NOV. LCT: What operators can learn about building a steady client base from a leading fleet vehicle seller.
David Klein is the founder and President of Dav-El Livery. Klein started Dav-El Livery in New York City in 1971. From his beginning as a chauffeur, Klein has built the company into a network consisting of more than a hundred affiliate and associate member companies across the United States.
Linked by a computerized reservation system, Dav-El affiliates and associates represent one of the most sophisticated limousine networks in the country. While visiting the Los Angeles recently, David Klein discussed the limousine business with Limousine & Chauffeur.
Limousine & Chauffeur: How old is your company now?
Klein: Sixteen years.
Limousine & Chauffeur: So your perspective goes back a long way...
Klein: You bet it does. Back to the days of no stretches. When we put our first stretches on the road, I bought two ’69 Lehmann-Petersons. That was in ’71 so they were two years old. They were gorgeous but they broke down all the time.
Then we got Carlos Allen to build our stretches. I didn’t know that they were being built in Mexico. I bought them through a dealer in Dallas. His name was Roger Harris.
Then we discovered that Carlos was building them and so we bought four cars from him. That was the beginning of stretches in New York. Nobody had stretches except a couple of old black Lehmann-Petersons. There were no new stretches because there was nobody building them.
Limousine & Chauffeur: Did Moloney Coachbuilders have a stretch limousine on the market at that point?
Klein: Yes they did, but I liked the glitz that Carlos added to his cars - the woodwork and such. He was willing to build custom cars and Moloney was never willing to do that He would never customize a car for me the way I wanted it.
I said to Carlos...”Carlos, we have to do this to a car...” And he would do it. I’ll never forget - the arguments over the moon roof. I said, “I’ve got to have a moon roof in this car.” Of course in those days, it was a sunroof. He said, “It’s going to leak and you’ll have problems,” but he did it. Moloney would never do things like that for me. He would never customize a car.
Then, in 1976, Carlos got aggravated with me. He didn’t want to customize them the way I wanted him to because it caused him a lot of problems. I was so furious that I flew on a little plane from Laredo, TX to Dallas and connected into a flight right up to Armbruster in Ft. Smith. They’d just started building stretches. Tom Earnhart had just returned to the family business.
Tom was willing to listen while his father, Mill Earnhart, didn’t want to hear about stretch limousines and such flashy stuff Tom got excited and got right into it. Armbruster built their first car for me in ’77 and I’ve stayed with them through till right now. I still buy a lot of product from Armbruster.
They’re willing to listen. They’ll customize the car. They’ve worked with me when I’ve had trouble getting enough lines of credit to pay for the cars when they were ready. They were terrific and were really patient until I got my leasing companies in order. Sometimes you have problems with that kind of stuff and Armbruster’s been a terrific company to work with.
Limousine & Chauffeur: Your cars don’t look like Armbrusters...
Klein: I don’t buy stretches from Armbruster. I buy corporate limousines and sedans from Armbruster at this point. My stretches are coming from Executive at this point.
And now my stretches are also coming from Dillinger/Gaines. I have to go to Dillinger/Gaines. They offer me too much. Like the new service facility they’re putting up. It will be open 24 hours in Manhattan. Who else is going to offer me that? If I’ve got a car that breaks down at 11 pm, then they’re open.
I like my cars to be pretty much the same. I don’t want a whole lot of different coachbuilders in there, but Executive makes a beautiful car.
The problem with Executive is that he doesn’t offer the leasing that Gaines does. And Gaines will offer you the whole package with the insurance and such. It’s a great deal, especially with insurance being such a problem today.
Limousine & Chauffeur: What would be your sense of change in the industry in the recent past?
Klein: In the ’80s, I think we saw an enormous number of chauffeurs and independent people coming from other industries opening up their own limousine companies. Small operations are being backed by their customers or their uncles or whatever. It’s a very easy industry to enter, and there have been too many people who have done it. The industry is flooded with coachbuilders and limo companies.
Limousine & Chauffeur: You started noticing this five or six years ago?
Klein: Tremendously. It began five or six years ago and the number of companies has kept increasing. Now you’re starting to see it level off. A lot of these people went broke. A lot of people went into this business thinking it was an easy business to make money in.
Limousine & Chauffeur: Can you charge enough to cover your costs in such a crowded market?
Klein: I believe that $50 an hour is a very fair price for a stretch limo with a chauffeur when we’re going out and spending $35,000-$50,000 to buy a car. A lawyer charges you $150 an hour and all he’s got is an education. He’s not giving you a car.
A chauffeur has a right to a decent salary. The cost of maintaining these cars is high and $50 an hour isn’t a lot for what we provide. And yet you get all these little guys who open up these companies and charge $32 or $35 an hour. It kills the industry. And these are the guys who go broke.
Limousine & Chauffeur: When you said there are too many coachbuilders... Do you mean that there are too many small coachbuilders, or too many new coachbuilders, or just too many overall?
Klein: There are too many coachbuilders building cars on spec. There’s only one way for a coach builder to survive in the business and that’s to only build cars when they have orders for them. Don’t flood the market. If the market’s flooded, it will only hurt them.
So there could be 800 coachbuilders as long as they’re building for 800 orders. But if they keep going on like this and building on spec, it’s going to hurt them and, ultimately, hurt the operators. If the coachbuilders overbuild, these cars sit around waiting for somebody to buy them at a cheap price. The guy who buys them at a cheap price will probably rent them out at cheap rates. This is not a cheap industry. It’s a luxury industry, and everything shouldn’t be based on price. It should be based on quality of service.
I’ve had a lot of little companies call me up and say, “Buy me out, David. We’re going broke.” There are all kinds of reasons that these companies are going broke... like insurance problems and higher costs, and more competition. In spite of all of these things, though, our business has never been better. My business is just phenomenal here in Beverly Hills, and in Washington and New York. It’s the biggest year I’ve ever had.
Limousine & Chauffeur: Not to the point of adding cars though...?
Klein: I’ve added cars. Tremendously. We’ve expanded our fleet in L.A. and in New York by about twenty percent.
Limousine & Chauffeur: Why is business so good for you?
Klein: I think it’s because the level of service we’re providing is what the limousine customer wants. We’re providing a quality service, we have a quality image, and we’re charging a fair price.
Limousine & Chauffeur: You’re like a brand name among limousine services aren’t you? Dav-El is known to provide a recognized quality of service.
Klein: Yes, we have credibility. People know that a Dav-El limousine will be there on time and that the service will be excellent. We shave personalized service even though we’re a big company. We don’t use an answering service and there’s someone there to answer the phone for them even if it’s 2 o’clock in the morning.
Limousine & Chauffeur: Are you using more sedans?
Klein: Our sedan business is growing by leaps and bounds.
Limousine & Chauffeur: Is that a big part of your growth this year?
Klein: The biggest. More and more people will hire a chauffeur-driven sedan anywhere in the country when they’re going to and from the airport. I can account for a lot of the growth in the sedan business with the fact that airports have forced the rent-a-car companies off the airport property.
Busy executives who have the money don’t want to spend their time going to the Hertz counter...waiting...and taking a bus off the property so they can get a car. It’s easier for them to take a sedan with a chauffeur to their hotel. Then they can rent a car the next day. They don’t need it that night anyhow. The cost of renting a car per day is almost the cost of taking a limo from the airport - and what a convenience! So that’s one cause of the tremendous growth of airport business everywhere.
Limousine & Chauffeur: Are you still focusing on major cities in developing the Dav-El network?
Klein: I don’t think there is great potential for Dav-El in the outback at this point. We are basically looking to expand in major cities. We will probably be opening a new outlet in a major city by the time this is in print.
Dav-El has a management consulting firm on retainer that helps us improve our management skills and our ability to manage a growing company. It’s run as a business. It’s not run as David Klein’s candy store. It’s a real company, with real business, and it will go on and on and on. I hope to eventually be able to go public with jt. It will take a little time, but we’re heading to that point.
Limousine & Chauffeur: What’s happening with the franchise program?
Klein: Well, the franchise program has been very successful in New York and we have a lot of very happy men who are making a lot of money.
Limousine & Chauffeur: Are some of them coming from Fugazy?
Klein: No. They’re not of our quality. We are getting men from Carey though. We’ve had a few Carey franchise men come to Dav-El because they get a better deal. Our rates are higher. If a man owns a franchise and he’s working for Dav-El with a stretch, for example, he’s getting $50 from Dav-El whereas he’s getting $38 an hour from Carey.
Limousine & Chauffeur: What’s the structure of your program?
Klein: The structure of our program, basically, is that a guy comes in and makes a down payment of anywhere from $10,000 to $20,000 per car. For a sedan or a limo, at this point, he has to put down $10,000. For a stretch, he has to put down $20,000. The total cost is $85,000, $95,000, or $115,000 respectively.
Limousine & Chauffeur: That’s sedan, formal, and “stretch,” respectively?
Klein: Yes. The stretch is $115,000. So he puts down $20,000 and we finance the other $95,000 for him. We carry the paper for him. He never has to pay more than that $20,000 down. The rest comes out of the revenue that he earns every month.
We get thirty-five percent of the ride…he gets sixty-five percent of the ride. For the balance of it, he has to lease the car, pay for the insurance, and pay for gas and driving expenses. The program is working out beautifully.
It would only work in major cities because you have to have enough business to guarantee the man some business. You have to have confidence that the guy’s going to get that business. Now in Washington, D.C., we’re offering franchises for less money.
After a few legal arrangements are made, we’ll also offer franchises in L.A. They won’t be as expensive in L.A. as they are in New York. New York has the most business. It’s open all night long. The chauffeur can work whenever he wants. L.A. has a lot of business, but it’s not anywhere near the business, per-vehicle, as in New York We want the franchisee to make money, and we want Dav-El to make money. We call it a “win-win” situation.
I should’ve franchised a long time ago. My customers are extremely happy because the service level has improved. The guys take better care of their cars. They’re on time. Once Dav-El got to be 50-60 cars, it got difficult to control the quality of service. With a hundred cars, you just can’t do it. If you stay small you can do it.
Limousine & Chauffeur: Why don’t we look at your Washington, D.C. franchise as an example.
Klein: We just started one there. Washington, D.C. is a very small limousine market it’s highly overrated. Too many people went into the business in Washington. The competition is horrendous. We have one office on Capitol Hill and it has twelve cars.
Limousine & Chauffeur: Do you call this operator a “lessee?”
Klein: Yes, we call him a lessee. We have one lessee and the rest are all house drivers who work for the company. We hope that a few more people will decide that this is the way to go and take on their own businesses. I think they will because the one lessee is doing so well.
Limousine & Chauffeur: Is that a model for the way it will work in other cities, where there would be one office and one place where the cars are located?
Klein: Dav-El always operates with an office and a garage. In Dav-El Washington, or Chicago, or Philadelphia, or New York, or Los Angeles...We always have a garage with telephones and people to answer those calls.
Limousine & Chauffeur: What are the different ways that your company works in other cities - like in a smaller city. Would it be a privately- owned company that carries your name?
Klein: At this point, nobody’s allowed to carry my name unless it is the Dav-El Company. The others are privately owned companies that carry their own name – like Limousines, Inc., of Dallas, TX, a Dav-El Affiliate. Sunbelt Limousine of Atlanta, a Dav-El Affiliate. Fifth Avenue Limousine of Boston, a Dav-El Affilate.
Carey refers to their companies as “Carey of Boston” and so forth. We don’t say “Dav-El of Boston.” Scott Solombrino owns the Dav-El affiliate in Boston and it is called Fifth Avenue Limousine Service. They can list themselves in the phone book as a Dav-El affiliate, but their company is not called Dav-El. Only in New York, L.A. Chicago, Washington, and Philadelphia.
L.A. is a difficult market to work in because most of your best chauffeurs are not in it for a career. Each market is different. In L.A., your best chauffeurs are actors. They don’t plan to be in this the rest of their lives. They’re not career men like they are in New York. So it’s going to be very hard to convince an actor that he should buy a business.
The biggest operators in New York are all franchised. Dav-El, Carey, Manhattan, Fugazy, Airbrook, all the big, big guys are franchised.
Limousine & Chauffeur: So ’86 has been a good year for you?
Klein: My L.A. business has grown about thirty percent. It has grown about twenty-five percent in New York, and about twenty percent in Washington. Chicago is way, way up-I don’t exactly how high. Dav-El’s business is growing in every market.
The two and three car operators are fading by the wayside, though. The business is not what they thought it was. They’re not able to make their payments and they’re not able to make a living. Do you know who I get most often wanting to buy a franchise in New York? Small operators who are not making a living.
They want to get rid of their cars, and their aggravations, by joining Dav-El.
The industry has become too much of a business. People want to rely on a big company and they want to know that the cars are going to be there. Not everybody’s a businessman, and not everybody should own a company.
We used to have hundreds of little rent-a-car companies and now we have National, Hertz, Avis, and Budget In the future you’re not going to have so many limousine companies either. You’re going to have a few major limo companies in every city.
People expect full service from a limousine service, and a small guy can’t provide this as well as a big guy. I think the slowdown is really hurting the little guy, not the big guy. I know my big competitors in New York are not hurting. They’re doing very, very well.
Limousine & Chauffeur: Are any improvements being made in regulations for airport access?
Klein: No. I don’t see any improvement and I think it’s getting more and more difficult for us to operate.
They come up with new laws every minute. They’ve got a new one at LaGuardia Airport that’s the most insane thing I’ve ever heard of in my life. Chauffeurs can no longer wait at the security gate. You can’t even do your job right.
Limousine & Chauffeur: From your point of view, is the T&LC working in New York City?
Klein: Right now it’s worthless, but the new commissioner came and spoke to the Association of Private Limousine Owners in New York recently and I had the feeling he will listen. I think Steve Spencer of London Town Cars, who’s the president of the association, has worked very hard to try to make it an effective thing for us. And I think he’ll be successful.
Limousine & Chauffeur: Are you a member of the Association?
Limousine & Chauffeur: That’s just a handful of the bigger companies isn’t it?
Klein: Yes, that’s exactly what it is. It’s all the big people. It’s twelve or fifteen companies like London Town Cars, Carey, Dav-El, Herzog, and Bermuda. It probably represents over a thousand cars.
Limousine & Chauffeur: How do you feel about the National Limousine Association?
Klein: I really don’t know. It’s getting to be a very large organization and there are a lot of members. This comes down to the same problem...that most of the operators in this business are so small that even a couple hundred dollars a year is more than these people can afford.
It costs me $500 a year to be a member of the New York Association of Private Limousine Owners. Now, do I want everyone in my company to join the NLA and each individual company to pay $200? If I have another twenty companies, am I going to spend $4,000 for each individual company to join? It’s a lot of money.
Limousine & Chauffeur: You seem to be painting a picture which offers a good opportunity for the businessman who knows what he’s doing, and who has the resources to maintain a high level of quality.
Klein: Absolutely. The industry has never been better. There’s more interest in limousines from people. To give you an example, over the last two weeks there has been a major article in the New York Times about limousines. You read about limousines everywhere. People are riding in limousines like crazy. There will be a piece this week on the CBS Evening News, about the booming limousine business. Business is booming and so I have nothing negative to say about the limousine industry. It’s growing. It’s growing for sure.
There are a million reasons that business is good. The convenience of cellular phones, the spread of tough drinking and driving laws, and many other factors have created this growth...And I don’t see it stopping.
Related Topics: anniversary: operator profiles, Armbruster/Stageway, Bill Fugazy, Carlos P. Allen, Dav El Chauffeured Transportation, David Klein, Dillinger/Gaines, Earnhart Coachworks, Lehmann-Peterson, Moloney Coachbuilders, operator profiles, Scott Solombrino, stretch limousine
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