Seeking information about the commercial kitchen hood cleaning industry
December 04, 2024
by a searcher from University of Pennsylvania - The Wharton School in Portland, OR, USA
I'd love to learn more about this fragmented, required-by-health-code industry from anyone who has direct knowledge or has even looked closely at a hood cleaner for sale.
I own a service plumbing company that does a lot of drain and sewer cleaning. Last week at an event a jokester introduced me to another business owner with the line, "The two of you have the grossest jobs of anyone I know... you should compare businesses." He is a retirement-age owner of a 30+ year-old commercial kitchen hood cleaning business with zero knowledge of how to sell and exit a business. We have many mutual friends and he's a solid guy, so I've agreed to spend some time with him to cover the basics of SMB transactions before he enters the sale process in###-###-#### It's not a large business... 2 vans, 4 employees, and ~$700K in revenue. SDE ~$200K. He handles sales and administration and rarely goes out with his crews to clean.
To best help him I'd like some background knowledge on this space. I'm also starting to ponder the industry as another vertical for my own portfolio and wondering if there are examples of successful aggregations of a handful of these companies in a single geography to make a more robust business.
from California State Polytechnic University in Los Angeles, CA, USA
You can charge a minimum price of $650 for a 2-hour job, trucks average $1,800 per night. Cleaning is mandatory, required every 90 days by the government. Internal workers don’t have the skills or equipment to handle it. Filter replacements happen twice a month. Your customers are every restaurant available in your area Your competitors are mom and pops shops and the industry is fragmented As a searcher I came across this industry and fell in love with it… All the above is great until you hit a wall…i can promise you that all the hood companies that are established will not sell. The contracts they all have print money. Think about it you have 5 crews each crew doing 1,800/night if you work 300 nights a year you are making $2,700,000 you can make a marging of 20% in this industry so you are netting around $540,000 of net profit. Thats a dream of every smb searcher Other learning that are specific for Southern California is that Unless you have a large amount of money, it's not gonna go as well as you think. The small companies that might be selling usually have very poor contracts or recurring service, there is a reason they want to sell. The larger companies in the area like Hoodz, Greenguard, fluesteam, and Bryan exhaust you're going to need a few million with the contracts they all have.
from Vanderbilt University in Denver, CO, USA
One thing to watch out for in this industry is that there's a franchise model for it seeking to cover the nation - KitchenGuard. They're selling new territories across the nation quickly, and franchises tend to have great sales ops. You and he could learn a lot about their operations, costs, expected revenues, etc. by downloading an FDD for the business at the link below. This isn't really "aggregation" in the way you asked, but is a single group trying to take over markets under a larger umbrella
https://apps.dfi.wi.gov/apps/FranchiseSearch/MainSearch.aspx
I have a bit more I can share regarding potential growth pathways and "risks" in the business, but this post might get a bit long - happy to connect on a call if you are interested,
I've taken a look at a few of these and am actually very interested in the industry despite the competition coming in the door. If you decide that the business isn't a fit for you, I'd welcome an intro to your (potential) seller here as it might be a fit for me and my family - we've been looking for something in the Portland metro.