Please check out my annual interview with @LibertyRPF, where I offer some thoughts on investing and provide an update on the business of scuttleblurb. If you’re looking for an eclectic mix of content related to investing, technology, art, and science, I recommend subscribing to Liberty's newsletter, Liberty’s Highlights. It’s one of my favorites. And if you enjoy this blog, don’t be shy about spreading the word!
On the heels of my GFL write-up, I thought I’d dig into another route-based business: uniform rentals.
Like waste management, the business of renting uniforms benefits from route density in that the more customers you have clustered along a route, the more efficiently you can serve them.
Like waste management, uniforming employees is an important but non-core activity. For safety and presentation reasons, healthcare professionals need to be outfitted with clean scrubs, electricians with flame-resistant gear, used car salesmen with matching polo shirts, etc. Companies could manage garment programs internally, but this entails various complexities they’d rather not spend time on. You could order a dozen maroon polo shirts from Amazon, but there’s no guarantee that Amazon will have in stock the same shade of maroon in a given size to outfit new employees as your business grows. If a plus-sized employee is replaced by someone with smaller dimensions, you’ll need to buy a brand new uniform while the XXL shirt and pants sit on the shelf. Over time, you will find yourself tying up more and more cash in garment inventory and volatizing cash flows with unpredictable garment purchases. By assuming inventory on their own balance sheet, a uniform rental provider can help dampen the swings and ensure you get exactly the right uniform when it is needed.
Like waste management, the market for uniform rentals and sales ($21bn), and workplace supplies ($27bn)1 in North America is pretty fragmented2, with Cintas, the largest player, claiming 15% share, followed by Vestis (a recent Aramark spin-off) at 6%, and Unifirst at 4%. Alsco, which is known as much for commercial linens as uniforms, is I’m guessing in the same ballpark as Unifirst in terms of revenue (they serve about 20% more customers), but they’re a private company so it’s hard to say with confidence.
Each has origins dating back to the late 19th/early 20th century. Aramark was founded in 1959 as food and beverage vendor before expanding into uniform rentals in 1976. Alsco started in towel deliveries in 1889. Unifirst was family run from its inception in 1936 until 2017, when Ron Croatti, the founder’s son, passed away after 26 years as CEO (two Croatti family members can be found in the ranks of senior management; one is on the Board). Cintas emerged during the Great Depression, washing and re-selling soiled rags back to manufacturing plants along the Ohio River. Like Unifirst, it too was continuously run by family for most of its history, with Scott Farmer, the great grandson of Cintas’ husband and wife co-founders, assuming the Executive Chair in 2021 after 18 years as CEO.
Over several generations, Cintas, Unifirst, and Vestis acquired and grew their way to leading positions. But ~38% of the industry is still served by local and regional operators, who will continue to be rolled up by larger players with the scale to volume purchase rental garments at cheaper prices. Another ~38% comes from “non-programmers”, companies that handle their uniform needs in-house but may eventually outsource this function to third-parties. Cintas, who serves 1mn business locations out of a potential market of 6mn, still gets 60%+ of new business from non-programmers.
But garment rentals also differ from waste collection in several crucial ways.