Terminix Supplement — Terminix At 75

We know that Terminix International is the largest pest control company in the structural pest control industry. And we know they’ve been an influential player for most of the industry’s history. But within its storied 75 years, there is also a lot that is not well known — such as how the company went from a research laboratory to a franchise network to an international corporation with more than $1 billion in revenue. In addition, as well as pioneering the industry of termite control, many may not know that the company was the first franchise organization in the structural pest control industry.

The story of Terminix is not only about growth but also of technological advancement. It’s about partnerships, creative problem solving, and experimentation. And, perhaps most of all, it’s about charting new territories to the benefit of consumers and industry professionals everywhere.

EARLY HISTORY. Terminix got its start simply because there was a need for termite control. The company was created in the fall of 1927 as a division of Memphis-based E.L. Bruce Company, the leading manufacturer of hardwood floors in the United States. Bruce began to receive complaints about "bugs" in its flooring, and customers came to the company asking for help.

Frank Lyons, head of Bruce’s technical department, was asked to figure out what was wrong and what to do about it. "Not a lot was known about what to do about termites," explained Charlie Hromada, retired senior vice president of licensee operations and technical services for Terminix. "It was a new phenomenon."

A chemist by trade, Lyons determined that the bugs were termites, and that to control them, entire structures had to be treated. He then developed a chemical formula and a control technique. It was a four-step process that included mechanical alteration, soil treating, foundation treating and wood treating. Lyons also designed and produced treating equipment for his technique, and he trained crews how to use the methods he prescribed. The chemical and treatment technique proved to be a breakthrough for the fledgling company.

The chemical Lyons created, named Terminix 3A3B, was patented in 1927, with Terminix receiving the first U.S. patent for a termite control chemical. "Terminix was ahead of its time in patenting a pest control product specifically for termites," Hromada said. "Truly Terminix was the pioneer in the termite control business."

The job of marketing the new service was given to Evan Fellman, vice president of E.L. Bruce. He coined the name "Terminix," based on E.L. Bruce’s desire to "nix termites." The company’s original slogan, "Terminix Terminates Termites," followed suit.

Former Terminix president and retired president and chief executive officer of ServiceMaster Carlos Cantu notes that Terminix, through its research and product introduction, virtually created the industry. "Terminix was an early leader in termite control technology," Cantu said. "We were able to influence the direction in which that technology was going to be developed and utilized."

In the early years of Terminix’s history, employees of E.L. Bruce performed the actual termite treatments, but the company decided it didn’t want to be in the application business. Instead it was determined that a franchising approach would be more effective to market the new service. Once again, the fledgling company would chart new territory: there were few other franchising organizations in existence at the time, and certainly no other pest control franchises.

The company used its existing network of dealers and distributors to identify people to perform the termite control service. "Applicators were either employees of the lumber dealers and distributors, or business people of various sorts who were interested in pioneering a termite control business," Hromada explained. Franchises were offered for sale to these people, and they were supplied with the proprietary chemicals and equipment Lyons had created. The plan worked. Terminix became one of the first successful franchise companies, and it was the first such company in the pest control industry.

As the franchise system grew, it was only natural that some of the company’s first li-censees were individuals already practicing pest control. For example, Otto Orkin, who owned a pest control business, purchased the Terminix franchise in Birmingham, Ala., in 1931. Orkin ultimately purchased four Terminix franchises.

UNPRECEDENTED GUARANTEES. In 1955, the company again broke new ground by offering termite protection guarantees on its service. Shortly thereafter, the program was modified into a continuing service contract, renewable annually along with a free inspection. And in 1959, Terminix again made history by expanding its contracts to include damage repair, originally up to $5,000. The company was able to offer this coverage, says Hromada, because by this time, chlorinated hydrocarbons were being used for termite control. Their proven effectiveness in the field, he said, "allowed the company to offer this damage repair contract for the first time in the industry." Not only would Terminix retreat, he explained, but the company would also repair any new damage sustained by termites.

In creating these contracts, Terminix literally set the standard for termite control. "Terminix led the industry into that and it was quite good for its customers," notes Hromada.

With the support of Terminix’s management, its unprecedented services and the sales efforts of the company’s early franchisees, Terminix continued to expand its reach. "You had a lot of local people promoting these businesses in their communities," Hromada said. "The local support was very helpful to growing the business."

THE PEST CONTROL MARKET. Being hesitant to try something new was unusual for the young Terminix organization. However when it came to pest control services, Terminix was wary. One individual who played a key role in convincing the company otherwise was long-time Terminix veteran Charlie Hromada.

Hromada began his remarkable career with Terminix in 1954 as its first research entomologist. "It was my job to develop and manage the training programs," he said. Hromada also worked on the formulation of the chemicals and on building the pest control operations of Terminix. Over the years, Hromada also built the company’s technical staff from one individual to what it is today: a large group of technical and training professionals scattered throughout the county.

"They left a lot of business on the table by not offering pest control," said Hromada. "I was interested in getting the company to consider and offer general pest control services." Hromada recalls that the Bruce family was reluctant to offer pest control because it didn’t involve wood-destroying organisms. However, several licensees had successful pest control businesses separate from their termite business. Ultimately, E.L. Bruce saw the wisdom of being able to offer a full line of pest control services to customers. In 1957 the company began testing general pest control services through Houston licensee Lloyd Blackwell, and one year later, Terminix began officially offering general pest control services along with termite control. Within several years, all Terminix franchises were offering general pest control.

AN ERA OF ACQUISITIONS. In 1968 the company’s strategic direction took another major turn when Cook Industries, a worldwide cotton and grain trading business, also based in Memphis, purchased E.L. Bruce and the Terminix division. Ned Cook, the owner of Cook, bought Terminix with the idea of expanding it into a service business. "His main interest was Terminix," Hromada said. "He gave us the money and the direction to expand the business, and the best and quickest way to do that was to buy back the franchises." The company began concentrating on growth by making acquisitions, repurchasing franchises, and installing more company-owned locations.

Dickie Gauthreaux, retired president of Terminix with 18 years of service to the company, recalls that the decision to focus on company-owned operations allowed Terminix more control over its operations. "We were able to plan our strategies and implement them without having to go to 500 different franchise owners," he said.

Long-time franchisee Bob Williams (who recently sold his franchise back to Terminix) said that up to that point, Terminix was more of a sideline business for E.L. Bruce, in existence mainly to protect the name of hardwood flooring. "When they began to operate businesses themselves, that’s when they really learned the business," Williams explained. "They were more influential and helpful because they truly understood the problems that were encountered out there in the field."

In 1970, Terminix purchased the second-largest pest control company in Mexico. It was Terminix’s first venture into international business, however it was a natural move for Cook, which already had strong business ties in Mexico. Two years later, the company changed its name to Terminix International. A key individual in helping to manage the Mexico acquisition was Carlos Cantu, who had been with Cook Industries before the purchase of Terminix, handling the company’s cotton trading business in Mexico. Fluent in both Spanish and English, Cantu assisted during the initial acquisition and was later named branch manager of the business. From there he quickly moved up the ranks in Terminix and went on to become president in 1978.

Acquisitions continued throughout the 1970s with Terminix buying such well-known regional names as Vogel-Ritt in the Northeast and Midwest and Delk Pest Control in California. "We bought quite a large number of the franchises and many large independents," recalls Hromada. "We were the place to go if you wanted to sell your pest control company." During the 1970s alone, Terminix added 48 company owned branches and grew to revenues of $98 million.

One of Terminix’s more creative partnerships over the years was with Sears Termite & Pest Control. In 1971, Terminix agreed to provide control services under the Sears name. "They got a commission and we got the use of their name, credit and support," Hromada said. The partnership worked well and the program expanded nationally throughout the 1970s. As time went on, however, the two companies didn’t agree on how the service should be marketed, and the relationship ended in 1986.

Terminix’s commitment to growth continued as Carlos Cantu was named president of the company in 1978. At the time, Terminix was the third largest pest control company worldwide, behind Orkin and Rentokil. But Cantu had no intention of staying in that position, and he quickly shared his vision of moving to No. 1 with the company.

"That was a very proud moment when we announced our intentions to become the largest," said Cantu. "We laid out a plan as to what we felt needed to be done and then we executed on the plan and stayed the course." Cantu served as president of Terminix until 1988, when he was promoted to higher positions of leadership within ServiceMaster. He was appointed president and chief executive officer of ServiceMaster in 1994.

Cantu, now serving as senior chairman, retired president and chief executive officer for ServiceMaster, notes that a major contributor to Terminix’s success can be attributed to the unwavering support, both financial and otherwise, provided by Service-Master. "ServiceMaster has been very instrumental in helping us achieve what we have, and helping Terminix get to where it is today," Cantu said. "Terminix has been shoulder-to-shoulder with the ServiceMaster organization."

AN ERA OF CHANGE. In 1986, change again swept through Terminix when Ned Cook, who had reached retirement age, decided to put the company up for sale. "Quite a lot of companies came in to bid for Terminix," said Hromada. ServiceMaster was one of the interested buyers which felt Terminix would fit into its business well. "They very definitely wanted to expand into a group of retail businesses, of which we were the first," Hromada said. Up to that time, ServiceMaster’s main business had been the management of services for medical facilities, a business sector that was beginning to slow.

ServiceMaster purchased Terminix with the goal of its being a driving force in the ServiceMaster Consumer Services business. Today that network fills a broad range of needs for residential and business customers. The corporation also operates lawn care and landscape services under the TruGreen Chemlawn and TruGreen LandCare brands, as well as a number of home maintenance and improvement services, including Merry Maids, ServiceMaster Clean, and AmeriSpec Home Inspection Service. Terminix now constitutes the organization’s fastest growing business segment and its second-largest division in terms of revenue and income, behind the TruGreen segment. In 2001, Terminix brought in income of $104 million to ServiceMaster, a 22 percent increase over the prior year.

With the purchase by ServiceMaster, Terminix continued its push for growth through acquisitions. And like Cook, ServiceMaster put tremendous resources into growing the company through this means. In 1990, Cantu’s goal to become the largest pest control company was achieved, with the purchase of Waste Management’s $90 million pest control business.

In the years that followed, a number of other large and successful regional companies were acquired, including Rose Exterminating of California, Nevada, Colorado, and Arizona. Still more acquisitions occurred throughout 1996 and 1997, with Terminix purchasing 101 pest control companies.

Even more recently, in early 2001, the company purchased its largest franchise, Allied Bruce Terminix Companies, based in Mobile, Ala. The franchise, run by Bob Williams, represented 76 locations in eight states and annual revenues of $66 million, and was the fourth largest pest control company in the United States before being purchased. Later that year, Terminix also purchased the nation’s third largest pest control firm, Sears Termite & Pest Control, representing $100 million in revenues.

In 1999, Albert Cantu, Carlos’ son, was named president and chief operating officer of Terminix (see related story on page 8). The younger Cantu had joined the organization in 1985 as a management trainee and quickly moved up the ranks in branch and regional management and then on to the position of vice president of operations in 1994.

During his tenure as president, Albert has placed a greater emphasis on the company’s employees, or "associates," as they are referred to within the organization. "Our service is only as good as the people that are out there delivering it," he said. "A greater investment needed to be made to make sure our people continue to have state-of-the-art training." Cantu explained that today’s more sophisticated society requires more sophisticated training and more opportunities for growth. "That’s been our focus the last couple of years: to make sure our associates receive the best of all those."