Traditional Car Service vs. TNC

city-girl-on-phone-taxi-app-250x166There has been much talk, debate, and back and forth recently about traditional car/limo service versus the new style ride sharing model, commonly referred to as Transportation Network Companies (TNCs).  While some localizations have welcomed them with open arms, other have created ordinances and rules to regulate these companies, while other places have outright ruled them illegal.  Whatever your stance on this issue may be, there are many things that a potential TNC customer should know before hiring them for your transportation needs.

As an owner of a limousine company, it is my job to give my clients the best service and experience as possible.  This means having pristine vehicles, well trained chauffeurs, all of the amenities that my customers would expect, as well as staying abreast of trends in service and technology.  From the early days of making a reservation by telephone, and signing a voucher or charge ticket in the car, we have certainly come a long way.  Chauffeurs are now getting their ride information electronically via a plethora of apps for phones and tablets, customers are getting their receipts electronically via e-mail and updates via text, and now customers are able to track their chauffeur on their smartphone via an app.  It seems that the chauffeured services were providing everything that a customer could want, and then came the TNC companies.  With their massive fundraising capabilities, and investors from Google, Goldman Sachs, Amazon, and many hedge funds that I can’t name, they have raised million upon millions of dollars to take technology to the next level.    I must say, as a business owner, the technology is simply brilliant.  You cannot dispute the ideas and innovations that these companies have brought to the table.  They have taken an industry that has operated similarly for many years, and turned it completely upside down.

I’ve had many customers, clients, partners, and associates ask me, “Jason, what do you think about these new TNC companies?”  My answer has and still remains the same, the IDEA is brilliant.  However, the way these companies are doing business is nothing short of a failure.  In my humble opinion, they have taken a great idea, a great concept, brilliant technology, and run it straight into the ground.  Something that could have the potential to take the chauffeured industry by storm, will most definitely fade as quick as a Texas afternoon rain shower.  You may say, this guy is just a limo company owner who is set in his ways, who is against a free market competition, and is scared that he may lose his business.  I say to you, I am one of the youngest owner/operator’s in my industry, I come from a background that had nothing to do with the transportation industry, my college degree is in a field completely away from transportation, and I am one of the most ardent supporters of the free market that you can find.  I, without fail, support innovations, changes, competition, and I believe 100% that if I don’t take care of my customers, someone else out there most definitely will, and they should!

To answer the question of why I think TNC companies are doing it all wrong, it boils down to one thing, SAFETY.  I spent my entire working life before starting my own business in the criminal justice field.  I started in corrections with the Texas Department of Criminal Justice, I moved to corrections in the county jail system, and finally graduated from the police academy and started to work as a police officer.  Somewhere in there, I finished my degree in Criminal Justice as well.  Safety has been a part of my life since the ripe old age of 18.  We have laws that protect us as consumers, citizens, and humans.  From requiring that we wear our seat belt, to not driving our cars over a certain limit, to having a designated driver after a night out on the town, these laws are put in place that we may be held accountable for our actions and prevent harm to ourselves or others.

One law that is very near and dear to my heart is the law requiring every motorist on the roadway to have liability insurance.  This minimum requirement is not to protect the person who purchases the policy, but is to protect me and you against financial loss if this person does something that may harm us or our property.  I myself, as well as many people out there, have been a victim of an accident that ended up costing us money because someone else was careless, disobeying the law or some other reason.  This can not only cause financial hardships on you, it can cause your own insurance rates to skyrocket because you now have to pay for another persons mistake.  As a business owner, I not only have to carry liability coverage for my vehicles, but I have to carry for-hire commercial passenger insurance (minimum of $600,000 single limit coverage per the City of Houston ordinances) to protect my most valuable asset, my customers.  If you are a passenger in my vehicles, and an unfortunate accident may occur, you can rest assured that as a bonafide limousine company, we have your back.  All of my vehicles are safety inspected by the City of Houston yearly per ordinance, we maintain proper commercial insurance that covers our vehicles, drivers, and passengers; and my chauffeurs are properly trained and randomly checked for the presence of illegal drugs and alcohol.   This is where we differ from a TNC company.

TNC companies use “independent contractors” who own their own vehicle, provide their own insurance policy, and receive payment from the TNC for doing your ride (typically the independent contractor receives 80% of the total fare while the TNC keeps 20% as their fee).  TNC companies own no vehicles, are typically not permitted or inspected by their localities, and run on personal automobile insurance that me and you would use for our everyday ride to work vehicles.  This is where a customer ought to do some serious thinking.  A personal automobile policy is that, a policy that covers your personal vehicle should you be in an accident.  It has no provisions to cover your vehicle and your paying customers should you be involved in an accident, and furthermore, every singly personal auto policy out there has a disclaimer that if your vehicle is being used for commercial work (i.e. picking up a paying passenger), that the policy is null and void and therefore, does not exist.  What this means is, if you are in a TNC vehicle and are involved in an accident and require medical treatment, you better hope that you medical insurance is up to par or you can expect the medical bills to start piling up.  Because these companies do not require their drivers to have a valid commercial for-hire insurance policy, it pays zero, nodda, zilch, nothing!!  That means not only are you left in the dust, so is that driver who was taking you for a ride.  Their policy won’t even cover the damage to their own car, much less another motorist or you, the paying passenger who made their policy null and void in the first place.  Most of these companies tout that they are covered by a $1.0M general liability policy that is a secondary policy to their contractors personal auto policy.  Whatever the driver’s policy does not pay, they have a secondary policy to back them up.  Unfortunately, in the insurance business, we know this to be a fallacy.  A secondary policy is only good if you have an original policy.  Remember I said that these personal auto policies are null and void should they be used for a commercial business?  That means no original policy, no secondary policy to back it up.  To compound this, when signing up with a TNC company, part of their disclaimers that you MUST agree to are that you will not sue them if something happens.  Waiving your right to legal recourse is a requirement to do business with them.  Tell me this, would you hire an electrician or plumber to work on your house if you were made to sign a waiver saying that if he damages your property that you won’t sue him?  The only logical answer is you would find a different contractor.  This should be true with the current business models of the TNC networks as well.

In business, profit margins command how a business is run.  If a business can cut a corner to slash their costs and improve their profit margins, you can bet that they will do it if they have the ability.  That is just the way the world works.  How many of you have driven clear across town to go to a gas station because their fuel is $0.02 cheaper than the one closest to your house?  Saving money is in our blood, it’s what we are taught to do.  We don’t always think about the fact that driving across town is going to cost us way more in fuel than the $1.00 we are going to save by going to the cheaper station, we just see a lower price and we go with it.  However, when it comes to our own safety, we must be more vigilant.  I, as well as 90% of the population out there, can’t afford to have a car wreck, go to a hospital for treatment, and simply give them my debit card to charge the amount that is due.  I have never thought, “maybe I should pack away $100k just in case I have a medical emergency.”  No, just like you, I pay my insurance premiums every month, and stash away a little bit to cover those pesky co-pays and deductibles, and the rest I use to pay my car loan, electricity, water and gas bills, and hopefully have a little bit left over to take my wife on a nice dinner somewhere that we don’t always get to go.  That being said, would you rather pay a little more money for a taxi cab or professional limo service and have the comfort of knowing should an unfortunate event take place, that you won’t have to worry about coming up with thousands of dollars in the spur of a moment, or would you rather cut corners and jeopardize your own financial safety and security.  To prove how free-market that I am, I will end with these words, THE CHOICE IS ALWAYS YOURS!

Thank you again to all my past, current, and future customers for your support.  Without each and every one of you, I would have no business to operate, you guys/gals are the heart and soul of my business.  Because of you, I am able to live the American dream of owning my own business, and most important, providing for my wife, my son, and my child who we will meet in April, 2015.  I look forward to many more years of your patronage and working together to meet our respective goals, and helping each other to succeed and improve ourselves, our lives, and the lives of those around us.  May God bless each and every one of you!


Below is a link to an article written by the National Limousine Association and their position on the emergence of the Transportation Network Companies.  It is a very informative piece that I hope will give you, my current and future customers, a little insight on how these companies operate.

NLA TNC Position Paper

About the Author

Management and oversight of growing a luxury, and corporate, transportation company.