E.V. gas prices cut into profits - East Valley Tribune: Business

E.V. gas prices cut into profits

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Posted: Monday, March 3, 2003 11:33 pm | Updated: 1:42 pm, Thu Oct 6, 2011.

East Valley businesses are swallowing soaring gas prices so far, but they say they’ll have to raise their fees soon or choke on the fumes.

“It’s a tough situation and a tough decision to make,” said Kendra Davidson, manager of Knights Taxi in Scottsdale, which provides van, limo and sedan services for Scottsdale and the northeast Valley.

“We haven’t been able to raise prices because of the competitive market, but our drivers are making less each day,” Davidson said. “It’s getting to the point where we can’t do it. We’ve got to make a decision pretty quick.”

All businesses are hurt when fuel costs climb, but for companies that spend a lot of time on the road — such as pizza shops, florists, couriers and cabs — rapidly escalating gas prices can be devastating.

In Arizona, the average cost of a gallon of unleaded regular gas jumped to $1.69 last week, up 5 cents from the week before and nearly 56 cents from a year ago. With the looming threat of war in Iraq and political unrest in Venezuela, there’s not much hope for a reversal of the trend.

Florists get squeezed from both ends, said Cean Molinari, floral design manager at Enchanted Florist in Scottsdale. Wholesalers up their prices to cover the increased cost of delivering the fresh flowers, but customers bristle at increased charges for retail flower deliveries, she said.

Molinari said the business is in a typical post-Valentine’s Day lull, so the last couple of weeks of rapid increases haven’t been too damaging yet. Other local flower shops are more concerned.

Country Blossom Florist, with stores in Gilbert and Mesa, has two cars to keep fueled for deliveries, said Janet Blanck, manager of the Gilbert store.

“Our costs have been rising dramatically with the cost of gas, but you can’t charge customers for it,” she said. Blanck said the only choice for florists getting squeezed is to downsize the arrangement or up-size the delivery fee.

Country Blossom is worried but is trying to wait it out until gas prices start tumbling, she said.

Patty Bellah, transportation manager for The Flower Shoppe in Tempe, said the same.

“We’re still eating it,” Bellah said. “But if it keeps going at this rate, we’ll have to raise our fees. We’ll just have to tell our customers, we’re certainly not doing it to make a profit.”

The Flower Shoppe has both contract drivers and company employees who deliver bouquets, Bellah said. “The contract drivers are hurting the most, paying for their own gas,” she said.

Contract drivers are the core of the courier services, the folks who pick up and deliver letters and packages all over the Valley all day long.

“I have one driver who used to pay $30 to $35 a week for gas, and now she said she is paying almost $60,” said Bob Perz, operations manager at American Security Couriers in Tempe. “That’s money right out of her pocket.”

Perz, who keeps four or five drivers busy, said he plans to ask the Midwest parent company for help in solving the dilemma.

“I’m talking to the home office this week about a fuel surcharge,” he said. “We need to get something workable so I don’t lose drivers, but so we also don’t scare away customers. You walk a fine line. Some customers will bolt at any price increase. It’s a cutthroat market here. ”

In Scottsdale, Lightning Courier CEO Tony Sorrentino said he has up to a dozen drivers on the road logging as much as 1,000 miles a day.

“We use a lot of gas,” he said. “With the price increases over the last few months, it’s been murder.”

Sorrentino said he is trying to combat the effect of the gas increases by routing trips carefully to make sure drivers sent on longer runs have paying deliveries on the return leg. But he said if gas prices keep escalating as they have in recent weeks, that won’t be enough.

“I’m trying not to raise prices,” he said. “But it’s tough. If gas averages $1.80 or $1.90 (a gallon), I’ll just have to raise prices or add a surcharge.”

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