UNF/CTAS

UniFirst’s takeover by Cintas has concerned customers who do not wish to do business with Cintas and who face expensive switching costs, quality problems and a lack of viable alternatives, according to several customers and industry participants. 

Both Cintas and UniFirst operate across the US and compete with other large suppliers such as Vestis, a spin-off from Aramark, along with privately owned Alsco and hundreds of regional independents. 

The merging parties provide uniform-rental and laundry services, cleaning supplies, mats, mops and various other products to clients ranging from food-service providers to heavy-industry companies. They primarily operate out of processing facilities, where they clean and repair uniforms, in addition to warehouse depots that act as hubs for expansive geographic networks.

Contracts and disputes

Contracts are a critical element of the uniform-rental business, as they ensure sustained revenue and allow firms such as UniFirst and Cintas to cover high upfront expenses such as customized uniforms.

An experienced industry participant who has spoken with the US Federal Trade Commission in connection with the agency's initial review of the transaction told CTFN, “The contract is the industry. If you remove the contract, then there is no industry.”

Automatic renewals, evergreen clauses, short cancellation windows, liquidated damages, unilateral price increases and termination fees are just some of the complex and sticky aspects of contract practices in the industry.

Disputes are common, as customers often try to exit contracts they see as unfavorable. In 2024, UniFirst took up an arbitration case against a 25-person bakery in the New York area for failure to pay, resulting in premature termination and breach of contract. UniFirst sought nearly $107,000 in damages, plus annual interest of 18%, plus attorney fees, totaling $160,000.

UniFirst won, being entitled to damages per its contract with the bakery: “If Customer breaches or terminates this Agreement before the expiration date for any reason … Customer will pay UniFirst, as liquidated damages and not as a penalty … 50% of the average weekly amounts invoiced in preceding 26 weeks, multiplied by the number of weeks remaining in the current term.”

That language appears to be common in such contracts, with two other examples including UniFirst v. Ray’s Construction Expert Masonry and UniFirst v. Kitchen + Kocktails, both of which resulted in arbitrators ruling in UniFirst’s favor. Cintas has also had its fair share of disputes, including one with Findlay Chrysler Dodge, Jeep, Ram in Ohio.

The industry participant said the facilities servicers win nearly all arbitration cases and have “no fear of losing”, showing their leverage over customers and willingness to defend contracts.

It was also said that these lengthy contracts have a brief cancellation window — sometimes as little as three months.

“It’s all one-sided. They can charge you whatever they want, and there is nothing you can do,” an owner of multiple car-maintenance franchises told CTFN regarding contract disputes with the companies. Such gripes about honoring a contract might seem off the mark, but the contracts in question are often extended under opaque circumstances.

A corporate-sales employee at a uniform-rental competitor told CTFN of frequent complaints about Cintas’s automatic renewals, which have been described as “sketchy” and “corrupt”. She gave an example of Cintas giving a client new mats, which triggered, apparently unbeknownst to the client, imposing a three-year contract extension.

The industry participant added that Cintas will often fight tooth-and-nail to replace garments to justify renewals, using what leverage they have to replace frayed, faded or torn uniforms for a customer at no cost if they extend their contract.

A factor in the need for garment replacements is a lack of initial quality control. In addition to being misdelivered, many uniforms have faded barcodes or company-identification tags that fall off easily, the source explained, adding that the “industry has a lot of dirty laundry”.

Customers

The FTC is preparing to interview staff at a large university in the southeastern US, according to the industry participant. The university is one of UniFirst’s oldest customers in the region, with the relationship dating back to the 1980s, and it recently underwent an internal review of its service contracts, for which UniFirst and Cintas were the only two bidders.

Senior staff at the university have expressed concern with the merger, citing a loss of credible choices and negotiating leverage, the industry participant said.

Meanwhile, a director at a multi-state auto group with nearly 20 locations told CTFN that his business moved away from Cintas due to “horrible” service and pricing and he is now satisfied with UniFirst. He said his area lacks major alternatives such Vestis or Alsco and that smaller players cannot offer a comparable service.

Further, the car-maintenance franchisee, who is worried about the merger, said he used to do business with G&K Services before it was bought by Cintas, then switched to UniFirst to escape poor customer service and high fees.

He said he gets uniforms, mats, towels and various other toiletries from UniFirst and dislikes the idea of having to split his procurement efforts across five or six different vendors that "don't have the resources to keep up with demand”.

He also mused about his business issuing and laundering own-branded t-shirts instead of requiring uniforms, though he acknowledged the feasibility of this option might change depending on scale. Larger industrial businesses require uniforms to be laundered with dangerous chemicals that would destroy a non-industrial washing machine.

Alternatives

In the Metropolitan Nashville Public Schools system, UniFirst currently has a five-year contract to supply uniforms and floor mats, and Cintas previously held this contract, highlighting the merging parties’ head-to-head competition.

A recently retired account manager at UniFirst told CTFN that Cintas is the dominant player in areas including Chicago, Washington DC and Philadelphia. He said he does not see other firms able to compete on the same level. CTFN also heard that the lack of viable alternatives is similarly true in other major cities.

Industry alliances such as the CSC Network and Apparel Services Network have formed to give smaller competitors the collective bargaining power, procurement scale and marketing resources to compete with national chains such as UniFirst and Cintas.

Another person who spoke to the FTC and is close to one of the industry groups said many UniFirst customers are seeking alternatives. In California, a director at a large regional uniform supplier said he has seen an uptick in interest from potential customers who want alternatives to Cintas and see the deal as an opportunity to win new contracts.

But the industry participant told CTFN that not one significant national account has yet been obtained by a master agreement by the industry groups, adding that large companies like Walmart are uninterested in having 200 different regional service providers to deal with.

FTC scope

CTFN previously reported that Cintas expects a second request from the FTC regarding the UniFirst merger but still thinks it will close the transaction early in the fourth quarter. This optimism may have been bolstered by the hiring of Miller Strategies, which is well connected to the Trump administration.

Should the FTC issue a second request, and given the high number of overlapping service areas with seemingly limited competitive offerings, potential remedies could be offered to allay authorities’ concerns. 

Potential structural remedies might include a divestiture of facilities in areas with significant overlap and lack of competition. As for behavioral remedies, getting rid of automatic renewals and expanding the cancellation window might go a long way with industry participants.

CTFN notes the merger agreement does not obligate Cintas to make any divestitures, though it is required to defend the transaction in court if necessary to get regulatory approval, and the deal carries a significant reverse termination fee of $350mn.