LUFF: What If An Affiliate Stiffs You? A Client Ditches You?

Posted on March 20, 2009 by LCT Magazine

Jim Luff’s Debate: Your thoughts please. . .
In the past two weeks, I have twice been canceled on short notice and I expected to be paid by the affiliates that placed the orders. Neither wanted to pay anything, although they knew I had expenses and it was the right thing to do. So, I submit to you the questions:
What should the cut off time be to cancel without any pay, and if canceled, how much should be paid to the company you farmed out when you cancel at the last minute?
Scenario #1:
A large network gave me an order three days out for an 8 p.m. pickup at a local restaurant with a final drop off in Los Angeles. As this is a four-hour round trip, I diligently committed a car to a five-hour block thus preventing me from chartering this vehicle to anyone else during that time period. I assigned a chauffeur to the run, thus eliminating any opportunity for him to earn any money during the five-hour block except for this trip that had a value to him of just over $100. On the night of the run, we received a call to bump up the pickup time to 7 p.m. instead of 8 p.m. The chauffeur arrived at 6:45 p.m. and at 7:05 p.m. we received a call that the ride is now canceled.
I billed the affiliate for the entire price of the arrangements in accordance with our own company policy. As far as I was concerned, the vehicle earned the revenue it was expected to earn. The chauffeur earned the pay he was expecting to earn and life goes on. That is until the affiliate called and informed me they were not going to pay the bill as the ride had been canceled. In the end, I was offered one single hour of pay. This shows me that this company places no value on my time, the time of my chauffeur, the commitment of the equipment, and the work done by everyone from the reservationist to the car washer to service this ride they had ordered.
Scenario #2:
A small operator in Los Angeles placed a standing order for transportation every Monday from a small farming community 25 miles away into our city for an appointment lasting one hour. The pickup time is set for 9 a.m. each Monday. Last Monday, the chauffeur is five miles out from our garage on the way to the pickup location when we get a call that the ride has been canceled. We again followed our company policy of last-minute cancellations and billed the client for the full amount of the trip as it was to have been. 
I will point out that Monday is one of our heaviest days of the week in the corporate and medical markets, and we frequently run out of sedans on Monday, so there was no way I was going to take a loss. I explained to the operator that once the chauffeur reports to work, the law requires a minimum pay of two hours. He asked how much I paid the chauffeur and said he would give me that but wanted me to know it was coming out of his pocket. I told him I did not care where the money comes from, and if his client places such little value on his company that they won’t pay him for canceling when the car is already enroute, that is his problem but I need to get paid. He did pay me.
My thoughts:
If you bought an airline ticket and you didn’t show up for your flight, the money, in most cases is just gone. If you had a deposit on a hotel room and you didn’t show up, the money is gone. I know that first hand as I lost my deposit on a hotel last weekend because we changed our mind on hotels after I knowingly made a non-refundable reservation and
then decided to stay at a different hotel where our friends were staying. I understand the purpose of a deposit and owed it fair and square. There is a certain value of committing a vehicle to someone and taking it off the market.  We charge a non-refundable $50 deposit to all retail clients at the time they book. We let them know up front this money will be applied to their charter but will never, under any circumstances, be returned so don’t book unless you are sure. This not only prevents many cancellations from happening, it represents a 100% profit center generating some $5000 annually.
My policies:
I have been told by many people that I have one of the most rigid and strict cancellation policies in the industry. I don’t care. Our company turns 19 years old in two weeks and what started as a one-car operation is now a 24-car limousine company, medical transportation company, and valet parking service providing jobs for 67 people so it works for me in my city.
The policy is posted on our website, on our contracts, on our fax confirmation cover sheet, and printed confirmation. We make it very clear that we require a non-refundable $50 deposit. The balance is due one week in advance. If you cancel 72 hours before your departure time, we refund the entire amount except the $50 deposit. There are no refunds on school events such as proms, formals, and graduations if canceled with less than one full week notice. 
If you cancel with less the required time, the entire amount of the arrangement is charged. Obviously with corporate accounts there are no deposits but the rule remains that anything canceled with less than 72 hours notice is billable at the price of the arrangements. The reason is simple. I am not in a big market. My phone is not ringing off the hook and most people book our services well in advance of the date needed. We don't get very many calls in at the last minute which means my car ends up sitting in the garage not making any money and my chauffeur has his income reduced because of last-minute cancellations.
Share with me your thoughts, your policies and your opinion on whether I should be paid, how much I should be paid, and what is fair.
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