American Home Shield 2010 Annual Report Download - page 8

Table of Contents
SMAC. SMAC provides financing to franchisees of the Company through commercial loans for franchise fees and royalties, equipment and vehicle
purchases and working capital needs and to consumer customers of Terminix through retail installment sales contracts. Commercial loans are typically for a
term of one to seven years and are generally secured by the assets of the franchisee and other collateral. On December 31, 2010, the outstanding balance of
commercial loans was $35.6 million with a bad debt reserve for commercial loans of $2.3 million. SMAC wrote off $0.9 million in commercial loans in 2010.
Retail installment sales contracts are typically for a term of 12 months and are unsecured. On December 31, 2010, the outstanding balance of retail installment
sales contracts was $19.5 million. In the event a customer fails to make payments under a retail installment sales contract for 120 days after the due date,
Terminix purchases the installment contract from SMAC.
Headquarters Functions. The Business Support Center, headquartered in Memphis, Tennessee, administers payroll, benefits, risk management, travel
and certain procurement services for ServiceMaster's internal operations. Various administrative support departments also provide communications,
marketing, government and public relations, administrative, accounting, financial, tax, human resources and legal services.
MARKETING AND DISTRIBUTION
ServiceMaster markets its services primarily through yellow pages advertisements, direct mail, the internet, television and radio advertising, print
advertisements, door-to-door solicitation and telemarketing. Additionally, American Home Shield and Terminix, in certain jurisdictions, market their services
through real estate brokerage offices, financial institutions and insurance agencies.
SERVICE MARKS, TRADEMARKS AND TRADE NAMES
ServiceMaster holds various service marks, trademarks and trade names, such as ServiceMaster, Terminix, TruGreen, TruGreen LandCare, Merry Maids,
ServiceMaster Clean, American Home Shield, AmeriSpec and Furniture Medic, that it deems particularly important to the advertising activities conducted by
each of its reportable segments as well as the franchising activities conducted by certain reportable segments. As of December 31, 2010, ServiceMaster had
marks that were protected by registration (either by direct registration or by treaty) in the United States and 117 other countries.
FRANCHISES
Franchises are important to the TruGreen LawnCare, Terminix, ServiceMaster Clean, AmeriSpec, Furniture Medic and Merry Maids businesses. Total
franchise fees (initial and recurring) represented 3.6%, 3.8% and 3.8% of consolidated revenue from continuing operations in 2010, 2009 and 2008,
respectively. Related franchise operating expenses were 1.6%, 1.9% and 2.0% of consolidated operating expenses in 2010, 2009 and 2008, respectively. Total
franchise-related profits comprised 27.5%, 25.9% and 32.2% of consolidated operating income in 2010, 2009 and 2008, respectively. We evaluate the
performance of our franchise businesses based primarily on operating profit before corporate general and administrative expenses and amortization of
intangible assets. Franchise agreements entered into 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
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