CHICAGO — It’s been said that “ignorance is bliss,” however, you probably won’t find many good operators who base their business practices on that sentiment.
Unless you’ve totally avoided the news lately, you’re aware of the fact that natural gas bills are expected to skyrocket in 2006 — a 52 percent hike for the country as a whole, according to the Energy Information Administration.
Since dealing with a natural gas price hike is something the industry as a whole has to confront, we asked distributors from across the country to share their thoughts on the subject.
REDUCING EXPENSES IS A SKILL
“I believe most of our operators are aware that natural gas will certainly increase in cost in the coming months,” says Stephen M. Bean, president, Universal Coin Laundry Machinery, Royal Oak, Mich. “Most will increase prices.”
Bean believes operators will leave the vend price alone and simply decrease the amount of drying time. “It’s interesting to note that customers of coin laundries generally understand and are empathetic to price increases that are motivated by increasing utility costs because these customers pay their own utility bills.”
Bean also believes preventive maintenance plays an important role in controlling utility costs. “Cleaning dryers regularly, along with the venting, makes them run more efficiently. Making sure that there is a good seal between the dryers and the space behind the dryers helps ensure that expensive air-conditioned or heated air is not being inadvertently used as make-up air.”
When looking at more efficient equipment, Bean advises operators to research and clearly understand the technical parameters of the equipment as well as the exact nature of their laundries in terms of existing utility values and construction issues.
Bean understands that reducing expenses without reducing service quality is tricky. “One of the best ideas is to concentrate on lowering the relative cost of utilities to sales by means of efficiency improvements. This can often, especially in older laundries, be accomplished by adding more efficient machinery. It is also true that marketing can increase gross sales and if this is done by keeping the marketing costs within the framework of economic sanity, the increased dollars taken in will have a mitigating effect on costs.
“Marketing is perceptual skill — not a department. Laundry owners need to understand that people will sit up and take notice of you if you will sit up and take notice of what makes them sit up and take notice.”
DON'T FORGET ABOUT WASHER PRICES
In Arkansas, owners are preparing to raise prices in order to deal with the anticipated natural gas price hike, according to Gary Gray, president and CEO of Justin Commercial Laundry Sales Inc., Little Rock, Ark.
“Dryer prices are getting the most attention, however, I feel we should be giving equal consideration to washer prices. Many laundries use more natural gas for hot water than for the dryers.”
In addition to raising prices, owners should be performing preventive maintenance (cleaning exhaust venting and checking make-up air vents) as well as giving serious consideration to replacing very old and inefficient equipment. Equipment evaluation should begin with the hot water system and then the dryers. “We find so many old laundries with inefficient tank-type hot water heaters.
“Return on investment should also be carefully considered in connection with any purchase of new equipment. Gray also owns 15 laundries, and practices what he preaches. He recently raised top-load prices at one location and has lowered his dryer times at four locations.
The good news in Nebraska is that operators are preparing for higher energy costs, the bad news is that the costs of overall expenses are keeping many of the smaller laundries from making necessary energy changes, says Joe Scarpello, AAA Midwest Equipment Co., Omaha, Neb.
“We have sent out mailers listing ways to conserve energy with existing laundry equipment. One way is to remove standing pilot lights and glow bar ignition and install spark ignition kits on the dryers. Owners can also replace their tank-type water heaters (75 percent efficient) with an insulated storage tank and circulating heating, which are about 85 percent efficient, or use the new, high-efficiency heaters that are 99.9 percent.
“As I go into many laundries I find that many operators cover the make-up vents because they feel they bring cold air into the laundry. The problem that develops is the dryers need make-up air from somewhere and the only other opening is the front door. When the door is opened, the dryers pull all the cold air into the laundry making the furnace run more.
“We completely enclose and seal the dryers from the rest of the laundry. We insulate the walls and seal around the dryers as much as possible. We try, whenever possible, to bring the required amount of make-up air into the dryer room from the roof.”
“Another area of wasted energy is the dryers themselves. Older dryers are rated at more than 100,000 Btu. The new dryers are around 75,000 Btu. New dryers increase the air movement, which reduces the amount of gas needed to produce the same results as the old 100,000 Btu dryers. The newer dryers also have computers allowing the operator to fine-tune the settings (amount to start, dry time, etc).”
Scarpello also believes that energy woes will lead to the demise of the top loader.
DON'T CROSS THE LINE
In North Carolina, operators are aware of the upcoming natural gas price hikes. “Painfully so,” says Joseph W. Johnson, Wade Johnson Corp., Greensboro, N.C.
Johnson says there are ways to reduce your overall expenses, but you don’t want to run off your customer base. “Don’t turn down the lights to the point that the store is dark, for example. Don’t lower the dryer temperatures. This causes longer dry times, which is counter-productive. These things will cost you customers.”
A proactive owner can, he says, lower dry times, increase wash prices and shop for more efficient washers and dryers.
As for maintenance, he suggests keeping the gas burners clean and dry and the screens and exhaust systems lint-free.
When shopping for new equipment, he adds, focus on the water heater efficiency, the extract and G-force and make sure any new dryer will dry the clothes properly, and not just have the lowest Btu.
ASK YOURSELF SOME QUESTIONS
Customers are looking at ways to combat the gas problem, according to Rick Sexton, MidAmerica Equipment Co., O’Fallon, Mo.
“Storeowners have quite a few options to battle the rising costs of utilities,” says Sexton. “First, look at the current vend price to time relationship for drying. The smart operator will look for the proper balance of time to price, i.e. going from 10 minutes for 25 cents to eight minutes.
“Another option is requiring 50 cents to start the dryer, then having a three minute cool-down at the end of the time rather than a two minute cool-down.
“You also can look at the cost of hot water; many operators forget that the cost of heating water usually represents 30 to 40 percent of total gas costs. I have one customer that keeps his water heater set at 125 F; however, he has all of his washers set at 110 F. Thus, he reduces the amount of hot water required for each load of wash, and subsequently his hot water heating costs.”
Sexton believes in preventive maintenance, but says that few operators follow such a schedule.
Sexton poses the following questions:
• When is the last time you cleaned the lint build-up out of your dryer vents?
• How often do you delime your water heater?
• Are you using old, 40-watt light bulbs when you might be able to upgrade to the newer 32-watt bulbs?
• Do you clean/replace your filters on a regular schedule?
• Have you considered upgrading to electronic ignition on your existing dryers?
If you’re looking for an equipment solution, Sexton suggests looking at the modern front loader. “The simple fact is a front loader uses about two-thirds less water per pound of clothing to clean the same load as an older top-load washer. If you reduce the water consumption by two-thirds, then you also reduce the hot water heating requirements for the same load.”
The best way to reduce overall expenses is to replace 15-year-old equipment with new, energy-efficient units, he says. But don’t discount preventive maintenance. “Preventive maintenance is a key ingredient to reducing overall expenses. Clean those dryer vents, blow the lint out of the motors on those washers, delime that water heater and change the furnace filters. Make sure that your dryers have proper make-up air and keep everything operating at its best efficiency. The operator will be amazed at how much can be saved in utility expenses as well as reduced repair costs.”
SHARING THE PAIN
When it comes to dealing with higher utility bills, a little customer understanding never hurts. “Inform your customers of the situation,” suggests Bruce Kusgen, All Pro Laundry Equipment, Lee’s Summit, Mo.
“Customers will be more understanding [of] higher vend prices if they know that the owner is not trying to be greedy, but rather just trying to stay in business. As costs go up, it will affect everyone.”
While the thought of replacing older, inefficient equipment with new equipment may be painful to some operators, it’s a necessary exercise, Kusgen believes.
“The hot water heating system normally is about 50 to 60 percent efficient. By upgrading to a 99.8 percent efficient heater you would have about a 25 percent reduction in natural gas consumption.
“Operators may also look into microprocessor-controlled front loaders that can be programmed to limit the temperature of the hot water cycle, allow higher vend prices for hot water cycles, extract at a higher G-force to speed up dry times and adjust water levels easily to reduce the amount of water used per cycle.”
On the maintenance front, Kusgen suggests cleaning dryer lint screens on a regular basis and making sure door gaskets seal properly to increase the air flow of the dryer and allow for faster drying times.
Operators are more aware of this price spike than any others because of the media coverage it is receiving in Tennessee, says Michael Davis, Star Distributing, Nashville, Tenn.
“I tell our laundry owners to cut the articles about natural gas out of the local newspaper and pin them on a bulletin board for people to read while they are doing the laundry. It helps them understand why you have to charge more for the service.”
Davis suggests a three-part plan to battle high costs.
“One way is to lower the time on dryers. People are generally between six and eight minutes per quarter right now, but the plans are to go to eight to 10 minutes for a 50-cent start on 30-pound dryers (if possible). On the 75-pound dryers, we recommend five minutes for a 50-cent start.”
The second way to deal with the natural gas increase involves washer pricing. “People are using microprocessor machines to charge a higher price for a warm and hot wash versus the price of a cold wash. Some smart owners purchased the type of washers that allow for charging different prices for different cycles.
“Some owners are charging a 25-cent gap between cold and warm wash, and a 50-cent jump to use the hot water cycle. There is also a special wash that is another 50-cent jump in price. At first, many people thought they would see negative feedback from customers, but surprisingly, we have seen few negative comments when the prices have been adjusted in this manner.”
The last change is to replace old, tank-type water heaters with instantaneous heaters. This can result in savings of up to 30 percent when compared to the tank-type hot-water heater, Davis says.
If you are going to shop for new, energy-efficient equipment, Davis says it’s imperative to make sure the equipment is fully programmable, from water levels to being able to charge different prices for different cycles.
“With the gas prices spiking already, and expected to rise 40 to 71 percent, you must be able to pass the cost of your rising utilities to the people using the gas and water.”
Unlike some other areas, utility-based rebates are available from the state of Tennessee, Davis says. “The state has established a Governors Award for certain counties across the state of Tennessee. From what I understand, 70 counties have already been approved for the award.”
Basically, Davis explains, laundry owners in specific counties can apply for a low-interest loan currently at 3 percent. To qualify, the laundry owner must prove that he is replacing the old equipment with all new energy-efficient equipment, and the new equipment can pay for itself by saving in utility costs over a seven-year period.
“We are currently working with engineers to provide the state with the necessary documentation to get the first laundries approved for this and should be able to use it to replace old, inefficient equipment in laundries across the state of Tennessee.”
ADJUST THOSE PRICES
“Down here, we have, for the last month or two, heard about a possible 70 percent increase in the price of natural gas,” says Bill Gilbert, SLM Corp., Belton, S.C. “Whether the gas companies get [the increase] or not is another thing. We are constantly fielding questions from customers about what to do.” In addition to dealing with customers in South Carolina, SLM Corp. also deals with portions of Georgia and North Carolina.
What’s the answer to the natural gas problem? “The last time this happened, we recommended a washer price increase. Now we are suggesting to drop down another minute on dryers. The norm is about six minutes. We are also suggesting another 25-cent hike on washers and a 50-cent hike on the larger front loaders — more than 25 pounds.
“I believe 90 percent of the people we deal with will take our advice. I don’t know why 100 percent of the people wouldn’t do it. It will be a drastic change.”
Gilbert says other local distributors seem to be on the same page as his company; he fully expects the region to go with higher prices.
While the people he serves have been aware of the upcoming problem for a while, they aren’t turning to energy-efficient equipment as a solution. “There has been no equipment bump. We are in a sales drought.”
For those looking to tackle the problem by adding energy-efficient equipment, Gilbert suggests looking at the age of your front loaders and making sure you have an updated water heater. “Some older laundries have even been shutting off their water heater and waiting for customer complaints. It’s a shame that some have to do that.”
To soften the blow of increased prices, Gilbert is asking customers to make photostat copies of news headlines dealing with natural gas increases, and post them in the laundry. “With this, maybe the customers won’t mind the increase as much. More and more other businesses here may be apologizing for price hikes due to the extreme gas situation.”
Where are things headed? “If increases like this continue, smaller operations may be forced out of business unless people come to their senses and increase prices to where they should be. If you don’t increase your prices, you may get some additional business, but you won’t be able to pay for your utilities.”
UNDERSTANDING THE IMPACT
“I think [operators] are aware of the upcoming increases, but I doubt they understand the impact the increases will have on their bottom line,” says Robert Minster, Belenky, Inc., Akron, Ohio.
Minster believes operators need to take a close look at how their stores run. “They seem to forget about how they heat their water and where they are using gas. Many have old, inefficient hot water heaters that should be replaced with high-efficiency heaters. In many cases, the payback makes the decision easier. They can also look at ways to reduce heat loss, such as insulating hot-water storage tanks and hot-water lines.”
Can preventive maintenance keep costs down, or is new equipment the way to go? “I’m not an engineer, so I can’t say how much preventive maintenance reduces expenses, but it certainly does. Leaky water valves waste water. Dryers clogged with lint affect airflow and reduce efficiency. Preventive maintenance is usually done by the owners, so the only cost is their time. Not only will preventive maintenance reduce utilities, but it will reduce downtime and increase the life of equipment.”
Minster believes cash flow is the No. 1 concern when it comes to equipment purchasing decisions. “People need to look at the savings in utilities, reduced maintenance costs and potential for a price increase compared to the investment they will make in new equipment. Tax considerations may also help some operators, especially the ability to expense large amounts of capital expenditures by using the Section 179 election.”
If you want to become an energy-efficient business, Minster suggests contacting experts for advice. “Often, utility companies will do a free site analysis, looking at heat loss, lighting efficiency, etc.”
MAKING A LIST
While Jeff Seele, Sav-A-Day Laundry Machinery Inc., St. Louis, Mo., says his customers seem to be aware of a major price increase in natural gas, he’s not quite sure how they are going to react to the situation.
Seele offers the following advice:
• Maintain your dryers, vents, water valves and water heaters.
• Check for leaks.
• Focus on lighting (bulbs, ballasts, install timers).
• Think about adding new equipment.
He urges owners to replace top loaders with front loaders, and think about more efficient dryers and water heaters.
When shopping, he adds, “Cheaper isn’t always cheaper. If you’re going to buy, look at cost vs. payback, then dependability over a long period of time.