There are many choices when it comes to joining a network. For instance, should an operator join an informal network such as Music Express or the prominent formal networks such as Carey or Dav El? Should an operator become a franchisee or a licensee? Should he stick to a well established network or consider joining a newer one such as BostonCoach’s recently established formal network, the “BostonCoach Connection?”
The purpose of any network is to be able to provide quality ground transportation and service to clients anywhere in the world.
“Our affiliates are hand-picked and thoroughly checked out,” says Harold Berkman, president of Music Express in Los Angeles and New York. “The purpose of our network is to accommodate our clientele out of Los Angeles and New York. We formed our network based on requests made by our customers. It was just an added dimension to our customer service.”
Manhattan International in New York, NY, also formed its network as an added service to existing clientele. “Our customers wanted the same quality ‘Manhattan service’ in other cities,” says Ed Martinez, vice president of Manhattan International. “They wanted centralized billing and the ability to make one call to get exemplary service anywhere they travelled. Since our only job is to please the customer, we set out to find first class limousine companies throughout the United States and abroad to represent us.”
WHAT ARE THE ADVANTAGES AND DISADVANTAGES?
“Operators are finding efficiencies with networks,” says Scott Solombrino, owner of Dav El. “Companies are starting to realize that it’s much more efficient for them to totally centralize their luxury ground transportation needs.”
Solombrino emphasizes that operators have an opportunity to grow with someone else’s marketing unit doing the work for them. “Operators are able to save a significant amount of money,” says Solombrino. “They do not have to spend nearly as much selling their business because they can depend on the network to do that for them. What they have to do is reinvest their money so they can keep their fleet and operations up to speed in order to maintain the levels of quality that are required to stay in the network.”
According to Mike Fogarty, director of planning for BostonCoach in Boston, MA, networks represent an opportunity for limousine companies to obtain incremental business in their service city.
“Participants in most limousine networks also have the opportunity to service their customers’ transportation needs in other cities,” says Fogarty. “Many customers like to make one phone call to re serve their limousine service on both ends of their journey. Participation in a network will allow limousine companies to capture this business.”
Because of the amount of members and the maximum age requirements of the vehicles, major networks such as Carey International and Dav El have been able to work out group buying plans that benefit their affiliates.
Carey and Dav El have both negotiated programs for fleet purchase, stretch manufacturer, and insurance which afford lower prices to affiliates. Additionally, the major networks have national and international sales forces to generate business for the affiliates. They also conduct national advertising campaigns and attend numerous trade shows and conventions.
“While some of these benefits are specific only to larger networks, they are also generic when considering what you should look at before joining a network,” says Don Dailey, president of Carey International.
According to Pat Pisano, director of sales and marketing for Capricorn Limousine Service in New York, NY, if conducted properly, a network is a win-win situation. “It is business handed over to you,” says Pisano. “Service and maintain it as you would your own, and it becomes ‘silver platter.’ Additionally, networks provide a greater range of national and overseas affiliated services.”
However, there is always risk when you place your customers with another limousine company. “If the reservation was made through your office, the service risk remains with you,” says Fogarty. “Customers will not remember that the transportation was provided by an affiliate. They will associate any service failure with you, not your affiliate.”
Berkman agrees. “Every now and then you are going to make a mistake in who you assign as an affiliate. Once that mistake is discovered, you do your best to change the situation as quickly as possible.”
Also, it is extremely important for a high level of trust to exist between a network and its affiliates. “There is the potential for unscrupulous operators to solicit your customers to book with them directly in the future,” says Fogarty. “This is an extremely shortsighted approach.”
Finally, it sometimes takes a while for some networks to pay their bills. It is often difficult for networks to reimburse quickly because of third-party collections. Operators must investigate payment terms thoroughly before getting involved in a network so they know what they are facing. Every major network has a specified reimbursement period for its affiliates.
DO YOUR RESEARCH BEFORE GETTING INVOLVED
There are a handful of networks in the limousine industry. These networks have different goals and objectives. As a result, requirements for participation vary with each network.
According to Dailey, if an operator has an interest in a network, he should learn more on how a network operates and should contact everyone with network opportunities.
“The operator should thoroughly research each of the networks to see which best fits his goals and aspirations,” says Dailey. “That research should include talking to current members of the network, visiting the corporate office, and meeting with each department that will be offering services Such as reservations, operations, sales and marketing, computer systems, and accounting. There is no substitute for direct contact with the network you’re thinking about joining. All references should be checked out, including if they are in compliance with the Federal Trade Commission (FTC). The agreement which the operators are asked to sign and operate under should be thoroughly reviewed by their own legal counsel.”
Once an operator expresses an interest to join the Music Express network, representatives from Music Express will visit that operator. “We choose our affiliates by going on-site to their facility,” says Berkman. “We thoroughly check every vehicle and closely scrutinize how business is conducted. We will also place reservations with these companies and go undercover as customers so we can observe how business is conducted in a normal setting.”
According to Fogarty, most networks have established operating requirements, which may include:
- Minimum levels of insurance coverage.
- Capacity to service transportation requests from network members.
- Ability to meet vehicle and driver quality standards.
“I would recommend that companies interested in participating in a limousine network read industry publications, attend industry trade shows, and gather as much information on the network as possible,” says Fogarty. “Utilize this information to determine which network offers the best opportunity for your individual company. Understanding your goals will make this easier.”
Fogarty believes operators should complete the following action items before deciding which network to join:
- Understand the results you would like to achieve through network participation.
- Check the references of the network through the National Limousine Association and local associations.
- Select a network which has a business model similar to your own operation. If you operate mostly executive sedans for corporate clients, select a network with a similar profile.
- Be sure that the network is financially stable and is able to pay its bills in a timely manner.
- Review the sales and marketing plan of the network. Be sure that the network is capable of producing a volume which will meet your expectations.
WHAT KIND OF REVENUES CAN AN OPERATOR EXPECT?
According to Berkman, revenues vary from city to city. “Miami, Chicago, San Francisco, and Atlanta simply have more business as do our Los Angeles and New York offices,” says Berkman.
Pisano agrees. “Revenues brought in through network affiliations depend on actual business realized from affiliates. During Capricorn’s first year of networking we received reciprocal business from four out of 14 affiliates we established throughout the year, with revenues close to $20,000.”
Ramon White, general manager of Carey Limousine in San Diego, CA, also says revenues fluctuate. “Our revenues tend to fluctuate from year to year,” says White. “But, generally speaking, we can attribute 30 percent to 40 percent of our revenues through network affiliations.”
Jody Cowen, president of Carey Denver in Denver, CO, strongly sells network benefits to her customers. “We can attribute 28 percent to 33 percent of our business directly to the network,” says Cowen. “However, over 80 percent of our business is related to our network involvement in some way, shape, or form.”
According to Solombrino, after an operator’s first year in the Dav El network, the network contributes between 30 percent and 70 percent to the business’ total revenue. “It depends on the market,” says Solombrino. “Certainly in the smaller markets the percentage is smaller. But in the bigger cities we contribute up to 70 percent to the operator’s total volume.”
Carey of Chicago has been affiliated with the Carey International network for over 25 years. “Since we purchased the franchise in 1979, our experience has been that at least 55 percent to 65 percent of our revenue is generated because of our affiliation with the Carey system says Linda Braasch of Carey Limousine in Chicago, IL, “In the pastry years, our revenues have grown in times. Much of our success is due to the benefits the Carey system of offers.”
According to Fogarty revenues vary by service cities. “In a larger market operators can expect to receive $25,000 or more a month from network affiliations,” says Fogarty.
“The smaller the markets, the smaller the revenues. We are new to the network business. I’ve just seen tremendous growth in the markets we service. In each city it continues to grow. Even through the summer months, which are typically slow, we are still seeing growth. I hate to put limits on what an operator can make because I see our figures going up.”
DOES AN OPERATOR NEED TO INVEST MONEY?
Berkman’s Music Express affiliate network charges no initial fees and only a 10 percent commission fee. He has successfully set up an informal network that not only meets the needs of his clientele, but the needs of his affiliates as well.
The Music Express network has avoided cash flow problems that can plague a network. By only charging a 10 percent commission fee, relationships have proven profitable for all.
“No investment is required in the Music Express network,” says Berkman. “There never has been an initial investment and there never will be. We run a low-key network to benefit all of our clients. We do not take commission from affiliates unless they specifically do work for us. For example, if Seattle calls Miami, we get nothing.”
Dav El also does not charge any up-front fees. “What’s most important to us is that we have the best operators in every market,” says Solombrino. “All of our agreements are for one year. This means that if an operator has had three incidents of a major nature in a year, we might not renew the deal. We don’t make a lot of changes. The people who are with us have very high standards.”
For Carey, a franchise investment is based on the size of the city. “Franchise run anywhere from $15,000 to $100,000,” says Dailey. “The only up-front investment would be a 25 percent down payment.”
Manhattan International does not charge a fee or dues to be a part of its network. “We take a commission from the work we give to the affiliate and pay a commission for work they put into the network,” says Martines. “In the beginning Manhattan pumped most of the work, through the network. However, we have seen an increase of work from our affiliates over the past two years.”
BostonCoach also does not require any up-front money to join its network. “We are just looking for people who provide high quality service and people who are able to service the work we want to provide to our customers,” says Fogarty.
NETWORK OPPORTUNITIES ALWAYS EXIST
Operators interested in becoming part of a network should not feel discouraged by limited opportunities. “Nothing is written in stone as far as who is the affiliate in a particular market,” says Berkman. “Relationships and affiliations are always subject to change. You just need to be patient and wait for the right opportunity.”
According to Pisano, network opportunities do exist and no city is “locked up” for a service-oriented, dependable limousine company. “There is definite market share for the company that goes the extra mile to ensure comparable service – the kind of service the customer has come to expect from his own hand-picked limousine company,” says Pisano.
Dailey says there are still significant cities that are not locked out of network opportunities. “There are no opportunities available in the larger cities,” says Dailey. “However, if anyone is interested in a large city, they should let the network know they are interested. There is always turnover. People retire, sell their license, have illnesses in their families etc. If anyone expresses an interest in a major market, we keep their name on file. If there is a situation where a change is a possibility, we will go back to these people and see if they still have an interest.”
According to Solombrino, excellent network opportunities exist in smaller markets because these market were not significant five year ago. They are starting to mature and develop and people are now travelling to these cities. There is now a need to have solid operators in these areas.
“We get material constantly from operators all over the world,” says Solombrino. “We have files for every city in the U.S. that are filled with people who want to become affiliated with Dav El. The reason for that is because we have produced literally hundreds of millions of dollars for our affiliates. Our consistency is why we generate so much interest.”
For Boston Coach, network opportunities also exist. “As volume grows, if your affiliate is not able to grow to service that volume or they are not providing the service to meet your customers needs, then we are going to have to explore other options,” says Fogarty. “Opportunities exist for operators who are capable of servicing the demand and providing the level of service the customer expects.”
According to Berkman, operators can approach his network and inquire about opportunities. “If we are approached and we need an affiliate in that area, we will go and check them out,” says Berkman. “If we already have an affiliate in that area we go and check them out and if they meet our standards and qualifications, we’ll make them our number two affiliate in that market. Generally speaking, we always have two affiliates in any market so we have a backup.”
Additionally, network opportunities are not just limited to the larger operators. “I believe a limousine network can be beneficial to operators of all sizes,” says Pisano. “The larger operator has the capability, with more personnel and greater technology, to control and maintain quality service which is vital to success. However, the smaller the operator the better chance for quality control which is enhanced by the personal touch.”
According to Solombrino, a small operator can definitely be involved in a network in smaller markets.
“However, when it comes to big cities, the volume dictates that you have to have a certain number of vehicles in your fleet,” says Solombrino. “We now require that operators in larger markets have at least 25 to 30 vehicles before we consider bringing them into the network. Small operators have a much more difficult time because they can’t add and delete vehicles to their fleets fast enough. It’s impossible for them to keep pace with what’s required when business is brisk.”
“Networks vary from informal relationships to a franchise relationship, and there are many variations in between,” says Fogarty. “One consistency between all networks is the establishment of quality standards. Operators must remember that participation in a network will require them to provide service at or above these established quality standards.
“Keeping this in mind, operators of all sizes stand to gain the following from participating in a network: a new source of business; the ability to service their clients in other cities; and the opportunity to learn from interacting with other operators.”
Dailey emphasizes that once you are a member of a network you no longer have to depend solely on business from your local area. “This is especially important when economies are dependent upon industries which may experience a down-turn from external influences,” says Dailey. “As a network member you will continue to receive business from all the cities that are covered by the network. This point was strongly brought out through the Iraq crisis and the recession that followed where it was evident that members of networks fared far better than individual companies.”