Partners in Growth

Landscapes USA keeps the local” in multistate model”””

Dennis Dautel started Landscapes USA as a partner-owned company in 2000 under LUSA Holdings. He was involved in the consolidation of the landscape industry in 1996 and his company at the time became the largest subsidiary of Houston-based LandCare USA when the company went public in 1998. Several years later, TruGreen, whose parent company is Memphis-based ServiceMaster, bought LandCare USA. Dautel left about a year later and started Landscapes USA.

Landscapes USA uses its extensive horticulture knowledge to maintain flowers, grass and ornamentals to keep the landscape vibrant and thriving for the long term.
PHOTOS COURTESY OF LANDSCAPES USA.

Landscapes USA is organized as partnerships in the five states in which it has a presence. “Partners have the resources and some of the cost-efficiencies of a large company, but yet they are really local in that they have a big stake in the game, have a high motivation to take care of their clients and their employees and make sure they have a really good operation,” says Dautel. LUSA partners generally service office retail, industrial, multifamily residential and, in California, some municipal work.

“We partner with owners who have a strong track record and have done a really great job, but they’re getting at a point in their lives where their risk profile needs to be decreased, yet they still want to expand their business and continue to work in the business until they are 65 years or older,” he adds. In each location in which Landscapes USA operates, Dautel has known each of the company owners before they became a partner. In all cases but one, they approached him to create a partnership.

Business is good

Despite the economy and competition from smaller companies, Landscapes USA has had the “best couple of years we’ve ever had,” says Dautel, attributing that to its hard-working partners, and an enviable high customer retention ratio that has allowed the company to continue to expand while the industry, for the most part, is merely holding steady.

“The economy is not expanding, so there’s not a lot of new landscape environments being created for construction,” he says. “Whenever that happens, you also have all of the construction companies pushing hard to get maintenance contracts because they don’t have any new construction. When construction comes back, they dump the maintenance and go back into construction. I’ve watched that cycle for years.”

Landscapes USA does not have a standardized handbook of how to run a company, Dautel notes.

“We try to centralize things that have a high degree of economies of scale and then we try to allow the partners to run their operation the way they want to run their operation,” Dautel says.

“When an executive operations manager has the latitude to determine what kind of truck they want to buy, what kind of equipment they want to buy, how they hire employees and things like that, they enjoy their job more,” he adds. “They don’t feel like they are part of a rubber stamp that says every branch office is the same and you have to do everything the same. We don’t believe that creates intense job satisfaction and we believe that each executive partner needs the latitude to be able to build a culture based on who they are.”

Themed gardens are custom-tailored to each unique situation and often stimulate all five senses with designs that are accessible to all.

Dautel believes the best results occur when partners understand why they are relevant, understand the measurements that create whether they’re doing a good job or not, and are known in their environment. “The known part comes back to simple relationship-building that we all desire and thrive on,” he adds. “We want to have good relationships and we want people to feel like they’re part of the family.”

Landscapes USA approaches equipment similarly. Although LUSA Holdings has national accounts with companies such as John Deere, Ewing and Horizon, “we don’t force each office to buy from those vendors. For one client, Horizon might be cheaper than Ewing for irrigation parts, but Ewing is next to their office and there’s a relationship there where they get excellent service,” says Dautel.

Facing water challenges

Landscapes USA operations are in locales that for the most part are experiencing significant water challenges.

“In Texas, it’s extremely challenging because of the drought,” Dautel points out. “In the area where we’re operating in Austin, our lakes fill up depending on what happened north and west of Austin. There are three watershed basins and there’s been very little rain. We’re on once-a-week water rationing on the landscape, so it’s pretty much impossible to make anything look great. To make that even worse, we had about 90 days of 100-degree weather.” Clients are understanding, Dautel says.

“They still need a maintenance company,” he says. “The grass still grows; weeds grow some. It’s just that everything is growing less. Depending on what happens rain-wise, if we reach Stage 4, we are not allowed to do any new plantings at all.”

Dautel sees this as an issue that will require ongoing attention.

“As we continue to grow and consume in America, water in different parts is always going to be an issue that the municipalities and the states are going to have to address,” he says.

It is possible to have an attractive landscape without running the sprinkler system on an ongoing basis, Dautel says. “But, most landscapers are going to default when taking care of the client. They are going to set the clocks for three times a week regardless of what happens with the rain because if they don’t set it for three times a week, then they get a week of no rain, then all of a sudden things aren’t looking so good.

“You have all of these legacy systems and even systems being installed today that have no water management associated with them,” he says. “With excellent water management, you could reduce the watering of the landscape probably by as much as 80 percent. I know you can in Austin if you have the right systems in place.”

With help from Landscapes USA, offices parks can be transformed into serene and restful places.

Weather management systems are not mature, inexpensive or readily available, Dautel says.

“There are companies popping up trying to solve that,” he says. “They have to get more widespread and cheaper. The distribution model hasn’t been correct yet. The products for water management have to begin with the landscape maintenance companies, which means they have to understand those products and be able to install them and manage them.”

It is his hope that over the next decade, “water management will be as standard as mowing lawns,” Dautel says. “I think the products are going to come down to the point where when you slap a controller on, it’s got a wireless 4G cell phone where it can hook into the Internet, be managed remotely and will be a low-cost solution so that every controller can be managed for what actually happens in its area with rainfall.”

Plant selection is customer preference

Planting to conserve water is a client preference, Dautel says. A lot of clients don’t like low-maintenance plants, he adds. He, for example, likes cactus for its form, but realizes many clients would not plant it. Indeed, in the Austin market, for example, magnolias are popular. “We end up buying magnolias on refrigerated trucks from Florida,” he says. “They do well in Austin if they are planted in the right soil; they don’t need a ton of water. They look great in years where we have a lot of rain and they won’t look so good during a drought, but they won’t die.

“Most plants will live without having an irrigation system, with the exception of extreme drought. Most of the plants we plant here are a hardy plant. They’re drought-tolerant plants. By definition they don’t grow as well when they get watered.”

Other environmental issues, such as using chemicals and fertilizers, are managed locally, Dautel says. The company has earned more than 70 national and state environmental improvement awards. “Each office has licensed pesticide operators who work with the company, so they make decisions based on local rules on what you can use pesticide-wise, how it’s used and who can apply it,” he says. “Texas is a little bit less stringent than some other states, but the general rule is all of the partners want to do the best by the environment and they all know the least amount of chemicals we put out, the less environmental issues there will be.

“Another motivation is that it costs us money to put the chemicals out,” he says. “You put those two together and we have to make our landscapes look good, so we need to use chemicals to do that, but we’re not going to use any more than we have to.”

Health care, immigration laws present challenge

One of the challenges faced by the company is the new health care law. “We don’t know how to meet that challenge because we can’t get experts to tell us exactly what’s going to happen,” Dautel says. “We can’t get an answer on whether seasonal employees are going to be included. The vast majority of landscape companies do not buy health care for their crewmembers.

“It’s a very competitive environment. We’ve got small companies out there that cut corners in a lot of ways. They take contract labor versus full payroll tax and by doing that, they don’t have to pay workers’ compensation, state and federal unemployment, and Social Security taxes, so they can cut 20 percent of their labor costs just right there. If you throw health care in, I’d venture to say that no landscape company will be profitable.”

Another challenge is the H-2B visa program, Dautel says. His company uses the program extensively because it’s difficult to find Americans who want to take landscape crew jobs, he says.

“The Bureau of Labor Standards is making it extremely difficult for that program to exist,” Dautel says. “They raised the wage rate to a prevailing wage rate. In a city like Austin, Texas, it’s around $11.79 an hour. Nobody pays entry level or medium-level landscape workers $11.79 an hour. The Bureau of Labor Standards is basically trying to shut down immigration by pricing them out of the market.”

Because Landscapes USA is a large company, it can go through the H-2B process in a cost-effective manner, “but the guys who only have five or 10 employees can’t do that,” Dautel says.

Looking ahead, Dautel says by sticking to the company’s mission statement, “that will produce all of the growth that we can handle. We want to use earnings to continue to facilitate liquidity events for strong owners who want to stay and work with us. I think we’ll continue to do two or three of those types of liquidity events a year.

“If we have motivated, challenged employees, if we provide a great value to our clients, if we have jobs that are important and we enjoy and have money to give back, that’s where we want to be this year and 15 years from now.”

Dautel does not see Landscapes USA ever becoming public or acquired by hedge funds. “We want to identify the performers, grow them through the ranks of our company, and allow them to have an ownership opportunity in the company,” he says.

Carol Brzozowski resides in Coral Springs, Fla., is a member of the Society of Environmental Journalists and has written extensively about environmental issues for more than a decade. She can be reached at Brozozowski@aol.com.