Franchisees strive to cut energy costs…
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Franchisees strive to cut energy costs…

Franchisees strive to cut energy costs

Franchisees feeling the squeeze of higher utility bills are fighting back. Rising energy costs have forced franchisees to cut costs with techniques ranging from adjusting the thermostat to introducing new technologies and equipment.

Mounting energy costs are taking their toll on franchise operators. Since 2004, the price of natural gas for commercial use has increased 34 percent from a national average of $9.17 per thousand cubic feet to $12.32 in 2006, according to the U.S. Energy Information Administration. At the same time, electricity prices have risen 15 percent from 8.22 cents per kilowatt hour in 2004 to 9.42 cents per kilowatt hour in 2006.

Such cost increases take a bite out of a franchisee’s bottom line. For most operators, it is difficult to pass those increases on to customers with a higher price point for a product or service. So at least a portion of those higher costs comes directly out of the profits. “In order for franchisees to hold their own, they have to implement some of these energy efficiencies, because they simply can’t absorb these costs,” says Ed Rembecky, business development leader for retail markets at the Trane Co., a LaCrosse, Wis.-based manufacturer of heating, ventilating, air conditioning and building management equipment and systems.

One stumbling block to reducing energy costs is that firms often view the cost of operating a fryer or lighting their stores as an unavoidable cost of doing business. Yet some organizations want to change the way businesses think about energy costs. “One of our big mantras is that energy is a commodity just like green peas and fryer oil and chefs hats. It’s a commodity and you need to pay attention to it,” says Richard Young, a senior engineer, director of education at the Food Service Technology Center, a publicly funded research group based in San Ramon, Calif.

Efficient appliances pay off

Energy efficiency has emerged as one of the top qualities restaurants look for when purchasing new appliances. Experts advise that when remodeling or replacing kitchen equipment, the best option is to buy the most efficient appliances possible because the energy savings will more than make up for any higher upfront cost.

“Appliances are energy guzzlers,” says Richard Young, a senior engineer, director of education at the Food Service Technology Center in San Ramon, Calif. A fryer can run $4,000 to $5,000 per year in energy costs alone. So buying energy-efficient appliances will often pay for themselves in one year, he adds.

In addition, some businesses may qualify for rebates to help off-set the higher cost of energy-efficient appliances. According to the National Restaurant Association, local utility companies in at least 12 states offer rebates or other incentives for purchasing energy-efficient foodservice equipment such as solid-door refrigerators and freezers, compartment steamers and deep fat fryers.

Franchisees can find more information, as well as listings of energy-efficient appliances at Food Service Technology Center at Energy Star, an initiative of the Environmental Protection Agency and the Department of Energy, also offers a number of energy efficient resources on its Web site at, including an online “rebate locator” tool.

Some brands already have taken a proactive stance to help franchisees cut energy costs—primarily through education and other informational resources. “One of our primary goals is to ensure that our franchisees stay as profitable as possible,” says Les Winograd, a spokesperson for Subway Restaurants in Milford, Conn. “We are always looking at their fixed expenses such as rent, utilities, etc. and are constantly trying to come up with new ways to improve their bottom line.”

For example, Subway recently switched its interior lighting specification to incorporate energy efficient 5-watt light bulbs that give off the same amount of light, but use much less energy. Stores constructed in the past year have all included the new lighting, while other stores eventually will convert during remodeling phases.

In addition, Subway’s R&D and operations departments are working on a new “eco store” project. The eco store will be a fully functioning Subway restaurant that is built with the most energy-efficient equipment, construction and design available. “Part of this process included holding meetings in which our vendors were invited to help us learn more about energy efficiency, and bring to the table ideas about how we can continually improve what we are doing,” Winograd says.

Dimming light bills

Franchisees can implement a number of relatively simple energy saving steps that translate into sizable savings. One of the biggest energy costs for most retail and restaurant businesses is lighting. Lighting typically accounts for about 40 percent of a retail store’s energy use. The good news is that there have been major changes in lighting efficiencies in recent years. The most dramatic innovation is the ability to replace traditional incandescent lights with new compact incandescent lights or CFLs.

CFLs use a fraction of the energy and the bulbs last significantly longer. For example, a traditional 100-watt bulb can be replaced with a 25-watt CFL that will likely last five to seven times longer than the traditional bulb, Rembecky notes.

Innovations also produce significant savings in signage illumination. Traditional signs have utilized a combination of neon and fluorescent lights. However, colored LED lighting technology that has emerged in the last three years dramatically reduces both energy use and increases the life of the sign by as much as 10 to 15 years. Petco, for example, recently converted its store logo sign from neon to LED technology and the wattage used to power a single sign went from 6,000 to 8,000 watts per sign to 250 watts per sign, Rembecky says.

Controlling costs

Other top candidates for savings involve upgrading equipment and controls related to heating, ventilation and air-conditioning (HVAC) systems and water use. For instance, updating an existing air conditioning unit is well worth it, especially if a unit is more than 10 years old. New air conditioning units currently available are—at minimum—15 percent more energy efficient than standard units, and between 30 to 35 percent more efficient compared to units that are 10 years or older, according to Rembecky. In addition, many utility companies across the country provide some type of rebate for replacing older air conditioning equipment.

Another way to cut HVAC costs is by upgrading the control system. HVAC systems usually operate with a programmable thermostat that schedules heating and cooling based on peak or off-peak hours with a timeclock type mechanism. A single retail store might have multiple thermostats, and oftentimes those clocks gradually become less reliable in tracking the actual time. “I have been in some stores where it might be 2 p.m. and the clock is reading 10 a.m.,” Rembecky says. Franchisees can install one central control system that is set up to monitor a store’s entire HVAC system. The once complicated systems are now fairly easy for any store manager to operate.

Franchisees can also reduce costs related to hot water use. In most cases, a business pays a fee to pump water into a store, an energy cost to heat the water, and then another charge for used water that goes out to the sewer system. So the same volume of water faces three different charges. Here, franchisees can generate savings by eliminating water leaks and reducing water flow.

Installing appliances or mechanisms that manage the water flow and eliminate wasted water is one option. For example, traditional kitchen sprayers used for cleaning dishes can utilize between 3.5 and 6 gallons of water per minute. The addition of a low flow pre-rinse valve, which costs about $40, can do the same job while reducing the amount of water use to 1.6 gallons per minute or less. Even that one change can save a business several thousands of dollars per year, Young notes.

Ultimately, franchisees need to remember that energy use is a controllable expense, and by saving energy companies can have a direct impact on their bottom line.

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