Oakland funeral homes weather economic crisis, but still undergo transition

McNary-Morgan-Greene and Jackson Mortuary

McNary-Morgan-Greene and Jackson Mortuary in Oakland is one of many funeral homes that is still profitable, but have a declining margin of profit.

Throughout the recession, one Oakland industry has remained relatively stable—the death business.

Funeral homes and mortuaries in Oakland said they recorded few actual losses during the economic downturn, an experience that corresponds with a larger national trend.

In 2012, Albert Brown Mortuary had its “biggest year ever in terms of the number of cases we handled and also the number of people who came in to do advanced planning,” said Lisa West, marketing director of the Oakland mortuary. “Typically, the recession doesn’t really impact our business on the at-need basis. If there’s a death, people are going to come to us, no matter what.”

But the continued flow of black ink doesn’t hide the fact that this industry is in financial transition.

Though the average funeral home still makes a profit, the profit margins of funeral homes across the nation decreased from 13 percent to 5 percent in the past 20 years, said Dan Isard, founder and president of Foresight Companies, which provides business consulting for funeral home owners.

“I think [funeral home owners] have to look at a new way of doing everything except the compassion they show to families at time of death,” he said. “From a business standpoint, a lot of things are being looked at, and a lot of people are looking to preserve their way of staying in business.”

The roots of this problem go deeper than the 2008 recession. In 1984, the U.S. Federal Trade Commission changed the way funeral homes priced their services. Prior to that year, families would visit a funeral home to choose a casket or urn, and the price of the vessel included the necessary funerary services. After the Federal Trade Commission got involved, funeral homes had to itemize each of the services available, so that families could pick and choose what they wanted, rather than simply paying for the full package.

Not to say that the recession doesn’t make an impact on business—Isard said families do sometimes make different funerary choices when funds are low.

Funeral home owners like Steve Welch of Duggan Welch Family funeral home in the Mission district of San Francisco has seen this happen.

“The recession does cause people to spend less money,” he said. “They may want a limousine or an $8,000 casket, but instead, they get the $3,000 casket and skip the limousine.”

Customers who might have chosen a traditional funeral service and burial in better financial times sometimes opt for cremation, which is cheaper, said Earl Starnes, funeral director of McNary-Morgan-Greene and Jackson Mortuary in Oakland. Starnes said this has affected his business, as cremation rates rose to 60 percent, from 25 percent when he started at the mortuary 15 years ago. Higher costs of burial plots have also fueled this trend, he said.

“Fifteen years ago, people didn’t even want to hear the word ‘cremation,’” Starnes said. “Now, people are more accustomed to cremation.”

He said his business is still profitable, although margins are smaller than before. The mortuary’s highest selling products were caskets, so the trend toward cremation has either decreased the need for conventional caskets or boosted the sale of cheaper cremation-specific coffins. It’s led to changes in employee hours too.

“You know you’re not going to have high casket sales, so you have a leaner staff,” Starnes said.

Seventy-five percent of bodies are cremated compared to 40 percent in the 1980s, Isard said. It’s a trend that’s popular in Oakland. At Chapel of the Chimes Funeral Home, a majority of the clients are cremated, said Harley Forrey, general manager. The historic crematorium features Gothic and Romanesque architecture by famed architect Julia Morgan and houses over 39,000 niches, many of which have custom urns.

But along with popularity, the material cost of cremating an individual has increased, and Isard said many funeral home owners are reluctant to pass on those expenses to their clients.

“The problem is that funeral directors are caregivers. They may have businesses, but they treat them more like ministries,” he said. “When it comes to cremation, they never really understood how to establish their prices.”

The same is true for pre-arrangements, contracts individuals make with funeral home owners prior to their deaths, Isard said. The planned price of the funeral often does not change, even if the individual dies years after the original arrangement, leading to shortfalls for the funeral home.

“The problem is that the industry inflation rate is far higher than the yields that the investments are providing as a payoff,” Isard said.

He said funeral home owners rarely disclose this fact to clients who have pre-arranged their funerals. “That’s the ministerial mentality,” Isard said.

But some mortuaries actually benefited from the increased pre-planning. “We stayed steady because people learned the advantage of pre-arrangements,” said Albert Brown Mortuary manager Deborah Stevenson. “It doesn’t matter what the economy is, we still have to bury our dead. We just try to figure out the most dignified and economical way to do that.”

Stevenson added that Oakland’s diversity also increases business at Albert Brown Mortuary. “This is a very old, traditional place,” she said, explaining that people of all ethnicities—Asian, African-American, Italian and Latino— and religions have come to the mortuary. “We guide people through what it is they want.”

It’s this kind of thinking that Forrey says also brings clients to Chapel of the Chimes—another Oakland funeral home that said it had stable profits. “Customer service is one of our strengths,” he said. “We will do whatever it takes to serve your family—if it costs too much here, we’ll help you find somewhere else. It brings families to us.”

Forrey said they give every customer a tour of the property and a full disclosure of all services they provide. “Most people don’t really know what to do or what to expect when they come here,” he said. “Sometimes they say, ‘We just want the cheapest thing,’ but when they go through all the options, what they want is actually a ceremonial service.”

A ceremonial service is a formal funeral, as opposed to a non-ceremonial burial, in which there is no service or program.

Julian McClendon, a licensed funeral home owner in Oakland, said his business has grown through referrals. He said his clientele has been loyal and returns to him when they need his services.

“If you can survive in the funeral business for 20 or 30 years and know how to do it, then you’ll probably grow and things will continue to be good,” he said. “You have to go with the times.”

2 Comments

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