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Labor Ready, Inc.

Labor Ready, Inc.

1015 A Street
Tacoma, Washington 98402
U.S.A.
Telephone: (253) 383-9101
Toll Free: (877) 733-0430
Fax: (877) 733-0397
Web site: http://www.laborready.com

Public Company
Incorporated: 1989
Employees: 3,400
Sales: $1.35 billion (2006)
Stock Exchanges: New York
Ticker Symbol: LRW
NAIC: 561310 Employment Placement Agencies; 561320 Temporary Help Services

As one of the fastest-growing temporary staffing companies in the world, Labor Ready, Inc., supplies temporary manual laborers to small to midsized businesses in the construction, warehousing, hospitality, landscaping, transportation, light manufacturing, retail, wholesale, and sanitation industries. The process of recruiting laborers and matching them with customers in need of temporary workers is conducted by the companys network of dispatch offices, which has increased from one outlet in 1989 to more than 900 throughout the United States, Canada, and the United Kingdom, operating under the Labor Ready, Workforce, Spartan Staffing, CLP Resources, and Skilled Services brand names. To its client companies, Labor Ready promises Satisfaction Guaranteed, and to its legions of day laborers, the company offers a policy of Work Today, Paid Today. Labor Ready provides basic equipment to workers and pays them at the end of each day, either with a check or a voucher to be redeemed at a cash dispensing machine, installed in every dispatch office.

FOUNDED IN 1989

When Glenn A. Welstad founded Labor Ready, he was beginning a second career. In 1969 he and two business partners had started Northwest Management Corporation, a restaurant holding company that occupied Welstads attention for the next 15 years. When Welstad sold his stake in the company, Northwest Management controlled eight Hardees restaurants and more than a dozen pizza and Mexican restaurants scattered throughout a five-state territory. His expansion of the company, he believed, represented his lifes work, but within five years his assessment changed. Stepping into retirement at age 40, Welstad later wrote, led to boredom and the realization that my finances were not as originally thought. Consequently, Welstad decided, in 1989, to try his luck as an entrepreneur again. It was a decision that aside from alleviating boredom also turned Welstad into a multimillionaire and Labor Ready into one of the notable business success stories of the 1990s.

As he had with Northwest Management, Welstad enlisted the help of two associates to start Labor Ready in 1989, using a $50,000 bankroll to get the company started. The company started with an office in Kent, Washington, where Welstad provided day laborers for companies in need of temporary assistance. Welstad entered the market by signing a contract with Action Temporary Services, but by 1991 the business relationship had turned litigious. Welstad attempted to sever the ties connecting the two companies, which led to a number of lawsuits filed by each party. Welstad eventually gained his independence and Action Temporary Services eventually fell on hard times, filing for bankruptcy in 1994. Against the backdrop of legal salvos, however, Labor Ready was quietly building a foundation for what later promised to be a $1 billion business. Unknown to many at the time, and perhaps even to himself, Welstad governed a company in 1991 that possessed a formula capable of realizing enormous success. The fuel that would ignite the companys potential was expansion on a national scale, but in 1991 Labor Ready had only eight officesdispatch centers that served as matchmakers for the unemployed and the construction, light industrial, and small business clients that needed temporary help. When expansion on a national scale began in earnest, the efficiency and strategy bred under Welstads leadership unleashed the prolific financial strength of Labor Ready.

Before stock analysts and industry experts began trumpeting the success of Labor Ready, the company was a regional supplier of manual labor, providing its services in a modern, efficient, yet old-fashioned way. Labor Ready offices operated much like union halls. To get daily employment, prospective workers arrived at a Labor Ready office by 5:30 in the morning. If the applicant had never sought employment through Labor Ready before, he or she was interviewed by a branch office employee and the applicants skills were stored on a computer database. Background checks and drug screening were performed on a voluntary basis, necessary only when the applicant desired to work for a company with such requirements. If the skills matched the needs of the client company, Labor Ready dispatched the applicant to the work site and charged the client company generally 30 percent more than the workers hourly wage. In return, the Labor Ready office provided the recruitment of the daily laborer and the financial and administrative services associated with the day laborers employment, including payroll and workers compensation premiums. The day laborer received, if needed, the basic equipment needed for the work (such as hard hats, boots, back braces, eye protection, and gloves) to use free of charge and transportation to the work site for a small fee. Perhaps most important to the Labor Ready laborer was the companys policy of Work Today, Paid Today. At the end of a days work, Labor Ready provided its workers with a check, an enticing service that kept Labor Ready offices generally inundated with hopeful workers each morning.

The type of labor performed by Ready Laborprovided workers was generally strenuous, sometimes dirty work, the type of manual labor required of a blue-collar worker of the lowest rank. Accordingly, many of the applicants who gathered in Labor Ready offices each morning represented the fringe of society, those who found steady employment difficult to obtain because of substance abuse problems or criminal records. There were others, however, without glaring employment liabilities, individuals who, for various reasons, needed the employment assistance provided by Labor Ready and were attracted by the Work Today, Paid Today policy. Within this large, itinerant labor pool were people who had just moved to a new area without employment contacts, those who preferred the variety of a different job each day, and others who used Labor Ready to gain the experience needed to secure a full-time job.

COMPANY PERSPECTIVES

When we say We Put People to Work, we mean it. Each year, Labor Ready dispatches approximately 600,000 temporary employees to jobs in construction, manufacturing, hospitality services, landscaping, warehousing, retail and more. More than 300,000 businesses of all sizes throughout the United States, Canada and the United Kingdom use Labor Ready when they need a dependable source of labor. By fueling both individual and business growth, Labor Ready delivers a win-win: temporary employment gives customers the flexibility to quickly add reliable help on short notice and provides an honest days pay for an honest days work to dependable employees seeking income. Labor Ready provides temporary employees with a wide range of skills through our Labor Ready, Workforce, Spartan Staffing and CLP Resources brands. While we are Americas largest provider of temporary manual labor, we now offer more solutions for skilled positions through the addition of Spartan Staffing and CLP Resources.

At the heart of Labor Readys operations was the companys network of dispatch offices, each managed by a branch manager who was assisted by several support personnel. Each office was responsible for its own sales and marketing, customer relations, accounts receivable collection, budget controls, and recruitment of day laborers, giving the company a highly decentralized structure. Profitability hinged on the efficiency of each dispatch office and its ability to minimize workers compensation claims. Safety classes were held to reduce injuries, while operational efficiency was honed over time as the company expanded the number of its branch offices.

The characteristic that set Labor Ready apart from other competitors was the exclusive market niche it occupied. There were other companies that supplied manual laborers on a regional basis and there were temporary staffing companies that provided white-collar employees nationally, but as Labor Ready embarked on a decade of prodigious expansion, there were no national companies concentrating exclusively on supplying temporary manual laborers. Further, this market nichethe industrial segment of the temporary staffing market placeregistered explosive growth during the 1990s, expanding as Labor Ready itself expanded. Between 1991 and 1997, the industrial temporary staffing industry grew from a $5 billion-a-year business to a $13 billion-a-year business. Labor Ready moved headlong into this fast-growing market segment, positioning itself as the only national competitor. Between 1991 and 1997, the company increased its number of dispatch offices from eight to 316, fueling annual revenue growth from less than $10 million to $335 million.

RAPID EXPANSION: 199499

The companys rapid expansion did not gather speed until the mid-1990s. By the end of 1994, there were 51 dispatch offices, including four in Canada, but Welstad had not yet penetrated any markets in the Northeast and the Atlantic, and it maintained only a small presence in the Southeast with one branch office. To accelerate expansion, the company experimented with franchising the Labor Ready concept in 1994, licensing one franchisee in Minnesota who eventually opened five branch offices, but the companys franchising efforts stopped there, prompting Welstad to search for an alternative method to finance expansion. The logical alternative was an offering of stock to investors, which Labor Ready did in June 1996. Prior to the companys initial public offering (IPO), it had increased the number of its branch offices to 106 by the end of 1995, a year during which the first Labor Ready office was established in the Northeast. With the proceeds gained from the IPO, expansion plans became decidedly more ambitious. The company operated 200 branch offices by the end of 1996, including outlets in the Atlantic region for the first time, and by the end of 1997, the total had swelled to 316.

By this point in its history, Labor Ready had developed considerable skill in opening branch offices, using a process that had become standardized over time to blanket a market and achieve predictable results. Each new office cost approximately $50,000 to establish, generally taking no more than six months to realize a profit. On average, a Labor Ready office required $12,000 in business per week to show a profit. In 1997 a Labor Ready office averaged $27,000 in revenue per week, spurring Welstad to accelerate his expansion plans for the future. His expansion efforts in 1998, which included the establishment of 170 new Labor Ready offices, produced even greater results than the companyowned branches produced in 1997. In 1998 Labor Ready outlets averaged $31,000 in business per week, helping the company to record astounding financial totals for the year. Companywide revenue was up 81 percent to $607 million. Net income recorded a more prolific leap, increasing 184 percent to $19.8 million.

KEY DATES

1989:
Glenn A. Welstad founds the company in Kent, Washington.
1995:
The number of Labor Ready branch offices has grown to 106.
1996:
Labor Ready goes public.
1997:
The number of nationwide branch offices has grown to 316, with each Labor Ready office averaging $27,000 in revenue per week.
1998:
A total of 170 new Labor Ready offices are established, averaging $31,000 in business per week; the company installs the first cash dispensing machines (CDMs) in its dispatch offices.
2000:
Founder Glenn A. Welstad abruptly resigns as chairman and CEO and is succeeded by Richard L. King.
2004:
Labor Ready acquires Spartan Staffing, Inc.
2005:
Company purchases CLP Resources Inc.
2007:
Labor Ready completes the acquisition of Skilled Services Corporation, a skilled staffing provider.

Along with the robust financial and physical growth recorded in 1998, Labor Ready also celebrated the introduction of a new service for its day laborers during the year, a service Welstad heralded as a wonderful recruiting tool. Beginning in April 1998, the company installed cash dispensing machines (CDMs) in its dispatch offices, which gave its workers the choice of receiving cash at the end of the days work instead of a check. Instead of Work Today, Paid Today, the company could proclaim, Work Today, Cash Today, by distributing vouchers that could be redeemed at a Labor Ready CDM. For the workers, more than half of whom lacked a bank account, the approximately $1.50 fee charged by the CDM was a welcome alternative to the check-cashing fee charged by banks to individuals without bank accounts, which was generally $3 per transaction. For Labor Ready, the financial benefits of installing CDMs were also attractive. The company saved money by not having to process checks and it generated revenue from the CDMs as the recipient of the transaction fee charged to the worker. By the end of 1998, Labor Ready had collected $3.6 million in CDM fees.

By this point in the companys history, few could ignore the aggressive expansion and the impressive financial results achieved by Welstad. In five years, the number of Labor Ready offices had increased from 51 to 486, as annual revenues increased from $38 million to $606 million. Welstad, well aware of the enviable position his company occupied without competition in its market niche, was intent on tightening Labor Readys grip on markets, both large and small, nationwide. He announced, at the end of 1998, that Labor Ready would open 200 offices in the United States in each of the next two years, giving the company a projected 875 offices and $1 billion in revenues by the end of 2000. Welstad intended to saturate every viable market in the country, an objective the companys time-tested business formula appeared capable of fulfilling.

Labor Ready celebrated the beginning of its tenth anniversary by completing the most prodigious expansion in it history. During the first four months of 1999, the company opened 166 new dispatch offices, nearly reaching its goal of opening 200 offices during the first half of the year.

A NEW CENTURY BRINGS LEGAL CHALLENGES AND FURTHER GROWTH

Labor Ready exited 1999 with $851 million in revenue, a 40 percent increase over the previous year, and entered the new century poised to continue its aggressive expansion, with plans to open at least another 200 offices, including approximately ten in the United Kingdom, during 2000. In the year 2000, however, founder Glenn Welstad suddenly resigned as chairman and CEO over a questionable $3.5 million loan he took from the company without board authorization. He was replaced by Richard L. King, former president and chief operating officer of Albertsons, Inc. Welstads abrupt departure came not only at a time of expansion plans, but also amid efforts to rebuild the sales force the company had dismantled in 1998 and during a decline in same-store sales among its most established branch offices. The elimination of its sales force proved to be a costly mistake, sending Labor Ready into a tailspin. Executives soon realized that although maintaining its own sales force cost more money, it also generated considerably more sales. As a result, Labor Ready reversed course, committed to turning the company around with substantial investment in rebuilding and training a new sales force.

Labor Ready also came under fire when, in July 2000, day laborers filed a class-action lawsuit in Fulton County Superior Court in Atlanta, Georgia, alleging that the company was illegally siphoning money from their pay for work in the state of Georgia. The lawsuit charged Labor Ready with violating state law by levying fees averaging $1.50 for employees to withdraw daily pay from the companys CDMs. Class-action lawsuits were filed in New York and California as well. The fee amounts ranged from 2 percent to more than 4 percent of the workers pay, which averaged less than $50 per day at construction and other manual jobs. The fees exacted for making wages available through the machines had added $7.7 million to Labor Readys 1999 revenue.

Also during the summer of 2000, a prominent shareholder, the AFL-CIOs Building and Construction Trades Department (BCTD), sued Labor Ready for misleading statements in its Security and Exchange Commission (SEC) filings and to its investors and for failing to hold its annual shareholders meeting. The BCTD wanted an explanation for the approximately 400 percent drop in stock value since the companys last shareholders meeting and feared that the annual meeting, required by law, was being delayed intentionally by management. Two weeks before the August 31, 2000, filing of the lawsuit, however, the company notified the unions attorneys that the annual shareholders meeting had been scheduled for October. As a result, the unions lawsuit filed against Labor Ready in the Superior Court of Washington in Seattle was dismissed. Nevertheless, in February 2001, the state of Washingtons Department of Labor and Industries fined Labor Ready $734,000 for misclassifying workers in 1998 premium payments to the state workers compensation system. State officials audited Labor Readys 1998 records after the AFL-CIO complained about the companys workers compensation methods.

In 2001, as the AFL-CIOs BCTD investigation into Labor Readys practices continued, the company suffered a series of major legal reversals. The U.S. 4th Circuit Court of Appeals in Richmond, Virginia, ruled against Labor Ready for punishing workers for exercising their right to join unions. The long-running case began in 1996 after workers in Kentucky, Ohio, and West Virginia tried to unionize with the help of the AFL-CIOs BCTD, which charged the company with unfair labor practices. The charges were upheld by the National Labor Relations Board (NLRB) and then by the court, which ruled that the NLRB had the authority to compel Labor Ready to end its illegal practices and compensate workers. This ruling followed another reversal involving a NLRB order to post an official notice in all Labor Ready offices notifying workers that they would not be punished for organizing or for talking to each other, or to the companys customers, about working conditions or pay. In May, Californias Office of Safety and Health held both Labor Ready and Manpower, Inc., responsible for worker safety at job sites and ordered the companies to inspect all sites before sending out workers. At the same time, California state auditors found that Labor Ready had underpaid workers assigned to several state college construction projects and ordered the company to pay $100,000 in back wages, penalties, and assessments to the state. In addition, the New Hampshire Superior Court ruled that the companys practice of charging workers for rides to job sites constituted an illegal payroll deduction. The court ordered Labor Ready to pay the workers back. Labor Ready also was being sued in other states for illegal deductions for transportation, safety equipment, and the use of its CDMs.

Labor Ready won its own lawsuit in October 2001 when a West Virginia court concluded that the AFL-CIOs BCTD had illegally attempted to disrupt the companys business relationships. Yet despite the companys legal reversals and the AFL-CIOs campaign against it, Labor Ready reported 51 percent net income growth for 2003. The company attributed its profitability to year-over-year sales growth in all operating areas and most of its customer industries. Strongest growth came from Labor Readys light industrial and manufacturing customers.

In April 2004, Labor Ready acquired Spartan Staffing, Inc., a privately owned temporary employee company with annual revenue of about $50 million. Labor Ready purchased the company for $9.5 million in cash. With a total of 25 branch offices in Florida, North Carolina, South Carolina, and Texas, Spartan Staffing was expected to boost Labor Readys market share and strengthen its ability to serve customers. In May 2005, Labor Ready purchased CLP Resources Inc., a private Reno, Nevada, skilled staffing company with 50 locations in 20 states, for approximately $46.2 million in cash. With 2004 revenue of about $114 million, CLP served more than 4,500 small to midsized residential and commercial contractors by providing a range of skilled trades, including carpentry, electrical, drywall, sheet metal, and masonry.

In February 2006, Joe Sambataro announced his retirement as CEO and was replaced in May by Steven C. Cooper, who had served in the previous year as president. Prior to becoming president, from 2001 to 2005, Cooper was executive vice-president and chief financial officer at Labor Ready. In June 2006, Labor Ready announced that it was buying back up to $50 million worth of its common stock on either the open market or in private transactions. In November, the company suffered another legal reversal when New York States highest court ruled that Labor Ready was charging illegal fees to cash workers checks. The Court of Appeals ordered the company to pay almost $70,000 in restitution, fees, and interest. In addition, the attorney generals office announced that it planned to begin a statewide investigation into the companys practices.

Labor Ready announced in January 2007 that it was repurchasing up to $75 million worth of its common stock. This repurchase was followed by another company announcement in April that Labor Ready would be purchasing up to an additional $100 million of its common stock. The company maintained that its stock repurchasing plan was initiated to inspire confidence in the companys growth prospects. Also in April, Labor Ready completed the acquisition of Skilled Services Corporation, a skilled staffing provider with 21 locations in Florida, Texas, Arizona, California, Colorado, and North Carolina. The acquisition was expected to bolster considerably Labor Readys entry into the skilled construction trades sector with the 2005 acquisition of CLP Resources. The acquisition of Skilled Services Corporation was expected to add about $30 million in revenue for 2007.

Jeffrey L. Covell
Updated, Robynn Montgomery

PRINCIPAL SUBSIDIARIES

CLP Resources Inc.; Labour Ready Temporary Services, Ltd.; Skilled Services Corporation; Spartan Staffing, Inc.

PRINCIPAL COMPETITORS

Adecco; AHL Services; Manpower.

FURTHER READING

Beel, Susan, These Temps Might Not Type but Some Will Do Windows, San Diego Business Journal, December 24, 1990, p. 14.

Erb, George, Temporary Job Agency Enjoys Long-Term Success, Puget Sound Business Journal, June 4, 1999, p. 24.

Fagerstrom, Scott, The News Tribune, Tacoma, Wash., Market Summary Column, Knight-Ridder/Tribune Business News, May 7, 1996.

Gorham, John, Employer of Last Resort, Forbes, March 23, 1998, p. 48.

Higuera, Jonathan J., Labor Firm Sued over Fees for Pay in Cash, Arizona Daily Star (Tucson), July 16, 2002, p. D1.

Keenan, Charles, Temp Agency Uses Diebold to Pay Daily in Cash, American Banker, March 3, 1998, p. 21.

Labor Ready Helps Texas Businesses Meet Daily Work Needs, Knight-Ridder/Tribune Business News, February 8, 1998.

Maharry, Mike, Tacoma, Wash.-based Labor Ready Reports Record Earnings, Knight-Ridder/Tribune Business News, October 23, 1997.

Nguyen, Helen, New York State Court of Appeals: Transaction Fee Cannot Be Deducted from Daily Wages, Daily Record (Rochester, N.Y.), December 8, 2006.

Tacoma, Wash., Temp Firm Founder Named Entrepreneur of the Year, Knight-Ridder/Tribune Business News, June 26, 1998.

Washington-Based Temp Agency Focuses on Manual Labor in Southwest Florida, Knight-Ridder/Tribune Business News, February 12, 1998.

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Labor Ready, Inc.

Labor Ready, Inc.

1016 South 28th Street
Tacoma, Washington 98409
U.S.A.
(253) 383-9101
Fax: (253) 383-9311
Web site: http://www.laborready.com

Public Company
Incorporated:
1985
Employees: 1,238
Sales: $606.9 million (1998)
Stock Exchanges: New York
Ticker Symbol: LRW
NAIC: 56132 Temporary Help Services

The fastest growing temporary staffing company in the world, Labor Ready, Inc. supplies temporary manual laborers to construction, light industrial, and small business customers in the United States, Canada, and Puerto Rico. Unlike many other temporary help firms, Labor Ready focuses exclusively on providing manual laborers to its customers, a segment of the market without any national competitors during the late 1990s. The process of recruiting laborers and matching them with customers in need of temporary, unskilled workers is conducted by the companys network of dispatch offices, which has increased from one outlet in 1989 to more than 650 within a decade. To its client companies, Labor Ready promises Satisfaction Guaranteed, and to its legions of day laborers, the company offers a policy of Work Today, Paid Today. Labor Ready provides basic equipment to workers, free of charge, and pays workers at the end of each day, either with a check or a voucher to be redeemed at a cash dispensing machine, installed in every dispatch office.

Founded in 1989

When Glenn A. Welstad founded Labor Ready, he was beginning a second career. In 1969 he and two business partners had started Northwest Management Corporation, a restaurant holding company that occupied Welstads attention for the next 15 years. When Welstad sold his stake in the company, Northwest Management controlled eight Hardees restaurants and more than a dozen pizza and Mexican restaurants scattered throughout a five-state territory. His expansion of the company, he believed, represented his lifes work, but within five years his assessment changed. Stepping into retirement at age 40, Welstad later wrote, led to boredom and the realization that my finances were not as originally thought. Consequently, Welstad decided, in 1989, to try his luck as an entrepreneur again. It was a decision that aside from alleviating boredom also turned Welstad into a multimillionaire and Labor Ready into one of the notable business success stories of the 1990s.

As he had with Northwest Management, Welstad enlisted the help of two associates to start Labor Ready in 1989, using a $50,000 bankroll to get the company started. The company started with an office in Kent, Washington, where Welstad provided day laborers for companies in need of temporary assistance. Welstad entered the market by signing a contract with Action Temporary Services, but by 1991 the business relationship had turned litigious. Welstad attempted to sever the ties connecting the two companies, which led to a number of lawsuits filed by each party. Welstad eventually gained his independence and Action Temporary Services eventually fell on hard times, filing for bankruptcy in 1994. Against the backdrop of legal salvos, however, Labor Ready was quietly building a foundation for what later promised to be a $1 billion business. Unknown to many at the time, and perhaps even to himself, Welstad governed a company in 1991 that possessed a formula capable of realizing enormous success. The fuel that would ignite the companys potential was expansion on a national scale, but in 1991 Labor Ready comprised only eight officesdispatch centers that served as matchmakers for the unemployed and the construction, light industrial, and small business clients that needed temporary help. When expansion on a national scale began in earnest, the efficiency and strategy bred under Welstads leadership unleashed the prolific financial strength of Labor Ready.

Before stock analysts and industry experts began trumpeting the success of Labor Ready, the company was a regional supplier of manual labor, providing its services in a modern, efficient, yet old-fashioned way. Labor Ready offices operated much like union halls. To get daily employment, prospective workers arrived at a Labor Ready office by 5:30 in the morning. If the applicant had never sought employment through Labor Ready before, he or she was interviewed by a branch office employee and the applicants skills were stored on a computer database. Background checks and drug screening were performed on a voluntary basis, necessary only when the applicant desired to work for a company with such requirements. If the skills matched the needs of the client company, Labor Ready dispatched the applicant to the work site and charged the client company generally 30 percent more than the workers hourly wage. In return, the Labor Ready office provided the recruitment of the daily laborer and the financial and administrative services associated with the day laborers employment, including payroll and workers compensation premiums. The day laborer received, if needed, the basic equipment needed for the work, such as hard hats, boots, back braces, eye protection, and gloves, free of charge, and transportation to the work site for a small fee. Perhaps most important to the Labor Ready laborer was the companys policy of Work Today, Paid Today. At the end of a days work, Labor Ready provided its workers with a check, an enticing service that kept Labor Ready offices generally inundated with hopeful workers each morning.

The type of labor performed by Ready Labor-provided workers was generally strenuous, sometimes dirty work, the type of manual labor required of a blue-collar worker of the lowest rank. Accordingly, many of the applicants who gathered in Labor Ready offices each morning represented the fringe of society, those who found steady employment difficult to obtain because of substance abuse problems or criminal records. There were others, however, without glaring employment liabilities, individuals who, for various reasons, needed the employment assistance provided by Labor Ready and were attracted by the Work Today, Paid Today policy. Within this large, itinerant labor pool were people who had just moved to a new area without employment contacts, those who preferred the variety of a different job each day, and others who used Labor Ready to gain the experience needed to secure a full-time job.

At the heart of Labor Readys operations was the companys network of dispatch offices, each managed by a branch manager who was assisted by several support personnel. Each office was responsible for its own sales and marketing, customer relations, accounts receivable collection, budget controls, and recruitment of day laborers, giving the company a highly decentralized structure. Profitability hinged on the efficiency of each dispatch office and its ability to minimize workers compensation claims. Safety classes were held to reduce injuries, while operational efficiency was honed over time as the company expanded the number of its branch offices.

The characteristic that set Labor Ready apart from other competitors was the exclusive market niche it occupied. There were other companies that supplied manual laborers on a regional basis and there were temporary staffing companies that provided white collar employees nationally, but as Labor Ready embarked on a decade of prodigious expansion, there were no national companies concentrating exclusively on supplying temporary manual laborers. Further, this market nichethe industrial segment of the temporary staffing market placeregistered explosive growth during the 1990s, expanding as Labor Ready itself expanded. Between 1991 and 1997, the industrial temporary staffing industry grew from a $5-billion-a-year business to a $13-billion-a-year business. Labor Ready moved headlong into this fast-growing market segment, positioning itself as the only national competitor. Between 1991 and 1997, the company increased its number of dispatch offices from eight to 316, fueling annual revenue growth from less than $10 million to $335 million.

Mid-1990s Expansion

The companys rapid expansion did not gather speed until the mid-1990s. By the end of 1994, there were 51 dispatch offices, including four in Canada, but Welstad had not yet penetrated any markets in the Northeast and the Atlantic, and it maintained only a small presence in the Southeast with one branch office. To accelerate expansion, the company experimented with franchising the Labor Ready concept in 1994, licensing one franchisee in Minnesota who eventually opened five branch offices, but the companys franchising efforts stopped there, prompting Welstad to search for an alternative method to finance expansion. The logical alternative was an offering of stock to investors, which Labor Ready did in June 1996. Prior to the companys initial public offering (IPO), it had increased the number of its branch offices to 106 by the end of 1995, a year during which the first Labor Ready office was established in the Northeast. With the proceeds gained from the IPO, expansion plans became decidedly more ambitious. The company operated 200 branch offices by the end of 1996, including outlets in the Atlantic region for the first time, and by the end of 1997, the total had swelled to 316.

Company Perspectives:

Labor Ready, Inc. is the nations leading provider of temporary manual labor to the light industrial and small business markets. Based in Tacoma, Washington, Labor Ready was founded in 1989 by Chairman, CEO, and President Glenn Welstad. Labor Ready operates 650 offices in 46 states, Puerto Rico, and Canada. Labor Ready currently provides workers for over 195,000 customers, up from 70,000 in 1997. The Work Today, Cash Today mission gives Labor Ready a competitive advantage when attracting workers for temporary manual labor. If a customer decides to hire a Labor Ready worker for a full time position, no fee is charged to either party. Labor Ready filled more than 4.8 million work orders, issued over 6.5 million paychecks, and processed 533,000 W-2s in 1998.

By this point in its history, Labor Ready had developed considerable skill in opening branch offices, using a process that had become standardized over time to blanket a market and achieve predictable results. Each new office cost approximately $50,000 to establish, generally taking no more than six months to realize a profit. On average, a Labor Ready office required $12,000 in business per week to show a profit. In 1997 a Labor Ready office averaged $27,000 in revenue per week, spurring Welstad to accelerate his expansion plans for the future. His expansion efforts in 1998, which included the establishment of 170 new Labor Ready offices, produced even greater results than the company-owned branches produced in 1997. In 1998 Labor Ready outlets averaged $31,000 in business per week, helping the company to record astounding financial totals for the year. Company wide revenue was up 81 percent to $607 million. Net income recorded a more prolific leap, increasing 184 percent to $19.8 million.

Along with the robust financial and physical growth recorded in 1998, Labor Ready also celebrated the introduction of a new service for its day laborers during the year, a service Welstad heralded as a wonderful recruiting tool. Beginning in April 1998, the company installed cash dispensing machines (CDMs) in its dispatch offices, which gave its workers the choice of receiving cash at the end of the days work instead of a check. Instead of Work Today, Paid Today, the company could proclaim Work Today, Cash Today, by distributing vouchers that could be redeemed at a Labor Ready CDM. For the workers, more than half of whom lacked a bank account, the approximately $1.50 fee charged by the CDM was a welcome alternative to the check-cashing fee charged by banks to individuals without bank accounts, which was generally $3 per transaction. For Labor Ready, the financial benefits of installing CDMs were also attractive. The company saved money by not having to process checks and it generated revenue from the CDMs as the recipient of the transaction fee charged to the worker. By the end of 1998, Labor Ready had collected $3.6 million in CDM fees.

$1 Billion in Revenue by 2000

By this point in the companys history, few could ignore the aggressive expansion and the impressive financial results achieved by Welstad. In five years, the number of Labor Ready offices had increased from 51 to 486, as annual revenues increased from $38 million to $606 million. Theyre going in after a market niche with almost no competition on a [national] scale, one analyst remarked in 1998. Welstad, well aware of the enviable position his company occupied, was intent on tightening Labor Readys grip on markets, both large and small, nationwide. He announced, at the end of 1998, that Labor Ready would open 200 offices in the United States in each of the next two years, giving the company a projected 875 offices and $1 billion in revenues by the end of 2000. Welstad intended to saturate every viable market in the country, an objective the companys time-tested business formula appeared capable of fulfilling.

Labor Ready celebrated the beginning of its tenth anniversary by completing the most prodigious expansion in it history. During the first four months of 1999, the company opened 166 new dispatch offices, nearly reaching its goal of opening 200 offices during the first half of the year. The faster we can get offices opening and running early in the year, Welstad explained, the greater the opportunity for better sales in the third and fourth quarters, traditionally the companys busiest time of the year. With this record-setting work completed, the company marshaled its forces for the addition of more than 200 new offices in the ensuing year, well positioned for reaching $1 billion in revenues by the beginning of the 21st century.

Further Reading

Beel, Susan, These Temps Might Not Type But Some Will Do Windows, San Diego Business Journal, December 24, 1990, p. 14.

Fagerstrom, Scott, The News Tribune, Tacoma, Wash., Market Summary Column, Knight-Ridder/Tribune Business News, May 7, 1996, p. 5070290.

Gorham, John, Employer of Last Resort, Forbes, March 23, 1998, p. 48.

Keenan, Charles, Temp Agency Uses Diebold To Pay Daily in Cash,American Banker, March 3, 1998, p. 21.

Labor Ready Celebrates Its 10th Anniversary, PR Newswire, March 17, 1999, p. 6691.

Labor Ready Helps Texas Businesses Meet Daily Work Needs,

Knight-Ridder/Tribune Business News, February 8, 1998, p. 208B0904.

Maharry, Mike, Tacoma, Wash.-Based Labor Ready Reports Record Earnings, Knight-Ridder/Tribune Business News, October 23, 1997, p. 1023B0946.

Tacoma, Wash., Temp Firm Founder Named Entrepreneur of the Year, Knight-Ridder/Tribune Business News, June 26, 1998, p. OKRB98177773.

Washington-Based Temp Agency Focuses on Manual Labor in Southwest Florida, Knight-Ridder/Tribune Business News, February 12, 1998, p. 212B1208.

Jeffrey L. Covell

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