Open vs. Franchised Waste Markets (+ How to Save in Both)
Aaron Stahl / Waste Management / January 30, 2023
As a business owner, you’ll face many choices each and every day. However, whether you’re located in an open or franchised waste market is not a choice you’ll have to make. It’s not up to you. It’s up to local legislation.
Even though you have no control over what market you’re in, it directly impacts how you run your business. Whether your company is located in a franchised or open waste market could have a large effect on how much you’re spending on your trash and recycle costs. It will also affect how you procure these services, the negotiating process, and your annual budget.
If you’re scratching your head trying to decipher the difference between an open and franchised waste market — don’t fret. We’re going to break it down for you, highlight the differences between the two, and show you how to find savings regardless of the type of market you’re in.
An open waste market refers to a market where there is no restriction on who can provide waste management services, and any licensed company can enter the market and compete for business. This means there are no exclusive contracts or franchise agreements in place, and companies are free to offer their services to customers as they see fit.
In an open market, companies are typically free to set their own prices and services, and customers can choose which company they want to use. As a result, some believe that open waste markets are ideal because they encourage competition, potentially driving rates down.
In some cities, counties, or municipalities, the local government may have a franchise agreement in place with one or a select few waste management companies. These areas are known as franchised waste markets. In a franchised waste market, the local legislation has granted specific companies the exclusive right to provide waste management services to the residents and businesses in that area.
Some people argue that franchised waste management markets are beneficial for customers. The system popped up in the 90s as an attempt to give the local government more control over waste management and disposal. As a result, waste producers don’t have to negotiate contracts or shop around for the lowest prices. However, others believe that regulations designating specific waste management companies only benefit the municipalities.
Traditionally, most of the country has operated as open waste markets. However, more and more cities are turning to a franchised model. In general, franchised zones are found on the West Coast of the United States. The following cities have some type of franchised market.
By adding provisions that require contracted waste haulers to keep improving services and continue innovation, local governments can try to battle some of the downsides of franchised markets.
New York City is in the process of overhauling its waste management system. The city is hoping to implement the new model sometime in 2023 or 2024 and is currently in the process of accepting bids for ten-year contracts. However, the idea is to have each zone have up to three waste haulers who will negotiate pricing.
Los Angeles has also been transitioning to a franchised system but has experienced a rocky start despite years of planning. In LA, waste management companies are obligated to reduce landfill-bound waste. Many municipalities are watching these two major players navigate the complicated process of implementing a new system to help settle the debate about which model functions the best.
While business owners don’t have much control over whether they’re based in a franchised or open waste management market, it can still significantly affect their bottom line. Understanding the differences between the two types of markets can help company leaders better comprehend how they can save money on waste management.
With an open market, consumers have a choice when it comes to their trash haulers. This choice can affect both residential and commercial trash producers and, in the end, play a major part in how much trash hauling costs. In an open market, the choice between competitors helps keep the price low. However, some argue that people and businesses can save valuable time and money in a franchised collection zone by not having to spend time procuring waste management.
The jury is out on which system model encourages more innovation amongst waste haulers. On the one hand, city contracts can stipulate specific demands about infrastructure improvement, landfill alternatives, and clean energy. Meanwhile, others think the lack of competition will stunt innovation in the industry. As a result, new or smaller companies with innovative methods or systems will have trouble finding a market share, and larger established companies will see little incentive to change things up when locked into long-term contracts.
Some supporters of the franchised system claim that it gives the public sector greater control over waste management and recycling efforts. For example, LA is using its recently implemented franchise zoning program to help realize a long-term zero-waste plan. Meanwhile, in an open market, these changes can only be caused by consumer demand.
Regardless of whether your business is in an open or franchise market, you’re going to see lots of fees on your waste management invoice. However, franchised markets typically see additional fees that are meant to cover local administration costs.
One plus side to franchised zones is that businesses can easily predict charges and, therefore, plan budgets ahead of time. While this may save some time for procurement teams, in the end, companies still end up spending more. In open markets, businesses can shop around and find a trash hauler that fits their budget rather than the other way around.
It’s hard to say which system functions better, and there is likely not a one-size-answer that can fit every municipality. In fact, even the trash haulers themselves aren’t in agreement. However, trash producers in both open and franchised markets have noticed some serious problems with both.
For starters, waste management vendors often include confusing jargon or terms in their contracts, making it difficult for the average person to understand fully. In addition, invoices are often loaded with errors and overcharges, and it is up to the customer to catch these mistakes.
Another significant issue is that even when you’ve signed a contract, waste management companies are allowed to increase rates for specific valid reasons. This includes changes in government regulations or an increase in landfill pricing, labor costs, or fuel. While this is essentially the haulers passing on costs to their customers, they sometimes increase pricing by more than their costs have gone up.
While there’s not much that customers can do about valid price increases, there are many other fees and overcharges that get added to waste and recycling invoices that are invalid. Unfortunately, the responsibility falls on the customer to monitor bills and keep these charges in check.
While most business owners don’t have time or staff to dedicate that much time to waste management invoice auditing, there are third-party experts like P3 Cost Analysts who have a team of experts prepared to do just that. Here are a few of the invalid fees that we keep an eye on.
Waste haulers have a history of making up new fees as they see fit or attempting to pass off invalid fees as valid ones. Charges such as fuel fees, overflow fees, extra pickup charges, overhauling, and others need to be monitored for excessive application. This is the best way to save money on waste management services regardless of the type of market.
In open markets, renegotiating or negotiating new contracts can save businesses tons of money. Unfortunately, those in franchised zones cannot negotiate pricing. However, sometimes savings can be found if haulers are not following the franchise agreement.
Replacing faulty or old equipment can also have a big effect on waste management costs. Machinery such as compactors, balers, and some types of dumpsters often come in more efficient or functional options. With equipment functioning correctly, you’ll save money in the long run.
The following six steps outline our process for identifying and recovering overcharges and invalid fee increases for our clients. Our process is designed to help our clients identify and recover overcharges and invalid fee increases and potentially find new vendors for their waste management services.
The exact steps will vary based on the type of market your business is located in. For example, in an open market, we may be able to negotiate a new contract for your company, while in a franchised market, we may focus on improving equipment like trash compactors to lower waste loads.
The P3 Waste Audit Process looks like this:
The waste management industry can be confusing for business owners, and many just accept what charges are sent to them each month. Don’t be like them — control your waste management costs by letting P3’s team of experts run a waste audit for your company today.
We can assist you in potentially canceling your contract, auditing your current invoices, evaluating the cost-effectiveness of your contracts, identifying overcharges, and helping you negotiate better contract terms.
Schedule a free expense audit with P3 to start saving money on waste management services today!
