Limousine & Chauffeur: We have five very experienced operators as panelists...Donald Ott is President of V.I.P. Limousine in Stamford, CT. Don has a background in many of the different areas of limousine operations including collections, management, and marketing. V.I P. Limousine has 80 vehicles.
Next is Richard Ramis who is a regular contributor to Limousine & Chauffeur magazine. He owns Illinois Limousine in Chicago.
Art Squires is the owner of Southwest Carriage Limousine in Houston. This year will be Art’s 10th year in the limousine business. In addition to his limousine service, he also operates a Ticketron outlet, an Avis franchise, and an advertising agency.
Janet Valentino is one of the founding partners in Ms. Limo in Cherry Hill, NJ. Janet is on the board of directors for the South Jersey limousine Association. Her service was featured in an article in the May/June issue of Limousine & Chauffeur.
Bob Verde has been in the limousine business for the past twenty years. Bob’s father started Bermuda Limousine in New York City 47 years ago. It is currently one of the oldest and largest livery services in New York. Bob is a member of the Association of Private Limousine Services in New York City.
I asked each of the people on the panel if they would simply start the discussion by saying something that they think is a concern in operating a successful limousine service.
Ott: Thank you. I don’t hear many people talk about profit. Anyone who is serious enough to have attended this convention should think about profit. I don’t know about the rest of you, but I hate working for nothing. I think one of the essential ingredients to making a profit, at least in our state, is knowing where we are at any given moment.
We produce monthly financial statements. We also have weekly stat sheets for driver payrolls which we use to measure our sales. If you give me approximately one hour, I can tell you whether we are making money or not. That’s very essential to our operation.
Ramis: People who aren’t successful in the limousine business like to blame it on the rates or the types of business of others. People who don’t make money in the limousine business probably wouldn’t make any money if they were running a hot dog stand or selling bicycles. If you know business, and you do it properly, you can make money selling or servicing anything.
Squires: I’d like to start by saying that the word I’m most concerned with is entrepreneurship. Unless we get the business...The coachbuilders ‘will not sell any coaches and no one else in the business will succeed either. Operators need to think about how to go out and really capture that business.
Valentino: Now after we get the business, how are we going to keep it? With a good quality chauffeur with the right personal qualities and proper training. That chauffeur will help you keep the business. You have to have a professional appearance...and good behavior is the most important factor. He will maintain clients without a hassle and I think he is the prime reason for the success and growth of a livery service.
Verde: I was walking around here for about two and a half hours this morning and, up until two minutes, ago, when this young lady spoke about chauffeurs, I didn’t hear anyone mention the prime thing that I think is important in a limousine service and that is...luxury service. This is a luxury business. Many companies that call themselves limousine services are really high-class taxi services. There is a big difference, and it starts with the quality of service given by a chauffeur.
Limousine & Chauffeur: Let me ask one question of the panel...Is there a logical way to set rates?
Ott: Our first consideration at V.I.P. is profit. When it comes to rates, if we need to raise the rates, the rates go up. On setting hourly mileage rates, we do look at our competitors. We review about a half dozen of the major competitors and try not to go too far over what they are doing.
Ramis: In any city you’re always going to have your high-priced companies and your price-cutters. We have always chosen to be just a little under the middle. The lower we go, the more business we get but the less money we make. It’s a question of quantity versus quality. You just have to pick a spot and hold with it.
Squires: We’ve always been high. We’ve set our rates high and we’ve set our customer clientele high. We’re going to stay high so that, when a person pays us, they can’t wait to send the check in because of the service we’ve delivered.
Verde: We merely project our expected costs for the following year, figure in our profit margin, and then set our rates accordingly. Our rates have always been pretty high.
Limousine & Chauffeur: Do you adjust your rates once a year on an average?
Verde: This year we did it twice. We raised our rates twice this year. We normally do it once.
Audience question: What percentage of the receivables from charge customers do you lose to bad debt?
Squires: One-tenth of one percent. That’s historical. We try to get rid of the bad customers. We don’t keep them around. If they do not pay their bills on time we get rid of them.
I have seen a company that is not here today, a New York company, that had an average of over 120 days on their receivables. You let them go over 90 days and you’re going to have a lot of bad debt.
Ramis: I’m not so lucky I don’t have exact percentages, but credit card back-up charge customers don’t mean anything. Credit card guarantees don’t mean anything anymore. Illinois Bell pays in 90 days and, if I don’t wait 90 days, another company’s going to take their business. I really don’t mind. It’s good money so I’ll wait.
Audience question: Do you encourage credit card customers?
Verde: To a degree we do. And I say to a degree because the credit card customer is very usable in slack periods to keep the wheels going. In heavy periods, like snowstorms, our people are instructed not to take any credit card calls. They may open our own charge account.
Squires: We take an awful lot of credit cards simply because of Ticketron. It’s a way of life down in our area.
Audience question: How do you handle chauffeur salaries and benefits?
Valentino: We have established an hourly rate for our drivers with hourly customers. Any flat rate job has a flat rate salary. If it’s Philadelphia airport, it’s a flat two hours. That’s what he gets paid for. If it takes him an hour and a half, he still gets paid for two hours. If a customer is charged for a delay, then he gets paid for it also.
Squires: We just changed our rate system after ten years. We’re on computer. We used to pay the guys $4.50, $5.50 and $6.00 an hour plus their 15 percent gratuity and last year we changed everything. Now everyone in our company gets $3.50 an hour, but the starting driver gets 10 percent guaranteed...the step up driver gets 15...and the last two steps...the guys that have been with us for at least six months, we’re paying them between 18 and 20 percent. We found that the tip incentive is better than the hourly incentive. Also you save a lot of money on your tax situation. So look into it depending on the state.
Audience question: How often do you pay your drivers?
Squires: We pay twice a month at a mandatory meeting where I’m there to hand the guy his check. He must be there to get his check and he must stay for the two-hour meeting about what’s going on in the world. So we see every driver in person twice a month.
Verde: I guess I’m the different one up here. Our men are on a 40 hour week with time-and-a-half for overtime. They get quarterly bonuses and yearly bonuses...plus, of course, the gratuities of the job. That means that, whether they’re driving or not driving, they’re being paid. It’s a forty hour week, time and a half after forty. We guarantee fifty hours and they must work fifty hours. We pay $4.50 an hour.
Audience question: How does Mr. Verde’s incentive program work?
Verde: As I mentioned a few minutes ago, the men get quarterly bonuses. The bonuses are worked in this manner: it is pro-rated on an hourly basis. In other words, a normal quarter would produce approximately 620 or 650 hours of work on a 50 hour week. For that, let’s just use the 50 hour week without any overtime because it is easier to explain. For that, a man will receive a $300 bonus for the quarter. That happens four times a year. This is for doing his job.
However, we do have penalties that can be incurred. To begin with, we ail have airport misses. That’s the prime example. If we determine upon investigation — and we call every customer we miss — if we determine that it’s the chauffeur’s fault and that he did something wrong, he will be penalized $25 against this bonus. If he makes a second mistake of any kind, whatever the situation may be, he’s penalized an additional $50. If he has a third “boo-boo,” as I call it, he gets no bonus at all and the odds are that he’s being fired. This is in a quarter.
There are some situations where he loses his bonus immediately like with any type of a front-end accident. Front-end for us is from the rear of the front door right around to the rear of the other front door. I really don’t care who’s fault it is because he’s supposed to be a professional driver. Another “boo-boo” is if I personally happen to see one of my drivers with a customer and he isn’t properly attired, including his hat. Then he will lose his entire bonus. At the end of the year we have a Christmas bonus based on the number of overtime hours that they have worked, and also on the profits before the end of the year. It may be anywhere from $.25 to $1 an hour depending on the year.
Audience question: How much time and effort goes into driver training?
Valentino: We have prepared a driver’s manual, and we do spend some time with the drivers going through that manual. Then we also have training in the vehicle. It involves spending quite a bit of time and money. We do that because, like I said before, we feel that the driver is very important to our business.
Audience question: How are chauffeurs trained at V.I.P. Limousine?
Ott: We spend a lot of money I mean a lot. I would guestimate that it is between four and five thousand dollars per chauffeur.
As soon as they come in, we put them out on the road with other drivers. They’re riding shotgun...actually picking up customers and learning first-hand what the job is about under actual conditions...not phony conditions. Then we have a program of road-testing where we put them through a test to determine their skills as a driver.
We put them through what we call “road familiarization tests.” That’s something we’ve only recently tried to effect. We take a couple of towns within our area — and there are 50 to 60 places that each person must go. They must report back and identify these places. This is to give us an idea of their map-reading ability and to familiarize them with some of our common pickups areas. We have weekly meetings and we have weekly evaluations of the trainees. If anyone is below acceptable standards, he must show some very quick improvement or his job is on the line.
Look at major corporations? What do they spend training their salespeople? I would imagine 50 times what any of us spend when you add up all the costs. It’s worth it. These are our salespeople. I never see a passenger. I don’t know how many of you do. I never see them. I have only met two or three of out customers out of seven or eight thousand. But the drivers know them all.
Audience question: How does Bermuda train its chauffeurs?
Verde: We have pretty much on-the-job training. A new man with us does not go out in rotation. We will pick the jobs for him. In effect, that is his on-the-job training. The best way to get around on-the-job training is to try and hire experienced men. And the best way to get experienced men is to pay more than the guy next door. This is what we aim to do.
Audience question: How do you feel about female chauffeurs?
Valentino: We do not have any female chauffeurs. I have to be honest. I did a lot of driving when I first started. I hired one female chauffeur but she did not last long. There are a few female chauffeurs in our area who seem to be doing a good job, but we just don’t have any.
Squires: We’ve had two female drivers and both of them were excellent. I lost them both to clients. We had a very good experience and we’re looking for two more female drivers.
Audience question: What kind of advertising works, and do you set a certain percentage of the budget for marketing?
Valentino: This is an in-depth question. I’d guess that your biggest expenditure is your yellow pages. I’ve been in the advertising business, and I believe in advertising...and I use a great deal of advertising in another business I’m involved in...But I have found that, in this business, you have to go out and sell your service.
I don’t get a big response from newspapers. We do a very select mall show in our area, but the majority of our business is obtained by actually going out and selling our service, and by referrals from our customers. If we do a good job, they refer other people to us.
Squires: I’d like to dwell on this point for a second because Houston, today, is in economic downstrides. We lost three banks on February 1, 1987. We really are having some tough times down in the Texas area. For that reason, about two years ago when things started turning sour, we switched our emphasis with the 12 cars we had from the stretch to the four-door sedan.
Then we went out to the airlines and eventually found out the real people you need to talk to. Finally we landed two airline contracts. Today we’re doing in excess of 300 transfers with the same 18 cars, plus the Budget franchise that I have. It’s a very, very good source of income. We’re hooked directly to the KLM terminal in Houston. We get about 30 orders each day...no phone calls. They own half of the terminal and I own half.
So there’s a lot of business out there that you have to go and get when the economics say you can’t wait for that $45 an hour guy. You have to go out and get the airport guy and, after you give him a good ride, he becomes a regular customer. We get 10 to 15 new customers every month from our airline service.
Verde: I disagree completely about the value of the yellow pages. I would think that yellow page advertising would be dependent on the area where you are operating. We’re based in Manhattan and, after a two year survey, we found that less than one percent of our new accounts came through the yellow pages.
We used to take a half-page or a third-page in the yellow pages. It was big dollars...But we have decreased it to a one and a half by one and a half ad. Now I may not be right...in which case I might be looking for a job next year. But we have no results at all with the yellow pages and we find that they are a complete waste of money in Manhattan. In the suburban areas, I think they may be a main source of advertising.
Squires: We quit the yellow pages entirely because, when someone goes to the yellow pages, they’re just picking a name or an ad or a number. They’re not picking a service. They just need a limousine. We quit it we didn’t lose job one, and we put all that money into sales calls. We came out way ahead.
Ott: We don’t do it either. In fact, it got rid of a lot of garbage calls once we stopped it. But there is a place where I notice that it did help someone. A person who broke away from our company started his own limousine company, and he said that it definitely got him a few trips here and there. It helped him survive initially.
After he’d been in business for a couple years, .and he kept very good records because he had a separate phone and it was a small company...he knew all the calls that were coming in. He did not have one single regular user out of any of his yellow page advertising.
Audience question: How do you handle farm-outs?
Ott: We have very few...one or two a month. We do our business with someone who’s been very reliable and fast.
Valentino: We do a lot of farm-outs and we have to rely on companies that have done an excellent job for us in the past.
Audience question: What’s your percentage of wedding business versus corporate business?
Verde: We do just about no weddings at all. No weddings and no funerals.
Valentino: I would have to say that it’s 50-50. We do a lot of weddings and we also do a lot of corporate things.
Squires: We’re about 98 percent corporate, 2 percent weddings, and no funerals at all.
Ramis: I’m about one-third corporate, one-third airport and one-third wedding, prom, and whatever.
Audience question: Have you heard of name infringement being a problem?
Squires: It all depends on the state. In Texas, you can’t copyright the English language. You really have to ask your attorney as to your own situation.
Audience question: When do you pay chauffeur gratuities on charge accounts?
Valentino: Our drivers get paid the 15 percent when they do the job.
Ott: As soon as their pay period comes. We don’t wait until it’s collected.
Squires: We found that in order to keep the driver with a weekly income, you’ve got to give him some survival money, even if it takes us 60 or 90 days to collect. We pay that chauffeur immediately because we want to keep him. And that’s your answer: Pay your man and you’ll keep him.
Verde: I agree. Money is how you keep drivers. We’re trying to bring our men up to being the best paid chauffeurs in New York City. I also I ask my men to go out and find qualified chauffeurs. For every qualified man they bring in who lasts for six months...they get a bonus of some $200 or $300 dollars.
Squires: We put ads in the newspaper that say: “Dress appropriately, and be here at 7:00 in the morning.” Our interviews last from 7:00 to 7:30am. We wash out fifty percent the minute they hit the door. If the other 50 percent are there on time, and dressed appropriately, they’re on the right track. Then the insurance company makes us do the next step which is to submit their name for insurance clearance. By then you’ve washed out a good percentage of applicants who are poor prospects.