service marks, trademarks and trade names that it deems particularly important to the advertising and
franchising activities conducted by each of its operating segments. These marks are registered in the United States and over 113
other countries and are renewed at each registration expiration date.
FRANCHISES
Franchises are important to TruGreen ChemLawn, Terminix, ServiceMaster Clean, Merry Maids, AmeriSpec and Furniture Medic
businesses. Total franchise fees (initial and recurring) represented 3.4%, 3.3% and 3.2% of consolidated revenue in 2005, 2004 and
2003, respectively. Related franchise operating expenses were 2.1%, 2.1% and 2.0% of consolidated operating expenses in 2005,
2004 and 2003, respectively. Total franchise fee profits comprised 10.5%, 10.3% and 10.9% of consolidated operating income
(excluding the impairment charge in 2003) before headquarter overhead in 2005, 2004 and 2003, respectively. Franchise
agreements made in the course of these businesses are generally for a term of five years. ServiceMaster renews the majority of its
franchise agreements prior to their expiration.
COMPETITION
ServiceMaster competes with many other companies in the sale of its services, franchises and products. The principal methods of
competition in ServiceMaster's businesses include quality of service, name recognition, pricing, customer satisfaction and
reputation. Competition in all of the Company's markets is strong.
Lawn Care Services. Competition in the market for lawn care services comes mainly from local, independently owned firms
and from homeowners who care for their own lawns.
Landscape Maintenance Services. Competition in the market for landscape maintenance services comes mainly from small,
owner-operated companies operating in a limited geographic market and, to a lesser degree, from a few large companies operating
in multiple markets, and from property owners who perform their own landscaping services.
Termite and Pest Control Services. Competition in the market for termite and pest control services comes mainly from
thousands of regional and local, independently owned firms, from homeowners who treat their own termite and pest control
problems and from Orkin, Inc., a subsidiary of Rollins, Inc., which operates on a national basis.
Home Warranty Contracts for Systems and Appliances. Competition in the market for home warranty contracts for
systems and appliances comes mainly from regional providers of home warranties. Several competitors are initiating expansion
efforts into additional states.
Home Inspection Services. Competition in the market for home inspection services comes mainly from regional and local,
independently owned firms.
Disaster Restoration and Cleaning Services. Competition in the market for disaster restoration and cleaning services comes
mainly from local, independently owned firms and a few national professional cleaning companies.
House Cleaning Services. Competition in the market for house cleaning services comes mainly from local, independently
owned firms and a few national companies.
Furniture Repair Services. Competition in the market for furniture repair services comes mainly from local, independent
contractors.
Electrical, Heating, Ventilation and Air Conditioning. Competition in the market for electrical, heating, ventilation and air
conditioning services comes mainly from regional and local, independently owned firms throughout the United States and a few
national companies.