Thursday, November 08, 2007

Energy puts pressure on profits

Business owners wring out savings from switching to alternative fuels, investing in more energy-efficient machinery and shortening operaing hours.

Joyce M. Rosenberg, The Associated Press November 8, 2007

NEW YORK —The lights go out at night after the last wash at Jim
Whitmore's five coin laundries -- no longer does he use a fully
lit store as advertising. And at Todd Waldemar's Wing Zone
store, he's shutting down some of the fryers during off-peak

Small-business owners are getting pinched by the soaring prices
of oil, gasoline and other fuels, eating into their profits as they
gas up vehicles, heat and cool their premises and run machinery.
Often, they turn to common sense solutions to save energy and

For example, no longer flooding a store with light at nighttime.

"We used to use it as a way to advertise our stores -- people
drive by at night and would see clean stores," said Whitmore,
whose laundries are in the Boston area. He said his energy costs
have gone up 10 to 15 percent in the last year.

Small businesses have had to become creative and smarter to
cut energy costs. Companies that do a lot of deliveries as part of
their business -- florists, for example -- have been reducing the
number of delivery runs they make each day. They're also using
mapping software to find the shortest routes, and making sure
vans and trucks are filled as much as possible to capacity.

Many that consume a lot of energy buy contracts ahead of time
to get oil or natural gas at a set price. And many business
owners invest in more energy-efficient machinery or switch their
heating systems to wood or other alternative fuels from oil or
natural gas.

Whitmore is in the process of replacing his washers and dryers,
and is searching for machines that will use less energy and
water, reducing his costs over the long term. He sees a side
benefit of going greener: by advertising that his laundries are
more environmentally friendly.

"Hopefully some of it will flow to the bottom line and help pay
for the new equipment," he said.

At Ranch Rudolf, a resort in Traverse City, Mich., owner Sid
Hamill has replaced most of his heating system with a wood-
burning furnace. He estimates it's saving him between $10,000
and $12,000 a year in fuel costs.

Since his business is located on 195 acres of land, he cuts most
of the wood he burns from his own trees.

"The wood works well for me," Hamill said, and estimated that
the new heating system "basically has paid for itself."

He's still using some regular fuel, but is hoping that fairly soon
he'll be able to switch the entire property to wood-burning

Rising energy costs are forcing some companies to shorten their
operating hours -- a sacrifice in particular for restaurants that
pride themselves on being open 24/7.

Phil Greifeld, chief executive officer of the Huddle House
restaurant chain, said the company is allowing its less-profitable
franchisees to close at midnight, although Huddle House has
advertised itself as "always open, always fresh, 24 hours a day."

"There was a lot of internal debate about it, but it's a good thing
we did that in terms of helping people to control their costs,"
Greifeld said. The result: Those restaurants that are closing at
midnight are making more money.

Other steps Atlanta-based Huddle House is taking include
reconfiguring its seating arrangements, to allow restaurants to
accommodate more customers and increase their volume. The
company, which has 440 restaurants in 17 states, is also
working with equipment manufacturers on burners that turn the
gas on when a pan is placed on the stove and turn it off when a
pan is removed.

"It really does add up" in saving money on energy, Greifeld said,
and added about cutting costs, "it's something you have to work
on day in and day out."

While businesses try to cut costs as much as possible, most are
ultimately forced to pass some of the higher energy prices on to
customers. Delivery charges are going up, manufacturers are
repricing their goods and restaurants are raising their menu
prices. Generally, small business owners say their customers
understand -- energy prices are going up for them as well.

Waldemar uses independent delivery drivers for his Norfolk, Va.,
Wing Zone stores, and they're asking for more money per trip.
"Eventually, it's passed on to the consumer, because that's how
it works," he said.

But Waldemar is also contending with rising fuel costs for
cooking the chicken wings and other food he sells, plus higher
electricity prices. He estimates that his propane costs alone have
risen 30 to 40 percent over the past year.

So, one solution is to turn off unused fryers during down times.

"There's only so much I can do," Waldemar said.

He's also looking at more fuel-efficient equipment as he plans to
expand. He has two stores now, and plans to open one more in
January and another in March.

Raising prices isn't easy, though, for many small-business
owners, because of the competition they face. Whitmore noted
that his pricing is expressed in minutes -- the number of
minutes a customer gets of dryer time per quarter. He can cut
the drying time only so much before customers, who tend to be
lower-income, might go elsewhere.

"We're in a competitive market, and our competitors are not
always eager to play ball," he said.While businesses try
to cut costs as much as possible, most are ultimately forced to
pass some of the higher energy prices on to customers.

Copyright © 2007 Blethen Maine Newspapers

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