Understanding Rental Laundry Programs

April 24, 2018

This is the second post in a five-part series sharing common-sense strategies that have worked for other companies looking to move on from rental laundry services. Read our first post, and follow along with our series: Understanding Program Responsibilities, Managing Garment Inspection and Turn-In, and Auditing the Final Inventory to learn more about each step.

Are you facing service issues that have caused you to consider alternatives to your laundry rental program when your contract expires? The first step along the path forward is to gather information about your current program. Generally, you’ll want to make sure you understand:

How Rental Programs Work:

Similar to leasing a car, industrial laundry rental programs are sold as a simple and economical approach to putting workers into arc-rated and flash fire rated clothing (FRC). In theory, here is how they are supposed to work:

The supplier owns the clothing, and charges a flat weekly fee for its use.
Soiled garments are picked up each week and laundered offsite, and laundered clothing is simultaneously returned. Soiled garments that are picked up one week are laundered and returned the next.
When a garment is worn out due to “normal wear and tear,” it is to be replaced by the supplier. In practice, though, the supplier is motivated to keep garments in service as long as possible to maximize profitability, and many customers have found that suppliers replace worn out garments with previously-worn garments.
When an employee changes sizes, they are to get the new size while continuing to pay the same weekly fee. However, there are typically some added fees: “prep” charges to add barcode and logo and/or name, if applicable. If the new size is considered an oversize, there is often a one-time fee for each garment held in inventory or an increased weekly rate.
When an employee leaves the company, their uniforms are returned and the weekly fee is to be discontinued.
The costs are positioned as being straightforward: for example $10 per week x 52 weeks per year = $520 per employee.

It sounds simple on the surface, but in reality leasing clothing is anything but simple.

In fact, new and replacement garments are often subject to set-up charges for barcoding, logo and name – where applicable.

And, other hidden or unexpected charges, billing issues, and other challenges inherent in rental programs can – and often do – double anticipated company spend!

Understanding Your Program:

From there, the next step along the path to making a change is to understand the terms of the existing program.

To do this, you’ll want to review the agreement itself, taking note of key details:

What is the end date?

Most service agreements are based on a specific finite period. Knowing the end date is critical, for several reasons:

You’ll want to plan ahead to phase the implementation of your new program to begin accordingly.
You’ll want to understand how much notice is required to end the agreement (commonly 90 days), what form the notice is required to take (typically a certified written letter), and to whom it should be directed. Many agreements require notice to be sent to the attention of the General Manager, by certified mail.
If you’re like many other companies, you may find that your service agreement has already reached maturity and is auto-renewing each year, or for “Like Terms” (normally 5-years). In this case, it’s especially important to understand when to give notice to prevent the agreement from automatically renewing again – locking you in for another year or more.

How does the agreement compare to the invoices you are receiving?

Take a closer look and compare key details on your invoice to the agreement itself. For example,

Do the prices and terms on your invoices match what is in the agreement?
Are all of the employees on your invoice still employed with your company?

What are the service level agreements?

Most rental laundry programs are positioned as “service agreements.” This terminology implies a two-way relationship that benefits both parties: the laundry provider agrees to provide services as described, and your company agrees to pay for the services you receive, as described.

However, “service agreements” may be legally binding and may have significant buy-out clauses for premature termination and because of this, the customer may be “locked in” for multiple years.

It may be worth having your legal counsel review your services agreement, however, to clarify the responsibilities and obligations of the parties and any recourse for the failure to meet such responsibilities. If your provider is consistently coming up short on performance metrics that are specifically outlined in the contract, you may want to review your options and consider alternatives.

And remember, if your company was renting it does not own the garments, and whenever your service agreement ends, you may be responsible for returning the assets to their owner – that is, your uniform rental provider. Follow along with the next posts in our series to understand the associated responsibilities – and practical approaches to each step along the way through the transition.

Read on to our next post: Understanding Program Responsibilities