Service Charges: The “Dirty Laundry” of Uniform Rental
When choosing a service model for sourcing arc-rated and flame resistant (AR / FR) clothing, price often factors heavily into the decision. However, when it comes to uniform rental (“rental”), the weekly program charges quoted by suppliers do not paint a full picture of overall expense. For example, one of the seemingly smallest line items on a rental invoice can have some of the biggest impact on total program cost: the service charge.
As Chad Barker, Tyndale’s Regional Sales Director with over 15 years of past experience in uniform rental and industrial laundry explains in the video linked below, this fee – sometimes also known as a “DEFE charge” or similar – is assessed above and beyond the contract rental rate. Unfortunately, customers aren’t typically aware at the outset of the contract that this automatic charge even exists, let alone the extent to which it will increase their program spend. In reality, the service charge can add $25-50 per person to the first year of the contract, and more in subsequent years following price increases.
How Much is the Service Charge?
The service charge is typically assessed as a percentage – ranging from 5-10% – of the weekly program charges. It’s also subject to:
- Weekly minimum: the customer pays either the prescribed percentage of their weekly invoice, or a minimum of $X – whichever is greater.
- Annual increase, assessed alongside the annual price increase on weekly rental program charges at the annual anniversary date of the program.
View this video to learn:
- Why the rental program service charge is likely here to stay, and
- The possible impact on weekly rental program charges if the “big three” rental providers were to remove it from invoices
Why are Rental Customers Critical of the Service Charge?
The service charge was added to rental program invoices to help rental providers recuperate ancillary costs for things like fuel surcharge, delivery, operating expenses, and other incidentals. While this may sound reasonable in theory, in practice this charge is seen by some rental companies as a simple profit enhancer:
- In almost all cases, operating costs and market conditions were taken into account when the rental program was priced at the contract outset. Therefore, these costs are already accounted for in the weekly rental program charges. As a result, customers are paying for the same costs twice – in both the weekly rental program charges and in the “service charge” line item.
- Components of the charge – like the fuel surcharge – may even be extraneous. For example, if the price of fuel goes up, it often comes back down. However, the service charge is not reduced accordingly, and in fact only goes up in time.
- The service charge is seen as added charges for the “cost of doing business” – that is, charges for the basic services they are contracted to provide in the first place.
As the service charge shows, programs that seem to be “cheapest” at the start can end up being the costliest in the long run, once charges and fees are factored in. Unfortunately, the service charge is one of many line items you can expect to see on a rental program invoice above and beyond the weekly rental charges.
Follow along with our series at TyndaleUSA.com/blog to better understand the differences between renting and purchasing AR / FR clothing, and contact us today to learn more about a next-generation solution that offers budget certainty and a host of other benefits.
