This is the final 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. Don’t miss the other parts to our series: one, two, three, and four.
If you’re considering entering a rental agreement for arc-rated and flame resistant (AR / FR) clothing, beware: in addition to the issues explored in the other posts in our series, rental contracts typically feature long terms with automatic renewals and significant financial liabilities, making them difficult to exit. In fact, the long-term costs of entering a contract hastily can be staggering, and unintended consequences for the user experience can be grave.
Common Issues with Rental Contracts
Buried fees and stiff penalties inherent in many rental contracts can double the expected costs of the program, while automatic renewals can keep companies locked in with little recourse. For example:
- Rental contracts terms typically range from 5-7 years.
- Contracts typically feature evergreen clauses – that is, automatic renewals for “like terms” (5-7 years) or for at least a year.
- Contracts contain very specific parameters for where, how, and when to provide notice of non-renewal. Miss even a small detail in the process and the contract is automatically renewed for a year or more.
- Contracts typically include exclusivity terms that prohibit the customer from buying any products the rental company provides from any other supplier.
- In a rental program, the supplierowns the clothing and it must be returned at the end of the contract — leverage that rental suppliers use to lock customers in. Buy-out for early exit is steep and the process can be intimidating. Most rental providers have internal counsel for legal, and are coached to bill everything on exit they possibly can – setting a bar that is a budget buster.
- Standard price increase language for garments is 5% or CPI, whichever is higher.
- Most contracts have large minimums.
- Cancellation for cause can be very difficult; contractually, service deficiencies are presumed cured unless properly notified by the customer within a tight window that is challenging to meet.
- Replacement rates for items lost, damaged, unreturned, abused, etc. are usually billed at full retail pricing – far exceeding the supplier’s actual cost – and not depreciated for time in service or if it was issued used.
These are just some of the charges and challenges commonly found in rental contracts.
Top 3 Unintended Consequences of Rental Contracts
Beyond frustrating and costly, these contractual issues lead to unintended consequences to the wearer experience – with dangerous implications for safety and compliance:
- Access to Innovation: To maximize profit, rental suppliers limit the number of garment styles in the program, and keep garments in the system as long as possible. However, the last 10 years have seen a revolution in FR clothing and manufacturers are constantly introducing innovations in style, comfort, and protection. Since rental contracts are generally 5+ years, self-renew, and difficult to exit, they effectively eliminate access to innovation for years to come.
- Product Choice: Ask 10 field workers which FR garments are most comfortable, and you’ll get 10 different answers. Since comfort is subjective, choice is the single largest driver of comfort. Yet, as outlined above, rental programs limit workers’ access to choice by design.
- Employee Comfort: Employees who do not get a say in what they wear may not be comfortable in their clothing. As a result, employees are less likely to wear their protective clothing, wear it properly, or care for it correctly – creating issues for both safety and compliance while forcing employers to spend more time moderating employee complaints. This is especially true when workers are aware softer, lighter, more comfortable, or more stylish alternatives exist but are not available to them.
Charges, challenges, and unintended consequences like these help explain the industry’s shift away from rental programs – and why it’s critical to dig into the details before signing on the dotted line.
In fact, the vast majority of AR / FR clothing is purchased outright and laundered at home today. More than 90% of investor-owned electric utilities, 50 Fortune 500 companies, and countless mid-sized companies have opted for a managed direct purchase program for AR / FR clothing. And, once in a managed program, 99%+ never look back – a true testament to the program’s ability to control costs while harnessing the power of choice and access to product innovation to drive worker safety and compliance.
Already in a rental contract? With some pre-planning in advance of the contract expiration date, an efficient transition to a next-generation solution is possible.
Complete this brief form to download a summary of our five-part series – complete with COVID-19 case study illuminating the charges and challenges associated with leasing/renting AR / FR clothing: