Operations

Ubernomics: Should Limo Operators Do Business With TNCs?

Posted on August 20, 2014 by

One year ago, Brentwood Limousine of Detroit decided to conduct an experiment and start letting chauffeurs take Uber runs during downtime when out in the city. The reasoning was if the fleet could handle last-minute bookings through the convenience of Uber, without neglecting scheduled runs and affiliate trips, then it would increase the usage of each vehicle and bring new revenue along with it.

After one year of trials, Brentwood reports the test has succeeded. Nick Kokas, global operations manager for Brentwood, says the biggest benefit has been the increase in readily available cars out in the field for dispatch. “We’re able to offset the cost of the cars being on the road by having Uber in the mix,” he says. “That increases our availability to existing customers and our national affiliates we represent in the metro Detroit area.”

Brentwood is an example of an increasing number of limo operations that are quietly doing a little business with Uber on the side. But that also draws the ire of operators who see Uber and transportation network companies (TNCs) as quasi-legal imposters who intrude on and undercut safe, regulated luxury transportation. At issue is how fully Uber Black complies with various state and local regulations. The ensuing regulatory disparities have led to clashes nationwide between TNCs and other ground transportation sectors.

Operators interviewed for this article all said they only do business with Uber Black, the highest-end TNC which claims it hires only professional chauffeurs with commercial licenses and commercial insurance. The operators said they do not work with UberX, a lower-priced TNC version that requires drivers only to be 21 years of age with a personal license and personal auto insurance.

Logistics

Brentwood Limousine president Mark Grabow and global operations manager Nick Kokas say the size of greater metro Detroit makes it beneficial for the company to put more cars out in the field. By letting chauffeurs handle Uber runs in the downtime, they are able to increase availability for short-notice affiliate and in-house reservations.
 
Brentwood Limousine president Mark Grabow and global operations manager Nick Kokas say the size of greater metro Detroit makes it beneficial for the company to put more cars out in the field. By letting chauffeurs handle Uber runs in the downtime, they are able to increase availability for short-notice affiliate and in-house reservations.
 

The on-demand aspect of Uber has not been a problem for Brentwood Limousine. Kokas says because Uber selects drivers based on proximity, the cost of traveling to the client is minimal. Once they are picked up, trip lengths range widely from as low as 10 minutes to a full hour, he says.

Two separate dispatching systems have been established, one for in-house reservations and affiliates and another for Uber. “We have monitors in our dispatch room that show where all our chauffeurs are,” Kokas says. “Our chauffeurs know if they have a reservation to get to later, they have to log off in time to make it there early. If we get last minute in-house trips, dispatch instructs them to log off.”

The 43-vehicle fleet at Brentwood enables it to more easily distribute demand, and affiliates [and clients] have been happy about the increased availability of cars, Kokas says. “The window keeps getting shorter and shorter. They want the car faster, the receipt faster, everything faster.” To maximize car efficiency, Brentwood focuses Uber work primarily at night when demand from affiliates and in-house clients is low.

Eli Darland, president of Rare Form Limo in Seattle, Wash., explains his rationale for doing business with Uber: “It’s a last minute job at somebody else’s rate. The same thing happens all the time with affiliates.”
Eli Darland, president of Rare Form Limo in Seattle, Wash., explains his rationale for doing business with Uber: “It’s a last minute job at somebody else’s rate. The same thing happens all the time with affiliates.”
Dealing With Uber Clients

Eli Darland of Rare Form Limo in Bellevue, Wash., also has begun experimenting with Uber work. He has one vehicle registered with the company, and instructs chauffeurs to turn the app on between jobs and on trips back to the home base before hitting the gas station. He also will send the vehicle out during identified peak Uber demand times and locations. Chauffeurs who do Uber work are trained and experienced and not new hires.

“I don’t put new guys into Uber because it gives them a bad idea for the job. It’s like a taxi cab,” he says. “Clients jump in the car. They open doors. They talk all the time. Chauffeured transportation is very different from that.”

After the first six months of working with Uber, Rare Form Limo has netted an additional $2,500 gross profit that “we would not have made without partnering with them,” said Darland, who projects potential yearly profits to be close to $5,000 per vehicle.

Ethical Concerns With Uber

Ben Zaharie, president of AZ Sedan in Phoenix, Ariz., chooses to put more energy into traditional limo affiliate networks and keeps away from Uber business. “The technology is definitely changing the demand,” he says, “But Uber will not be the only company to offer this service in the future, and I don’t think they’re going to become a primary chauffeured transportation company.”
 
Ben Zaharie, president of AZ Sedan in Phoenix, Ariz., chooses to put more energy into traditional limo affiliate networks and keeps away from Uber business. “The technology is definitely changing the demand,” he says, “But Uber will not be the only company to offer this service in the future, and I don’t think they’re going to become a primary chauffeured transportation company.”
 

Uber’s opposition and resistance to standard regulations has soured many limo operators from working with the company. Ben Zaharie of AZ Sedans in Phoenix, Ariz., says he has been approached by Uber executives with interest, but never been 100% convinced, and opts to stay out.

“Every business is different and everybody has a different business model,” Zaharie says. “I get that the industry has changed and demand has changed and customers want service and they want it now, but my motto has always been quality service and not fast money.”

Uber has been banned in Arizona, yet the company continues to operate despite its illegality. Similar cease and desist orders from regulators across the country have been ignored by Uber, and it’s this disregard for laws that has alienated many limo operators who believe the company competes unfairly.

“I’m a firm believer in competition. I like competition,” Zaharie says. “But compete fairly.” He credits the success of his company to strong brand development and good relationships with affiliates, and reports that last year business was up three-fold and revenue doubled, “and that’s without Uber,” he says.

Dan Goff, general manager of A. Goff Limousine & Bus Company, which operates across Virginia, agrees that Uber operates unfairly, but that efforts to fight the company are not productive. “I don’t think what they’re doing is fair in any way, but I think the resolution to the unfairness is not wasting time trying to stomp them out.”

Goff worked with Uber in 2013, but has since pulled back as regular business demand has picked up. He says his main issue is Uber’s exploitation of state regulators’ inability to adequately enforce policy, and its willful circumventing of laws while investing in lobbyists to promote bills in the company’s favor. “They made the decision to ignore laws and get away with it, and it’s a winning bet. They put money into lobbying,” Goff says.

Dan Goff, general manager of A. Goff Limousine & Bus Company, based near Charlottesville, Va., has experimented with most every new booking tool to come through the industry, including Uber. He believes new technologies such as apps can radically change the chauffeured transportation business in five to 10 years, but it will still be a fertile industry for entrepreneurs. “We will find our way through,” he says. “But we won’t do it by calcifying and being unwilling to change.”
 
Dan Goff, general manager of A. Goff Limousine & Bus Company, based near Charlottesville, Va., has experimented with most every new booking tool to come through the industry, including Uber. He believes new technologies such as apps can radically change the chauffeured transportation business in five to 10 years, but it will still be a fertile industry for entrepreneurs. “We will find our way through,” he says. “But we won’t do it by calcifying and being unwilling to change.”
 
The Future For Uber and Limo

Goff estimates Uber has cut into his sedan revenue by about 20%, and believes working closely with regulatory boards will be critical for operators in the near future so that Uber is not the only advocate for change. “The fight now is to make sure loopholes in regulation blown open by Uber and their large lobbying funds are wide enough for us all to drive through,” he says.

Uber’s issues with insurance compliance, proper background testing, licensing, and many other regulatory factors are being hashed out by officials in various state and local markets nationwide. Many limo associations have successfully opposed Uber’s neglect of rules, and seen fines and tickets issued to Uber drivers for illegal activity.

Some limo companies opposed to Uber have stated they will no longer send affiliate work to operations that work with the TNC. Others believe Uber offers a lower level of service than traditional limo companies, and that the ethical concerns are nothing new to capitalist business.

Darland doesn’t like Uber any more than the next operator, but believes the technology is here to stay and there is room for Uber and limousine companies. “Ethical violations are a part of life,” he says. “Most of the products we enjoy have some areas of questionable practice during production. But comparing Uber to limo work devalues what we do. Uber can’t do road shows, they can’t do high-end events, and manage group business travel like we do. They’re going to eat into business regardless, so why not make it back on the other end?”

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