How Haulers Can Respond to NYC’s Franchise Zones Plan
Article published on 09/08/2016

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New York City is on track to implement a franchised zoning system for commercial waste collection, which could stifle entrepreneurship and competition within the industry.

However, the move to zoned waste collection will take approximately five years and requires legislative approval, according to the city’s sanitation commissioner Kathryn Garcia, as reported in Politico.

So haulers should understand how the franchize zones could affect their business and then consider alternative self-regulatory measures that may cause the city to reconsider its plan. Even if the franchize zones do come to fruition, haulers will be better off by putting new practices into place now.

How Franchise Zones Affect Haulers

On the one hand, private waste haulers could lose customers if they do not win bids with the city to service the zones they want. Those that win the rights to service zones benefit by having less competition, but others will be restricted as to where they can grow their business.

Small haulers could be particularly hurt by a zoning system, because nearly 40% have business in three or more boroughs, so it’s unlikely they’d win bids in all the areas they currently serve.

On the other hand, those that do win bids will likely have less ground to cover, which could help reduce costs.

“Should a franchising agreement include provisions or requirements that increase the operational costs for private carters, these expenses may be passed on to customers in order for the carters to achieve the operating margins established previously. Examples of such requirements may include prevailing wage standards, facility or fleet requirements, diversion targets, infrastructure investment, or safety-related measures.

“However, a zone system could also generate cost savings for carters as a result of improvements to collection efficiency, including reductions in truck maintenance, fuel consumption, and overtime costs,” says an NYC study of the plan.

The study was commissioned by the Department of Sanitation (DSNY) and Business Integrity Commission (BIC) and completed by consultants including BuroHappold Engineering, Appleseed, Sam Schwartz Engineering, and Paul Carpenter Associates.

Regardless of which way prices move due to zoning, the plan could result in improved price transparency for the industry.

Currently, large customers in NYC pay approximately 38% less than small customers, according to the city’s study, and many small customers do not have formal contracts in place. In fact, city-wide, 62% of all customers do not have a written contract with their hauler, finds the study.

“While benefits of the predominantly informal nature of the market includes flexibility for carters to adjust pricing and customers to change carters as needed, it also leads to uncertainty on both sides in terms of pricing for the customer and revenue stability for the carter,” says the study.

Haulers may also not be pricing their services as efficiently as they should.

The rate for recyclable waste is on average only 5% less than regular waste, “indicating that the current market pricing does not reflect actual waste material produced,” the study says.

Alternatives for Haulers

NYC’s franchise zone plan isn’t the only way to improve price transparency and environmental standards. New technology can accomplish the same feats, without curbing competition. For example, Grid Waste’s open marketplace lets haulers create price zones to more easily generate quotes that reflect their circumstances such as the type of waste being collected and collection frequency. The platform also lets haulers create variable pricing models so they can adjust what they charge based on their route density. So a hauler that has most of its customers in Astoria, for example, can offer discounts to these clients since the hauler saves time and fuel going from business to business. In comparison, a hauler with customers across the five boroughs can price its services to better reflect the logistical issues the distance may cause.

Customers can also more easily request price quotes through Grid Waste’s portal that you can embed on your own website, which is key because the customer initiates the transaction for over half of commercial waste collection services in NYC, according to the BIC Customer Register in 2014, as noted in the study.

And haulers have a pressing need to offer potential customers better pricing tools online, because 71% of all internet leads are wasted, according to InsideSales.com as reported in Forbes.

So by allowing customers to more easily request and receive prices, the way they do in many other industries that have variable pricing such as car rentals or airlines, haulers can increase their customers’ trust and thereby strengthen customer service.

Haulers can also use new technology such as sensors to help them get a better gauge of how full their trucks are and route accordingly.

And “representatives of larger customers, with a more sophisticated grasp of public policy, did raise queries as to whether environmental goals could be achieved through alternate policy choices, such as mandatory recycling and composting programs, or stricter fuel emissions standards for commercial carting trucks,” adds the study.

As the franchise zone plan plays out over the next few years, the industry should take these self-regulatory steps to improve transparency and efficiency. Doing so may prevent or alter the city’s plan, and it will at least improve haulers’ service meanwhile.

Contact Grid Waste to find out more about how we can help.

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