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Gas prices and the bottom line

September 15, 2012
By Steve Browne , Marshall Independent

MARSHALL - The recent jump in fuel prices contrary to expectations is directly or indirectly expected to affect the bottom line of many businesses.

Unleaded gas in Marshall was up to $3.94 as of Friday, and No. 2 diesel was at $4.15.

Some local businesses that deliver over short distances have noticed an effect already.

Article Photos

Photo by Steve Browne

Fuel prices in Marshall jumped to $3.94 per gallon of unleaded this week, and to $4.15 per gallon of No. 2 diesel as of Friday.

"It does affect business," said Kristen French, manager of Domino's Pizza. "The drivers get paid mileage and we've had to raise our delivery price from $1 to $1.50."

However, local businesses which deliver within town may be choosing to absorb additional costs at present.

Pizza Hut pays drivers a flat-rate delivery fee and has not raised delivery prices, according to Pizza Hut manager Jessie Klatt.

Jimmy John's sandwiches delivers within a two-mile radius and hasn't raised delivery costs, and has actually seen more delivery orders.

"A lot more people call for delivery because they don't want to drive here themselves," explained Jimmy John's manager Brenda Wittrock.

Where the price rise hurts is in medium- to long-range delivery.

"It's going to effect us," said Chuck Bradley, owner of Chuck Bradley Trucking. "Some companies pay you a fuel surcharge, which helps. But some just pay a flat rate, take it or leave it. Sometimes you just have to walk away. The bad part is it affects the drivers."

Bradley said most medium-haul trucking pays drivers a percentage of what the load pays. If costs of delivery rise, that's less for the driver. Drivers do not get a percentage of any fuel surcharge since that goes to cover increased operating costs.

Chuck Bradley's nephew Jamie Bradley is president of Doug Bradley trucking based in Salina, Kan., with an office in Marshall. Doug Bradley trucking specializes in longer-haul transportation with vans and refrigerator trucks.

"Fuel surcharges cover much, but not all of the cost in fuel," Jamie Bradley said. "In my opinion, in the long run the rise hurts the economy. If you bought it off a shelf, it was delivered in a truck. No railroad delivers to Walmart. If you buy less, less gets made."

For transport companies with regular routes there are belt-tightening measures that help when costs rise, but many may have made all the adjustments they can during previous fuel price hikes.

"It's definitely hurt the bottom line," said Tim Haubrich, general manager of PepsiCo bottling plant in Pipestone. "We still have to make all our deliveries, it just costs a bit more. We've absorbed most of the increase. A couple of years ago when prices first increased we did a lot of reconfiguration of our routes. Some places we had twice a week delivery we reduced to once a week. But we can't reconfigure any more."

And increased transportation costs can have an effect beyond the obvious ones.

"It is definitely affecting us in different areas, and in many ways more than driving trucks up and down the road," said Turkey Valley Farms General Manager Keith Burger. "We use a lot of utilities and the rise affects them."

Burger pointed out his operation uses a lot of liquid propane gas to heat the turkey barns, which is delivered by truck. A rise in fuel prices is also driving a rise in electricity costs, and could show up in things like the cost of soft drinks as transportation costs and this years drought drive up the price of corn.

"It's a double whammy," Burger said. "There's also an increase in corn prices. Corn syrup is used as sweetener in a lot of products."

Western Community Action's Community Transit serves people most in need of transport in a five-county area.

"We don't see the initial impact because we purchase through the county," said Cathleen Amick, transportation director for WCA. "And we have a cushion, but if fuel costs continue to jump and stay there with no increase in our budget we may have to cut back on service."



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