Laundry Concession ContractsThings to Consider

By Kevin McCann, FIHM Vice President

Many multi-unit building owners engage laundry concessionaires to provide laundry services in their buildings as opposed to owning and operating the equipment themselves. Laundry concessions can provide a favourable and dependable revenue source for the building in addition to providing a significant convenience for the residents. Often, the building manager will approach a laundry company and ask for a quote, accepting all of the details in the submission along with the revenue proposal. This can lead to a one-sided contract that does not necessarily benefit the residents or the owner. When inviting bids from laundry contractors, the property manager should prepare a specification that clearly defines requirements that will not only elicit a favourable bid, but also ensure that the residents and owner are protected and well serviced.

Some contracts have automatic renewal clauses. Where these clauses exist, it is important for the building manager to ensure that proper notice is given, to enable a new contract to be negotiated. Any new contracts should not be permitted to have automatic renewal clauses.

All machines should be new, commercially rated and energy efficient. The efficiency rating can be as simple as stating that the machines need to have an “Energy Star” rating or a specific “Energuide” rating. Typically, front loading machines are the most efficient. As getting the laundry in and out of front-loading machines can be difficult for seniors or handicapped individuals, the manager may want to specify that the machines (or a portion of them) be mounted on pedestals.

Where possible, dryers should be gas fired as opposed to electric. Electric dryers use a lot of electricity and with “time of use” metering, can be expensive to operate.

Clauses should be incorporated in the contract to ensure that the vendor complies with standard accounting practices and allows the owner to conduct periodic audits. The machines should have non-resettable coin counters to ensure audit results are accurate.

Insurance requirements should be stipulated clearly and include a specified amount for commercial general liability insurance, including bodily injury and property damage, product liability, contractual liability, water damage and legal liability. The contract should include a clause that indemnifies the building against personal injury claims and other lawsuits that may arise due to the vendor’s negligence, omissions, intentional acts, etc. Proof of insurance must be provided.

Details should be included that clearly stipulate response times for machine failures, the communication methods to be used, timelines for compliance and allow the owner to terminate the contract for “non-performance”.

In order for the bidders to be able to put forward their best offer, it is important that the bidder knows some essential details about the building i.e. number/ size of units, tenant/member type (seniors, family, mixed) and historical information about the number of wash/ dry cycles that the laundry room has generated in the past. The cost per wash/dry cycle should be reviewed each time a new contract is being negotiated to ensure that the rates used are attractive to the residents while providing a reasonable return to the owner. Typically, longer term contracts produce the best revenues for the building owner, as the successful bidder can depreciate the value of the machines over a longer period of time. Most laundry concession contracts run between five and ten years.

In many buildings, the laundry room can be a social gathering place for the residents. Building managers should ensure that laundry rooms are well lit, safe, clean and furnished with enough seating to accommodate those who would like to stay in the laundry room while they wait for their laundry to be finished. u