What is a Franchise Waste Collection Area?

Here is a compare and contrast I excerpted from Los Angeles:

Current Open-Market System
Solid waste collection services are provided through an open-market system in which each resident directly arranges for services with the hauler.  Although many waste haulers are doing a good job, this system has been unable to meet demands created by changes in Federal and State laws, public attitudes toward protecting the environment, and consumers’ demands for better services and protection against excessive rate increases.

Proposed Franchise System
The new franchise system will provide residents with ways to dispose of solid waste in an environmentally-friendly way.  Haulers selected to provide solid waste collection services are required to enter into a franchise agreement with the County based on specific terms and conditions.  The agreements are based on services expressed by the community and are designed to improve customer service, increase accountability, promote cleaner neighborhoods, and regulate rates charged by haulers.

Benefits of Franchise System
The franchise system is designed to provide uniform service standards for haulers operating in each franchise area.  The system provides each community with the flexibility needed to create services that will benefit area residents.  These features are modified to reflect feedback received through survey cards, community meetings, and telephone calls.  This interactive process allows the County to tailor each agreement to meet the needs voiced by each community.  The franchise system also benefits the community by limiting the wear and tear on County streets, assists the County in meeting the State’s waste reduction mandate, and reduces the need for new landfills.

To me this definition is vague. Essentially franchise waste collection areas serve to reduce the number of garbage trucks driving around town and ensure a greater amount of compliance for the community.

What this means for an organization is that they have a difficult time negotiating rates because there is no competition. The rates have been determined by the local government. This is widely true, but not always. You have to make a few calls to double check.

Since most people’s idea of waste cost reduction is simply rate negotiations, you can see why they give up when confronted with a franchised market. However, waste reduction and recycling is still wide open and can provide a a big cost reduction.

Keep in mind that recycling rates are most often lower than waste disposal rates and recyling more can net you a win. Then there are other methods of reducing the frequency of pick ups that will drive down costs.

To be honest, these projects take some elbow grease and often busy managers never find the time to do their best. In short franchise markets are a great place to get a third party involved. OK, that’s a plug, but it’s the reality.

If you are in the UK, The Greenhouse provides businesses with tailored waste management programs to minimize their waste output and costs.  Check them out. In 2008 their reveunes were over $8,000,000. The Greenhouse has a particularly interesting case study for a large carpet retailer where they utilize backhauling of recyclables. I say so because Midas has long considered backhauling to be the gold standard in recycling for chain retailers because it allows them to leverage their scale.

Essentially about one-third of landfilled material is recyclable. Tenants, both residential and commercial want to recycle, but the owners have been lagging.

Logistically, buildings have to supply three waste and recycling bins. One each for trash, recyclables and composting.

Initially, I had some reservations as to how you were going to achieve any substantial or worthwhile waste and recycling savings.

However, the results of your work exceeded my expectations and the expectations of my facilities director.

Please feel free to use me for a reference. I wish you continued success.

Kalman Wenig
CEO
Premier Care Centers, LLC

What they’ve done is to install a minimum recycling processing fee. This protects Waste Management when the floor drops out on recycling commodity charges. Of course this has been the case in most recycling commodity markets in recent months.

Not satisfied with breaking even, they are also expecting a “fair return” on their capital with this move.  What this mark up is, is unspecified.

Waste Management says it will still share a portion of any proceeds it makes from recycling sales, but don’t expect to see that until commidty prices recover. Even so, you need to be watchful of commodity prices and Waste Management to ensure they are making good on their word.

In today’s market, waste disposal costs should be triggering some alarm bells. Companies like Waste Management Inc., and Allied Waste Systems, the two largest companies in the waste industry are focusing on return on capital, a big part of which is coming from price increases. What’s more, all businesses have seen a significant run up in their costs of doing business over the past three years due to the rise in materials, transportation and fuel costs.

Fuel in particular is a pass through cost that adds anywhere from seven to eleven percent on top of the standard service fees that hauler’s collect. Virtually all waste vendors’ contracts have a clause that allows them to pass through their diesel costs. “If you’re obliged to buy them their diesel, then it’s just smart business to see that you get the service you need, at a fair rate, in the fewest amount of trips possible,” says Tim Johnson, President of cost containment firm Midas Management Consulting LLC.

While every business generates waste and recyclable materials, Johnson says most firms have not yet awakened to the cost containment opportunities available in their waste, recycling and by-product disposal programs.

This disturbing trend is the rationale that led Johnson, to publish the just-released report, “5 Warning Signs of ‘The Sucker Punch’, How to make sure your solid waste management program isn’t hitting you where it hurts!”

“It’s a classic vicious circle that has most firms unintentionally limiting their profits,” says Johnson. “Senior executives and small business owners view waste as an afterthought because it’s a comparatively small expense – they see it as an inescapable cost of doing business. Meanwhile, line management doesn’t pay waste much attention because it’s not on senior management’s priority list. Consequently, this low hanging fruit is ignored.”

The report is designed to help executives establish, improve, and benchmark waste and recycling cost containment initiatives. It contains an original analysis designed to help executives understand:

* Why relying on haulers for industry expertise is often expensive.
* The myth of “national purchasing leverage” in the waste industry.
* Benefits of maximizing recycling opportunities.
* Three basic options available to executives the benefits and risks associated with working internally, hiring a broker or hiring a consultant and who chooses which model.
* Four case studies from different sectors.

It’s clear from the report that those firms that move to create or improve their initiatives now can look forward to hefty returns on their investment. For firms that fail to address these expenses, their costs will continue to spiral, unnecessarily limiting their profits.

• Pinpoint over-payments, errors, and overcharges
• Ensure the relationship between the landfill and your hauler is to your benefit
• Identify the primary drivers of your vendors’ costs and use them to your advantage
• Consider access technology that may be helpful to you, speeding processes and cutting costs
• Evaluate costs versus benefits for technology upgrades so you can make informed decisions
• Identify cost recovery and recycling alternatives to create new revenue streams
• Provide accurate long-term waste disposal costs – no surprises
• Advise you how and when to renegotiate your contracts to your advantage
• Seize new revenue opportunities for you from market trends
• Help you understand which taxes, tariffs and fees are your responsibility – and which are not!

We will make best-practice recommendations, tailored for your situation, and implement only the strategies you approve. And since we share in the profits we create for you, we’re always seeking out new ways to save you money and enhance your revenue streams.

We examine your contracts, visit your facilities, and peer in your dumpsters. Then we make best-practice recommendations tailored for your operation. Typically, we find that businesses treat their waste disposal solution as a low priority or a fixed expense, which may result in over payments and needless cost overruns. These fall into roughly four categories, all of which ultimately result in higher costs for you…

(1) Conflict of Interest Relationships

Businesses typically rely on the waste haulers to set up their disposal solution. But haulers have no economic incentive to save you money because they get paid for every truck they drive on site, and every dumpster they haul – whether full or not.

This is like the fox guarding the hen house – a true conflict of interest.

If the relationship between hauler and client has been abused, we’ll find over-service, overcharges and fee increases – it happens to companies of all sizes.

(2) Incompatible Business Strategies

Haulers follow an operational efficiency model. If they help you save money, they lose money. And most haulers simply will not swap short-term revenue gains in exchange for long term customer loyalty.

(3) Withholding Technology Improvements

New technology and equipment improvements can save a customer’s cash, but customers rely on their waste hauler to provide them with the latest news and information. And, not surprisingly,  many haulers consider it counterproductive to provide information, advice and technology that will reduce a customer’s costs. After all, the hauler’s revenue and profitability is closely tied to their customer volume.

(4) Automatically Renewed Contracts

Many businesses are operating under their original (and outdated) waste disposal agreement. Often, the hauler’s contracts will have automatically renewed several times since inception – with no attempt at new price negotiations.