Fuse Alliance Members Talk Commercial Opportunities
Fuse Alliance, a member-owned organization of professional, commercial flooring contractors, reported record-breaking attendance of more than 350 people from the United States and Canada at Rise of the Contractor, the organization’s annual conference held recently in Orlando.
“Flooring projects today are more complicated than ever, and as a result, the flooring contractor’s role in the supply chain has become more important than ever before. As a fair and impartial network of flooring professionals, our network has the collective strength to elevate our skills and expertise,” said Geoff Gordon, executive director for Fuse Alliance.
We sat down with four Fuse members learn more about what’s happening in their markets: Todd Bircher, executive vice president of Floors Inc., in Omaha and Lincoln, Neb.; John Finch, principal and owner of Legacy Group in Renton, Wash.; Ross Langhorne, sales manager for Sherland & Farrington Floor Covering in New York City; and Abby Reinhard, owner and president of GP Flooring Solutions in Gates, N.Y.
FT: Tell us a little about your company and your focus.
Finch: I’m with Legacy Group. We’re predominantly focused on commercial floors and interiors — mostly occupied tenant improvements (TIs) are our specialty. We also do new construction. As towers continue to go down in our market over the next 18 to 24 months, we are focusing on TIs.
Bircher: I’m with Floors Inc. We have offices in Omaha and Lincoln, Neb., and serve an area extending several hundred miles from our physical locations. Our market has been strong the past few years and does not seem to be slowing this year. There is growth in the education, healthcare, and senior living sectors. There also has been some migration from rural to urban business centers. This means more facilities and services are needed to accommodate growing populations.
Langhorne: Sherland & Farrington. Our bucket of businesses is basically Fortune 100. That’s what we specialize in, both in the city and on a national basis. We do a sliver of institutional and education, but typically those would be capital projects because they tend to go union. We are a union shop.
Reinhard: GP Flooring Solutions. We’re based out of Gates, N.Y. We do work throughout New York state and we do a lot of institutional work, higher ed, K- 12, healthcare, corporate work, and we have a maintenance division, which is something I’ve been very excited about.
FT: What are some of the key challenges you are facing?
Reinhard: Labor and moisture are the two that we identified already last year, so I would say, since last year what’s changed? We weren’t talking about tariffs and pricing increases the same way last year that we are this year.
FT: How about silica safety?
Bircher: Silica safety ended up being less of a problem than anticipated. It’s hard to define why, but the guidance offered by Fuse was helpful. It felt like a textbook example of how to prepare for regulatory change. One exciting and cool thing that came out of it is it led us to look at our safety program in general. At Floors Inc., we ended up rewriting the entire program. We may not have looked at it as closely if the silica issue was not raised.
Finch: I’d echo that for sure. We had some safety consultants come in and asked them to look at our program and see what we are doing right and what we are doing wrong. We bought all the great, fun equipment, and it just helped us be a little bit better. If and when things come down the line and we need to be audited for any reason, we have the documentation, we have a track record, and we have the equipment.
Langhorne: Our issues are really somewhat different. We’re doing much more concrete, much more polished, and much more ceramic. We’ve had a few projects with liquid linoleum. It’s the explosion in new materials, how to get trained in all of them, and how to make sure we do the right job with all of them that is probably one of the biggest challenges that we’re facing. Also, the issue of union versus non-union. A few years ago, I believe it was 28% of the city was union. I think now we’re down to about 20%, so you have a handful of large contractors chasing an ever-shrinking slice of the pie.
Finch: I’d say that the market is shifting as well. Adding to your point about things going to concrete, I see some of our competitors in our market tooling up and spending a lot more dough diving into concrete, and they are taking their eye off the ball on soft flooring, which is our gig. We’re doing a lot more carpet than we ever have simply because our competitors are focusing on hard surface.
Bircher: LVT is a hot product category, and we are also seeing movement toward more ceramic tile business.
Langhorne: Yes, there is a movement to more hard surface but not specifically ceramic. I think the footprint of concrete and LVT—and I’m even seeing a little bit of a renaissance in wood in areas in lobbies and conference rooms.
Finch: Retail, mixed use, and multifamily are splitting a lot more into hard surface and using LVT for full apartments, things like that. We just don’t play in that market. A lot of our corporate customers are into sound absorption; so, really, acoustics are huge for us. LVT, as it relates to us, is probably only 15% of our business, maybe 20% of our business.
FT: What are areas where you are seeing opportunity?
Langhorne: One of the niches which we have seen sort of explosive growth in is our lift jobs. It is rare to have a weekend where I do not have at least one lift job. We jack the furniture, we move the furniture. That’s been one of our strengths for years.
Reinhard: Maintenance has been a big part of our business in the last few years.
Finch: We’ve stayed away from it because with the discrepancy between what we pay, we’re pretty much on union scale, so to bring in the maintenance has been a real struggle. Some of our best referrals come from our maintenance partners because we’re doing the repairs to the customers are working.
Langhorne: One of the things that has grown for us is the toppings component of our business. As these toppings are getting more cost effective, clients are relying less on the concrete and the mason trades and more heavily on the floor covering contractor to come in and pour 20,000 feet at a half inch or the whole slab at a quarter inch. The tolerances that we are having to hit are so much tighter than they used to be.
Finch: Preparation for glass wall partitions—we do a lot of that. That tolerance is an eight over 10 at best, sometimes the 16th. So it’s really important.
Langhorne: In my market, because so many of the buildings are 80 stories high and 70 years old, once the demo gets done, there’s so much roll to the slab and so many peaks and valleys that self-leveling is on virtually 75% of the jobs.
Bircher: We have seen opportunities involving fun and exciting design elements. A good example involves complex patterns that make installation challenging. When considering large, open areas, these designs require perfectly flat concrete surfaces. Floor prep is more involved because these large areas need to be leveled. It isn’t easy, but anything that requires expertise is an opportunity for us to shine.
Finch: It’s always about setting that expectation with your customer. Give them a couple of different options and say, “To what degree and level of tolerance are you wanting to have, based on how much it can cost you?”
Langhorne: The way we see it, it’s an absolute profit center. It’s still one of those areas where you don’t have five people running to do it for single digits. It’s not quite mainstream, but it’s not so difficult — too specialty — where we can easily master it, easily do it and make relatively good margin.
Finch: The margin should be 30-plus on that stuff.
FT: What’s your general outlook for the year?
Langhorne: I think we’re going to be flat. We had a really, really good year last year.
Finch: I would say that we’re going to be down maybe 2% to 4%. We had an epic year last year, and I would say our profitability is going to be higher. We bought a lot of materials last year—I’ve got 100,000-plus yards in my shop that haven’t been installed yet. I think our margins will go up.
Bircher: There is a lot of activity right now, and I’m projecting 7% to 8% growth. A lot of that results from cost increases. It doesn’t mean that we are doing more work or making more money. Our costs are higher, and our revenue is struggling to keep up. Success in the commercial flooring industry isn’t a straight line.
Reinhard: My stated goal is 9%. We made a lot of investments in people and technology, and it takes time to see ROI on some of that.