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This story was corrected on Feb. 27

Funeral home owner G. Douglas Stauffer says his new business model helps him cope with the industry's rising costs.

Stauffer Funeral Home of Frederick has five other locations in the region, in Walkersville, Mount Airy, Boonsboro, Brunswick and Thurmont. Consolidating their administrative operations in Frederick has helped cut costs, he said. His son George D. Stauffer II is co-owner.

"With the changes in the economy, funeral homes are not a whole lot different from a business standpoint," Stauffer said. "Operating costs and overhead are far greater than they were. … Contrary to what many people believe, the large profits simply aren't there. You've got to be a good manager and provide good service to survive, and you can't take shortcuts."

Demand for funerals has been as steady as the national death rate — about 8.3 per 1,000 people — and funeral homes in Frederick County are still fairly unscathed by the recession. Still, funeral directors such as Stauffer are on guard.

"We're going to feel an impact if it boils down to what funding a family has to work with," Stauffer said. "We haven't seen that yet in the area, but none of us knows how long the financial situation we're in will last. … We're not just in it for the profit motive."

Profit margins across the industry average about 6 percent, Stauffer said, and have declined in recent years. For him, rising costs include salaries for his growing staff of 70, maintenance on a fleet of 18 vehicles and managing real estate.

Both Stauffer, Keith Roberson of Keeney & Basford, also in Frederick, and Terry Connelly Jr. of Connelly Funeral Home of Essex say families have not been cutting back significantly on their options.

"Most people usually have life insurance and a lot of people prepare in advance," said Connelly, whose business provides about 350 funerals a year. "So far, I would say we're not affected that much by the economy."

Keeney & Basford, which Roberson acquired with fellow longtime employee Rick Graf in 2007, provides about 400 funerals a year at an average cost of $9,000. Roberson said revenues have held steady in recent years. "We work with families in their ability to pay, but we've always done that," Roberson said.

Prearrangements, or paying for funerals before they are needed, have started to wane at funeral homes, as families are looking more closely at their budgets. Thus far, Stauffer's and Connelly's prearrangement fund investments into insurance companies have fared well during the downturn.

Roberson, who invests prearrangement funds with local banks, said he has not struggled with investments either. "The funding we've been working with doesn't seem to be impacted yet," he said.

In the Baltimore area, Ruck Funeral Home has locations in Towson, Hamilton and Dundalk that have all noted steady revenues in recent years while providing nearly 2,000 funerals a year, said owner and president Michael J. Ruck. The business has 85 full-time employees.

"Most families know what kind of service they want before they come in," Ruck said. Roughly 22 percent request cremation, which is typically a less expensive service than burial, he said.

Law on funeral home owners still sparking controversy

The number of funeral homes in Maryland has remained fairly constant in the past eight years, fluctuating from 253 in 2001 to 242 in 2007, according to the Maryland Board of Morticians.

Funeral home owners in Maryland must have either a mortician's or a funeral director's license. In 1979, the state implemented a law restricting new licenses to only morticians in an effort to streamline the licensing process.

A push to revise the licensing process, including efforts by religious groups that do not want to embalm, was successful and the Maryland Board of Morticians is just starting to reissue those licenses, said executive director Laurie Sheffield-James.

The state also recently opened up funeral home ownership to corporations, both in or out of state. But those owners must still hold a funeral director's or mortician's license to operate.

A group of aspiring funeral home entrepreneurs, including one in Hagerstown, has sued the board over the licensing requirements. They argue that anyone should be able to own a home as long as they have a licensed employee, said their attorney Clark Neily of the Institute for Justice in Arlington, Va.

A ruling on the case, now in Circuit Court, is expected by June, Neily said. As of now, Maryland is the only state that requires a funeral home owner to be licensed.

While Stauffer declined to comment on the suit, citing his membership on the board of directors for the Maryland State Funeral Directors Association, Roberson said he supported the previous law limiting corporations' presence and keeping licensing restrictions to regulate service, he said.

"The right should be there for people to compete — it only makes us better," Roberson said. "But historically [licensing requirements have] been a good thing because people knew who they were dealing with."

Green funeral trend slow to take off

Nationwide, funeral home directors are starting to explore "green" funerals, a trend popular in Europe. Many families have been curious about eco-friendly burials, but most are "still making traditional choices," said Jessica Koth of the National Funeral Directors Association.

Green funerals usually involve not embalming the body, wrapping it in a shroud and using biodegradable caskets. Instead of tombstones, trees or plants mark the burial spot.

"We're helping educate our members about it," Koth said of such funerals. "We're seeing interest in it take off."

Both Stauffer, who is attending the International Cemetery, Cremation & Funeral Association conference in Las Vegas in April, and Roberson said they have had very few requests for a green service.

"It's not something that's going to take off tomorrow, but we owe it to ourselves to be enlightened and accommodating," Stauffer said. "If you take it to its purest form, there will have to be some regulatory changes."

Maryland's funeral industry

Roughly 880 licensed morticians in 2008.

Only state-licensed funeral directors may own funeral homes, a law being challenged by some would-be owners.

The U.S. death rate is 8.3 per 1,000 persons. As the death rate has held steady, so has demand for funerals.

Source: National Funeral Directors Association; Maryland State Board of Morticians and Funeral Directors; U.S. Census Bureau