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The Current State of the Residential Plumbing Service Industry

 

The residential plumbing service industry has been hijacked by sales and marketing oriented interests.

 

Years ago the residential plumbing industry was defined as plumbers doing plumbing work for consumers. Today “residential plumbing” appears to be a virtually unregulated “free-for-all” for anybody that wants to promote the unskilled as skilled and the unlicensed as licensed while charging hundreds of dollars an hour.   This change has been spearheaded by large corporate interests. ( example: Chemed Corp. which owns Roto-Rooter had over 1.2 billion in sales last year).

The likelihood that a licensed plumber will show up when you call a rooter/plumbing company for service in 2011 is estimated to be about 20%. Unbelievable you say?   Yes, it is – but it is so. New York City Seen Lax On Plumbers Up To 80% Of Jobs Illegal, Report Finds

This change in our industry did not happen overnight. It changed slowly over time.

Most states regulate who can perform plumbing services for very good reasons. Laws have been in place for years regulating both plumbing contractors, i.e. businesses, and the plumber that actually performs the work.

The reason plumbers are licensed has been forgotten. Plumbing systems provide our drinking water and carry away our wastes. The potable drinking water must be protected from contamination. People get sick and die from contaminated drinking water. Our water delivery systems operate under pressure and cause floods and major property damage when they fail. The average training required is four years of on the job training plus classroom study and certification tests in order to become a licensed plumber. Plumbers are certified skilled professionals. They are not cheap to hire.

Each state has their own laws. The laws vary from state to state. The enforcement of state laws regulating plumbers and contractors varies as well. Some states treat plumber license and contractor registrations violations as criminal offenses, other states consider violations as civil matters with fines.

Our state laws never anticipated the mass-scale pretending to legitimacy that is seen today in the residential plumbing services industry. Most plumbing services provided today to residential homeowners is being done by unlicensed “plumbers”, or as the rooter companies like to call them “plumbing technicians”. Both the consumer and the licensed plumbers are taking a beating from the bait and switch technique.

How did it get this way? Let’s look at some history:

The Camel In The Plumber’s Tent - Marketing Companies with Contractor Registrations

Camel nose in tent Roto-Rooter - 1980’s - The camel sticks his nose in the plumbers tent

In 1980 a drain cleaning company Roto-Rooter was purchased by Chemed Corp. Over the next few decades this drain cleaning company transformed its public persona, through advertising, into what has been described as the largest “plumbing” company in the world.

The average homeowner does not know the difference between a drain cleaner “technician” and a “plumber” thanks to Roto-Rooter marketing drain cleaning as plumbing (copycats are using the same business model).

This business model has become apparent and dominates the industry today:

The business model is very simple:

1. Advertise and promote plumbing services

2. Substitute non-licensed, uncertified personnel

This bait & switch increases profits dramatically by utilizing less expensive drain cleaner personnel as a substitute for a licensed plumber. This business model was actualized across the country. The profits generated could be maximized if the hourly rate was done away with. The charge basis went to "flat rate pricing".  It was now possible to charge hundreds of dollars an hour for a “plumbing technician” whereas it used to cost tens of dollars per hour for a “drain cleaner”. What was not apparent (and still is not obvious to most of us) is that a “technician” is not a “plumber”. This clever marketing done today never mentions “rooter” without attaching the word “plumbing” or “plumber”. The intention is obvious: imply that a rooter guy is a plumber. To make profitabilty even better Roto-Rooter started moving a large portion of the business overhead onto the employees. The employees were forced to buy trucks and insurance in exchange for a commission-based pay structure.   The commission pay was promised to be greater than wages with promises of “unlimited income potential” to the new salesman dressed up and marketed as a plumber.

The net effects of these changes were:

  1. Consumers calling for plumbing services would get an unlicensed “pretend plumber” a large portion of the time (estimated to be 80% of the time).
  2. The cost of a service call increased dramatically as the flat-rate pricing structure masked a substantial higher rate than anybody would pay hourly.
  3. The “plumbing technician” was paid on a commission basis and he was leveraged with a portion of the business overhead. (More than one class action lawsuit is based upon this.) Instead of a plumber in your house you now had a hungry commissioned based salesman pretending to be a licensed plumber. The commissioned based pay structure created an incentive to over-sell on every job.
  4. The legitimate licensed plumbers had to deal with the unfair competition created by this large corporation representing unlicensed unskilled commissioned salesmen as legitimate licensed plumbers. The options for the legitimate plumber and plumbing contractor was work for less pay (which didn’t work) or get onto the same business model as Roto-Rooter. Most became flat-rate, commissioned based businesses. That is the situation today. It is probably too late to undo this.
  5. The Roto-Rooter business model was so successful that it spawned many copycats. Virtually every drain cleaning company, large or small, nationwide, now advertises as a plumbing company. All have contractor registrations, most with “plumbers” and “plumbing” in the business names. The problem is that they are not plumbers. They are sales and marketing companies masquerading as plumbers. They are drain cleaners at best. Some have hired token licensed plumbers but the ratio of licensed plumbers to unlicensed “plumbing technicians” is very low overall.

The quality of the licensed plumber has degenerated over the years as sales and marketing companies that own plumbing contractor registrations are the wrong people to be training and certifying apprentice plumbers. The motives of sales and marketing owners are very different from owners that worked for years in the field as real trained plumbers. There are plumbers and there are salesmen/investors.

Roto-Rooter operates businesses in more than 100 company-owned branch and independent contractor territories and approximately 500 independent franchise operations, serving approximately 90% of the U.S. population and parts of Canada. Chemed Corp. Income is in excess of 1.2 billion dollars. (see Chemed 2008 annual report)

Camel in the tent 2

The camel has moved in and now possesses the tent

Roto-Rooter - 2011 - The camel owns the plumber’s tent

But not without somebody starting to notice that something is very wrong…

The public is starting to notice some problems with the Roto-Rooter business model. Check out the nature of the lawsuits:

The company that cleans our sewers takes care of our sick and dying. (??)

Chemed Corp. is involved in only two industries: Drain Cleaning and Healthcare

 

Chemed Corporation, through its subsidiaries, provides hospice care and drain cleaning services in the United States. The company operates in two segments, Vitas and Roto-Rooter.

  • The Vitas segment offers hospice services to terminally ill patients. This segment provides hospice services in the areas of routine home care, general inpatient care, continuous care, and Medicare cap. It also offers spiritual and emotional counseling to patients and their families through its team of doctors, nurses, home health aides, social workers, clergy, and volunteers.
  • The Roto-Rooter segment provides repair and cleaning services, including sewer, drain, and pipe cleaning, as well as plumbing repair to residential and commercial customers through its network of company-owned branches, independent contractors, and franchisees. Chemed Corp. was founded in 1970 and is headquartered in Cincinnati, Ohio.


There are some problems with the hospice care as well:

What does drain cleaning and hospice care have in common?

Both industries rely upon hiring state licensed certified personnel to perform specialized skilled work.The apparent business model is: Promote professional licensed services but substitute cheaper uncertified unlicensed labor even if it violates the intention and letter of the licensing laws regulating that industry. What makes this possible is the inability of the regulatory agencies to effectively enforce the licensing requirements. The fraud is too big and expensive. They have neither the budget nor the manpower to check if every employee that needs a license actually has one when the company that employs them has a vested interest in cheating.

The impression one is left with after reading the lawsuits and the profit reports is that Chemed Corp. has a business model that is based upon cutting the costs, by any effective means, of licensed skilled labor. How do you cut costs when what you sell is licensed certified, professionals? There is a reason plumbers and heath care professionals are paid more than unskilled laborors - they invest years in apprenticeship, training and schooling to become competent and certified as skilled. How Chemed cuts those costs can be guessed at by looking at what they did with Roto-Rooter: substituting sub-standard non-certified (unlicensed) personnel whenever it can while promoting, marketing and advertising a licensed professional. It is a bait and switch scheme tailored around the weaknesses in professional labor licensing laws and enforcement capabilities.

Questions:

  • Do we need large corporate interests to do our plumbing and take care of dying family members?
  • Why would we call a corporate marketing company instead of a local plumber?
  • What is wrong with our false advertising and plumber licensing laws that make this situation possible?
  • Is the consumer aware that the plumber that does the work is required to be licensed?
  • Considering the lawsuits, would anybody want these guys advising us what to do in a plumbing emergency or taking care of our dying parents?
  • Can anybody trust large for-profit corporations to have any consideration for the consumer - ever? If you think so - what would you base your belief upon?

rotorooter logo

  • Roto-Rooter has been described as the largest plumbing company in the world. Most of their service personnel are not licensed. You wouldn't know it by the size of their bill. Roto Rooter generated $600,000,000.00 + last year. Six hundred million dollars????
  • Vitas is the largest for-profit hospice company in North America. The fact is that a hospice industry never existed before 1980. It appeared as a non-profit grass roots movement of volunteers. Chemed Corp. turned the non-profit concept into a very profitable for-profit business. Medicare pays most of the bills (hundreds of millions of dollars).

The reason we license plumbers and health care is because it is critical that we, the public, get skilled competent individuals we can trust performing these important services. Companies substituting anything less need to be prosecuted for criminal fraud.

What to do?

  1. Demand more ethical conduct of corporations
  2. Demand better enforcing of existing consumer protection laws
  3. Hire local – Small shops have your neighbor as the owner. He is more accountable and most likely to have a real interest in a relationship that is mutually beneficial.
  4. Realize as a homeowner that trained licensed professionals are expensive. You must be willing to pay the real cost or you certainly won’t get what you expect. The consumer that wants the best for the least cost is vulnerable to the bait and switch. These corporate marketing pros know our weakness – we all secretly want something for nothing. When it comes to true skilled labor there is no free lunch.
  5. Demand that the "plumber" put his name and license number on any invoice for plumbing work.
  6. Fake plumbers are not cheaper than the real thing – If they will lie to you about being licensed in their advertising you can't believe anything they say after they are in your house.
  7. File complaints with the state licensing authority and the State Attorney General if you have a problem.

Check out http://www.BadPlumbers.org