American Home Shield 2007 Annual Report Download - page 9

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. As of December 31, 2006, the Business Support Center is headquartered in Downers
Grove, Illinois. In October 2006, the Board of Directors of the Company approved a plan to consolidate during 2007 the Business
Support Center into the Company's operations support center in Memphis, Tennessee.
SERVICE MARKS, TRADEMARKS AND TRADE NAMES
ServiceMaster holds various service marks, trademarks and trade names, such as Terminix, TruGreen LawnCare, TruGreen
LandCare, Merry Maids, ServiceMaster Clean, American Home Shield, AmeriSpec, InStar and Furniture Medic, 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 96 other countries and are renewed at each registration expiration date.
FRANCHISES
Franchises are important to TruGreen LawnCare, Terminix, ServiceMaster Clean, Merry Maids, AmeriSpec and Furniture Medic
businesses. Total franchise fees (initial and recurring) represented 3.5%, 3.4% and 3.3% of consolidated revenue in 2006, 2005 and
2004, respectively. Related franchise operating expenses were 2.2%, 2.1% and 2.1% of consolidated operating expenses in 2006,
2005 and 2004, respectively. Total franchise related profits comprised 11.3%, 10.5% and 10.3% of consolidated operating income
before headquarters overhead and restructuring charges in 2006, 2005 and 2004, respectively. Franchise agreements made in the
course of these businesses are generally for a term of five to ten years. The majority of these franchise agreements are renewed
prior to expiration. The majority of international licenses are for ten year terms.
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 and speed of service, name recognition and reputation, pricing and
promotions, customer satisfaction, brand awareness, professional sales forces, and reputation/referrals. 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. Scott's continues to expand towards a more national footprint.
Landscape Maintenance Services. Competition in the market for commercial 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 (Brickman and Valley Crest) 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. Ecolab competes nationally in the
commercial pest control segment.
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.
Residential & Commercial 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.
MAJOR CUSTOMERS
ServiceMaster has no single customer that accounts for more than 10% of its consolidated operating revenue. Additionally, no
operating segment has a single customer that accounts for more than 10% of its operating revenue. None of ServiceMaster's
operating segments is dependent on a single customer or a few customers, the loss of which would have a material adverse effect on
the segment.