Are Uniform Rental Programs Cost-Effective?

March 23, 2020

This is the third post in our series examining the industry’s shift away from uniform rental (“rental”) programs with industrial laundry for arc-rated and flame resistant (AR / FR) clothing, a closer look at misconceptions that sometimes lead companies to select rental for AR / FR clothing, and unintended consequences of entering the rental world. Click here for the intro post, here for our first post, and look out for posts four and five.

It’s easy to comprehend how uniform rental programs gained majority share of arc-rated and flame resistant (AR / FR) clothing delivery in the USA in the 1980’s and 90’s; a typical sales pitch for renting AR / FR makes intuitive sense at a high level, and one of the most attractive aspects of the rental pitch is the program’s promise to save companies money. After delving into the details, however, it becomes clear that understanding the true cost is anything but simple – and rental programs are anything but economical. In reality, between unexpected charges and fees and under-utilization of the service, rental programs often cost exponentially more – that is, both more than expected and more than purchasing the garments outright through a managed allowance program that leverages home laundry. Companies who have transitioned from a rental program to a direct purchase program have reported as much as 20-50% cost savings.

The Rental Sales Pitch

Rental programs are sold as a simple and economical approach to putting workers into AR / FR clothing:

The supplier owns the clothing, and charges a flat weekly fee for each employee for its use.
When a garment is worn out, it is replaced at no additional charge.
When an employee changes sizes, they get the new size while continuing to pay the same weekly fee.
When an employee leaves the company, simply return the uniform and you no longer pay the fee.

In theory, the costs are straightforward: for example $10 per week x 52 weeks per year = $520 per employee.

It sounds simple on the surface, but renting clothing is anything but simple. In reality, charges and challenges inherent in rental programs can – and often do – double anticipated company spend. Read on to take a closer look.

The Reality of Rental

Renting AR / FR clothing costs more than expected, and more than purchasing the garments outright through a managed allowance program that leverages home laundry. But why?

Rental providers add multiple ancillary charges above and beyond the contracted rate:

Set-up fees: rental providers assess a preparation fee (“prep charge” or “make-up charge”) amounting to $1-2 for name tags and $2-5 for logos – adding $55-121 to the per-employee cost in year one, and for every new employee added, in a typical 11-set program. Set-up charges apply to all replacement garments as well as new hires, size changes, etc. – increasing weekly program costs throughout the contract life. In all, these fees can add as much as 8-10% above and beyond what you initially expected to pay per employee.
Service charge: rarely defined at contract outset, service charges typically amount to an added 10%
Environmental charges: water remediation and other similar fees
Fuel surcharges: if the cost of gas goes up, a fee is often levied to account for this. However, when the cost of gas later drops, these surcharges are almost never removed.
Loss and damage charges:
- The rental provider has the exclusive discretion to declare a garment “damaged” and replace it.
- Lost garment fees are charged for every garment the rental provider can’t account for, regardless of why it can’t be located, and even if the garment is later relocated. Loss charges mean both purchase of a new garment, and the associated set up, name tag and logo fees.
- Replacements for lost/damaged garments are charged at full retail cost, regardless of the age/condition of the garment being replaced. And replacement garments issued are often previously-used. Some rental providers also charge “replacement charges” when a garment is replaced due to normal wear and tear or size change.
Route drivers are incentivized/evaluated on their ability to assess add-on charges.

Under-utilized Service

Internal audits have shown on average that 25-50% of employees in a rental program do not turn in their clothing for laundering in any given week. Known as “underwash,” under-utilization of the service is often due to worker absence on laundry pick-up day, frustration with service issues, etc. Yet – whether an employee uses the service or not – every item issued to the organization is invoiced as normal. In fact, your organization is invoiced at its weekly laundry rate for the duration of the contract, regardless of vacation, sick time, or training – amounting to your company incurring significant expense for a service that it’s not receiving.

Direct Purchase Managed Program and Budget Certainty

Rental or lease programs often have or are perceived to have a lower first-year cost compared to owning the garments, at least based on expectations when you enter the program. However, managed allowance programs are typically 25-50% less expensive over a 3-4 year window, and can even pay off in year one due to setup fees, service charges, escalating annual price increases, hidden charges, and other fees and business practices inherent in the rental service model.

Like renting or leasing a car, the upfront costs may be lower but medium and long-term costs are almost always much higher. In reality, renting or leasing clothing provides none of the benefits of leasing a car.

In addition, managed allowance programs deliver budget certainty, while rental billing frequently skews much higher than expectations quoted during the sales process. The cost of a managed allowance program is as simple as the number of workers times the “allowance” per worker per year (typically around $400), yielding a very stable, predictable cost.

Shipping, oversize, and turnover (that is, outfitting new employees “from scratch”) can add to managed program costs but can easily be accounted for in budget analyses, while unused allowance reduces costs. The net result of these few areas of uncertainty for managed allowance programs is that the unused allowance typically more than offsets turnover costs, and the year-end actual spend is very close to, and often LESS than, the original budget.

The True Cost of a Rental Program for AR / FR Clothing

Remember the estimate of a straightforward $520 per employee per year in the initial rental sales pitch? When all is said and done, after a few years of the contract, companies in rental programs typically pay more than $750 a year – and $1,000 per employee per year is not uncommon – thanks to automatic annual increases, loss/damage, other charges, fees, and administrative costs. Making matters worse, as we have seen, as many as 50% of employees in a rental program choose not to even use the service.

Follow along through the end of our series to download a complete copy of our whitepaper on Uniform Rental with Industrial Laundry for specific sample financial models and complete analysis.

Look out for the next post in our series, in which we take a look at the purported convenience of rental programs.

Time to move on from rental? Find out how Tyndale’s program delivers cost savings, while offering exceptional service and garment choice – key drivers of employee satisfaction and compliance.