Evaluating Laundry Customer Contracts (Conclusion)

Chemicals Supply: Campbell Dodson, Lavo Solutions LLC, Cincinnati, Ohio

Contracts of any type can be confusing and even daunting at times, especially regarding specifics around language, clauses, addendums, etc.

In my experience, reviewing contracts regularly, with professional legal counsel, can prevent mistakes and other challenges that can cost you wasted time and money. And, when you also consider the complexities of the COVID-19 pandemic over the past year and a half, now would be the perfect time to review your business’ contract language to ensure they are up-to-date.

During this extended time of uncertainty, some businesses are changing how they approach and accomplish reviewing contracts. There are many things to consider, and some include:

  • Keeping clear and accurate records of all contract deadlines.
  • Reporting on contract details and updates with a review team at least once per year.
  • Fully understanding and communicating any renewal provisions.
  • Keeping records of all communications with the other party.
  • To reduce the possibility of a disagreement, acting clearly and promptly.
  • Considering remote access to contracts.

In addition to the list above, many companies have said they are concerned now more than ever with managing and reducing organizational risk and are addressing safety concerns for any future contract renewals.

For example, some companies have revised contracts to included “Exposure Clauses” specific to COVID-19. These clauses can be written to help protect service employees, plant employees and customers alike from possible exposure to COVID-19 and other harmful pathogens.

Considerations could include requiring customers to notify your service employees of linens that have been exposed to the virus, requiring them to place the linens in biohazard containers or bags, or requiring them to be placed in specific areas for pickup.

Adding this type of specific language to contracts could help reduce exposure and the spread of unwanted pathogens to employees.

Finally, some companies are also considering a remote or cloud-based service with 100% digital access to agreements and other sensitive business information.

With more and more employees working remotely, these services can help teams review contracts safely and securely, without being in the office. These kinds of services offer peace of mind that your information is safe, secure and accessible 24/7, which improves accountability, centralized control and increases productivity.

When reviewing your contracts, you and your review team should be mindful that there are many things to take into account to help protect your business, your employees, and your customers. Consider current market conditions, environmental regulations, labor law changes, and, where appropriate, seek legal counsel to aid you in your review process.

Textiles: Cecil B. Lee, Standard Textile, Cincinnati, Ohio

When the time comes to renew a laundry contract, it is always the opportunity to correct or improve on the things you like and do not like. Sometimes issues swing too much to one side’s favor. These issues generally stand out to you. Contracts should be mutually respectful.

It is prudent to work toward re-signing a customer as much as a year before the current contract expires. You cannot run a laundry without planning, and customers need the ability to plan as well.

Contracts can be written with automatic extensions of one to two years that are triggered by a date like 12 months before the contract end date if not noted otherwise. A general rule is the longer the contract, the better.

One concept that thoroughly stood out to me as I was leaving managing operations was “legal outs.” I am never in favor of an out clause without cause, especially with a short timeframe.

For cause, out clauses within 60-90 days are reasonable. If a customer decides to leave and I need to alter my full-time employees (FTE), I need an appropriate time to notify my employees who may be affected by the departure.

Contractually, laundries want the ability and time to correct a problem a customer might have. Many times, these are called “cure periods” and can be set at 30-90 days to correct issues.

During the COVID-19 epidemic, reusable personal protective equipment (PPE)—isolation gowns for example—became a new opportunity for many laundries, as strange as it may seem.

If the laundry is to invest in additional products or new products like PPE, the customer needs to commit to using these items for at least 12 months. The same goes for investments in carts and other capital equipment.

If a customer signs on and you have significant expenses, the customer needs to repay for some of these costs if they exit early in the relationship/contract term. A schedule outlining early termination should be set up.

As you review your contracts, I would stress the importance of backup laundries to be used in the case of an emergency. Additionally, I would get copies of those reciprocal agreements and use those as exhibits in your contract. This is even more important due to COVID-19 and other natural disasters like floods, electrical outages, tornadoes, hurricanes, etc.

Of course, there are normal and long-standing regulatory requirements to adhere to. Additionally, there may be a requirement for the laundry to be accredited or certified and the contract would document that.

There should be a loss clause and it should be thoroughly understood by both sides. Deliveries should be realistic, and you could put a delivery window in your contract so that both you and the customer know when to expect the shipment of the linen within a one- or two-hour window. Sometimes penalty clauses for missed timeframes assist with keeping deliveries on schedule.

Dock times and space are limited so this may be a critical part of your contract. If you plan on a delivery lasting 24 hours (until the next day) and your delivery does not come for four to six hours, you may have some real shortages on the floors.

As a representative of Standard Textile, writing about contracts makes me think of linen contract specials. Special products can be a good thing and can satisfy your customer. The product is made exactly to customer specifications and there is a commitment from the manufacturer to stock and a commitment from the laundry to purchase. This is a clear, concise and satisfying relationship.

In the end, the contract is to provide a stable platform for the buyer and the seller regarding laundry and linen services. Each time it’s negotiated, you have the opportunity to fine-tune.

Thanks to Johanna Ames at Ames Linen in Courtland, New York, for her input.

Miss Part 1 with ideas from other institution laundry, consulting services and equipment manufacturing experts? Click HERE to read it.

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