Rising Fuel Costs & The Cleaning Specialist
Oil prices have been rising along with the anger of the American public. Many observers note that oil prices have not caused such emotional intensity since the 1970s oil crisis. With the price of gasoline affecting people worldwide, ICS decided to take a look at how high gasoline prices are affecting the cleaning specialist.
Peaches Decker of Decker Enterprise finds creative ways to compensate for the increase in gas prices, "We look for the least expensive 89 octane we can find in the Speedway/Super America chain of stations. Yesterday, I filled up at $1.95/gal. The prices in the Greater Cincinnati area raise on Thursdays, so we try to fill up on Wednesdays. As long as we can keep the cost at 4% or less, I don't intend to pass along a fuel charge. However, if costs exceed 4%, I will delineate the fuel charge on each invoice to every customer. I'll try to read my crystal ball and choose a figure that will cover the rising costs for the balance of the year."
While U.S. motorists are understandably up in arms over oil prices that have more than tripled since 1999, European motorists have regularly been paying as much as four times what Americans pay. The price of unleaded gas has risen by 16% in France, 14% in Italy, and 11% in Belgium.
Americans do tend to feel the energy price flux in a much more profound way than Europeans. In general, Europeans pay $4 for a gallon of gas while Americans pay $1-$2 per gallon. European governments are able to reduce the tax when energy prices suddenly rise, which protects their community from the full effect of the rise. Conversely, the American government has fewer methods to lessen the blow.
With such a disparity between European gas prices and American gas prices to begin with, it is understandable that when there is a shift in the cost per barrel of oil, we feel the most significant change in prices.
From Seattle's average price of $1.62 a gallon to Chicago's $2.13 a gallon, everyone is passing the buck as to who is responsible for the inflated prices. A U.S. Senator recently declared that there was gouging on the part of the large oil companies at the same time that oil industry executives blamed tight supplies, market conditions, and complications in refining the newly required cleaner-burning gasoline.
In late June, several governors asked the EPA to lift the new, stringent clean-air rules and President Clinton contemplated accessing domestic oil reserves, normally restricted for war time use.
In July, when Americans were appearing on local TV news stations, gas nozzle in hand, yelling red-faced about the ridiculousness of it all, forecasters announced that crude prices were expected to decline. U.S. officials predicted that crude prices would continue to decline, perhaps as much as $2.50 a barrel by August. They also stated that gasoline prices would most likely follow the price decline.
Some cleaning specialists expressed concern and felt that the higher gas prices will affect their business. Nicholas G. Nellos, owner/president of Expert Carpet, Wichita Falls, TX said, "The bottom line is we could have a recession by the fall if prices do not go back down. If there was not much to worry about then the GOP and the democrats would not be talking about temporarily removing the gas tax and trying to offset the prices. You can expect at least a 25 to 40 percent slow-down by the end of the summer. Raising prices will temporarily offset the problems. We could have big problems by wintertime. Save your money."
To many cleaning specialists, the important part in dealing with the higher gas prices, is taking action to offset the costs. Several cleaning specialists, commenting separately, revealed surprisingly similar solutions. They all stated that they had raised their prices by $10 per job.
"I have put in a $10 set-up fee to counter the raising gas prices. No one has said a word about it either. Since I run portables it more than covers the extra cost," stated David Hebert of Reliable Cleaning, Chicopee, MA. He further went on to say, "Remember all your cost should be passed on to the consumer. So when things go up then so should your prices. We charge $.35 a square foot and up and 15 linear feet and up for UPH. Now the gas prices have not really hurt me that much but I feel I must pass on my added costs or I am loosing money. So instead of going up on the cleaning price, I just put a set-up fee on the bill."
Grant DuBridge of Traditional Carpet Cleaning Inc. said, "Here in Grand Rapids, Michigan the gas hit a high of $2.29 a gallon at the local station. My gas costs have doubled in a two-month time. In response, I have raised my minimum price by $10. I have also requested that my commercial apartment accounts have more than one apartment ready for cleaning before calling for service. These two changes have more than covered the added cost of fuel."
Bob Savage, president of Perfection Carpet and Upholstery, Kettering, OH also increased his price per job by $10. "There is no reason why you cannot and should not, raise prices to compensate for the increased cost of fuel. I raised our prices $10 on each job (our minimum job is now $80), which should more than compensate for the fuel costs. We also use propane to heat with. Since that is a by-product of the refining of gasoline, it has also gone up a bit. This was three weeks ago. So far, no one has said a word about our 'new' price for cleaning."
Several cleaning specialists, conscious of the elements that affect their business, offered detailed accounts of how the higher gas prices were affecting their profit margins. Brandon J. Miller, owner of Miller's Complete, Portage, IN commented, "I have made some modifications to my operation due to the added costs associated with fuel. For starters, I am driving my personal truck (4-cylinder, stick) to do estimations and janitorial. That truck gets about 30 mpg as opposed to the 10 or so out of my Ram. I am also trying to run my machine as efficiently as possible. I make sure everything is ready before starting it up and shut down as soon as I can. I have also started to ask permission to dump on-site instead of carting the wastewater back to my shop for disposal. I have recently raised my prices due to a number of variables, one of which being fuel costs. I am not going to eat the consequences of economic actions."
Vince Davis of Commercial Quality in Queen Creek, AZ explained what his company did when fuel prices began to rise, "We took a real close look at the cost of fuel when the price jumped earlier this year. After a complete analysis, we realized that the fuel increase was really only in the neighborhood of about 12% in the Metro Phoenix area (from about $1.299 to $1.499, using optimistic math dividing the old price into the new price). This worked out to less than $0.45 per job. Not really worth raising prices, especially since gas prices started to fall soon after we looked at it."
Davis continued to say, "Rather than let our guys buy gas wherever it was convenient, we simply told them to start buying it at certain stations where it was cheaper, and were able to bring that fuel cost back down. You see, before, we were paying for gas at the closest station to the point at which we realized we needed fuel. By paying more attention, we were able to shave an average of a nickel a gallon off of our purchase, sometimes more. By being careful, we took our fuel expenditures back to where they were before. The end result was an increase in buying efficiency instead of an increase in costs. Pretty simple."
Other cleaning specialists gave a very different perspective on the raised gasoline prices. They expressed less of a cause for alarm than their counterparts, even citing other areas of the cleaning business that could be of more concern. "While it does represent an increased cost, fuel is such a low percentage of gross that doubling this expense will not throw profits way off. Remember that for any service labor is the biggest expense," commented Edward R. Hobbs of Hobbs Ultra-Clean Service in Corapeake, NC. Hobbs went on to say, "I don't think increasing oil change frequency would benefit very much, we already use synthetic oils in both the Performer and the van engine. We always try to schedule jobs in an area together whenever possible (gas is just one reason to do this)."
Brian Tilton at A-Prestige Carpet Care stated, "If you are not charging at least $.35 a square then you must raise prices! Up here in the twin cities we get $.35 to $.55 a square. At a thousand a day I don't worry about gas! My Butler runs all day for $35, what is that? Start charging $10 'waste disposal' fee. I do. Also trip charges of $7 should do."
Manufacturers are also aware of the impact that high gasoline prices are having on the cleaning business. "We are a manufacturer of carpet cleaning equipment, consequently we have not been directly affected by the increased gasoline costs. We have however noticed some increase in costs for shipping our equipment, since most of it goes by truck line carriers. Also we expect to see some increased costs connected with shipping in to us of parts and raw materials by our vendors. The real direct cost increase, I am sure, is being felt by the users of our truck mount carpet cleaning equipment," said Don Rush, sales manager portable division.
The high price of gasoline is affecting the cleaning specialist in various ways. Some cleaning specialists see the high price of gasoline as a serious situation that will profoundly affect their business and others see it as a minor problem that can be easily solved. One thing is clear, most cleaning specialists agree that the high gasoline costs should be shared with the consumer.
Steve of Chester Basset Carpet Cleaning recognized the need to pass the burden of high gasoline prices onto his customer, yet was reflective of how that in turn would affect the customer. "Fuel costs have had a big impact on the profit margin at my company. We really haven't taken any steps to reduce fuel costs other than trying to refuel at locations with the best per gallon price. Our truck mounts run approximately 6-8 hours per day so gasoline is our necessary evil right now. I have considered passing on somewhat of a fuel surcharge on to our commercial customers however I'm not sure how that will affect them?"
Whether the high cost of gasoline is seen from a social, political or economic perspective, it is something that is directly affecting the cleaning industry. Evolving with the times and being aware of what is affecting their industry, cleaning specialists in America are finding different ways to offset the cost of doing business.