Will Some Drown in a Predicted Sea of Rising Natural Gas Prices

Energy costs have exploded because of a jump in crude oil prices. That affects the per gallon cost of gasoline, but crude oil prices also impact the costs for diesel fuel and forms of compressed or bottled gas. Then things got worse beginning with last year''s -horrific hurricane season. That impacted gulf oil production. Now media reports are that these increases have spread to affect other energy costs as well. Natural Gas, propane and electric power prices have accelerated making the entire energy field subject to inflation. That, press reports say, will impact home heating prices and could give a real pocket book punch in the nose to the national coin and card-op industry. These increases have been mentioned prominently by national television newscasts, on a number of networks, and has been cited in numerous newspaper accounts from around the country. It''s being seen as big news because of the affect it could have on that substantial part of the American public that depends on coin and card operated laundries to do their weekly wash. Only in cases of emergency does the press seem to recognize the value of the coin and card-op laundry industry''s importance to the public''s health. Our industry has faced water shortages and fuel increases in the past, but this one looks dangerous for laundries that are operating close to the edge. One laundry operator has already announced that he will be closing his doors because the cost of drying clothes has gone up higher than the charges he feels he can pass on to his customers. Most taking that route make no announcement at all; they just go out of business. Laundry owners who have the most modern equipment will feel the least pain, but in the end all will suffer from the angst and anxiety of seeing their bottom line dissipate and fade as a result of rising energy prices. With natural gas prices expected to soar as much as sixty percent in 2006 alone, and go even higher in future years, many see danger ahead. A few see opportunity from the natural weeding out process that follows cataclysmic changes in the business climate. Older laundries should suffer the most, as their equipment won''t be as energy efficient as are operations equipped with newer models. Many older laundries cannot offer the -variety of washers, such as a mix of front-loading sizes. Some older top loading washers will actually use 40 gallons of water per cycle, and two thirds of that is hot. Hot water costs more money to use than cold and some of the older top loaders use from 35 to 40 gallons of hot water. Gas bills could be mitigated if those older washing machines were to be replaced with smaller front loads or with current model energy efficient top loads. Some of the really old dryers were initially purchased at a time when gas prices were so low, no one considered energy in the planning process. Now there are energy efficient dryers that markedly reduce gas consumption. Water heaters and their replacement with newer, more energy efficient models is one more step to be considered. In the time when the great bulk of existing laundries were built, again energy consumption by heaters was not even considered in the choice. Today''s water heater designs offer much higher efficiency that offer a genuine opportunity to save. According to Brian Wallace, President and CEO of the Coin Laundry Association, ''Rising energy prices will be more than just a glitch, it could be the biggest event in the history of the laundry business.'' Wallace is optimistic that the better operators will survive and prosper. ''It will have to be both a combination of cutting energy costs and running a tight operation that will be the secret to laundry success.'' According to Wallace, ''Too many laundry owners have gotten by for years with dryer pricing that is essentially a loss leader. Unless they raise prices, it will become a loss loser.'' It was several years ago that the standard dryer time was a quarter for ten minutes. With cool down time, it amounted to eight minutes of gas burn for each quarter. With rising natural gas prices, it came down to six minutes of gas input. Now operators are looking at five minutes for a quarter, or less. That may create buyer resistance. In the past, people have been reluctant to raise laundry vend prices out of fear of the customer. One industry executive has suggested that laundry owners sell the idea of a gas surcharge being added to the dryer vend price to make up for the sky rocketing gas prices. The freight people have been adding a fuel surcharge to their bills for years. Selling your laundry customers that this surcharge could be a temporary increase in pricing that is going to the gas company, not into the owner''s pocket. That would take printing up and posting notices in the laundry, and doing it a few weeks in advance so that the price hike doesn''t come as a surprise to the clientele. If properly sold to the customers in advance you will see a few grumble, but the gas costs for heating their homes will rise too, so they really know what the operator is going through. Washer vend prices also need to rise to cover the accelerating costs for both gas and electricity. This will present more of a problem for coin laundries than for card-operated ones because the increases will have to be in quarter increments. A card operator can do it in penny amounts if they want to. There is no question that both washer and dryer vend prices will need to rise if and when energy prices double, as they are predicted to do. This could all happen within the next year. The time to start planning and preparing a strategy and action steps is now. Every month an operator spends worrying, whining and complaining about the problem is a waste of time. If you should replace equipment, do it now, not later. You need to increase vend prices? Do it now, not later as it might prove to be too late. We see the storm coming and it''s bearing down on our industry. Take prompt action and you and your business will survive and prosper.