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