The two types of affiliates within the transportation industry operating as an Operator affiliate (OA), and a transportation broker affiliate (TBA). Both types of affiliates offer pros and cons to industry. First I would like to start by discussing (OA) operator affiliate.
An operator affiliate is an existing limousine company with equipment, employees that operates in an area.. Operator affiliates have actual driving experiences, service experiences. In addition, they also have an expense experience with fleet management and related overhead costs such insurances, workers compensation insurances, driver drug testing-screening-background checks,licensing and other misc. expenses. Are operator affiliates beneficial for us? Yes, they can be and can also be useless for us.
Some local operator affiliates can be very helpful whereas some can be useless and inconsiderate in working together in reciprocating business.
Examples of useless affiliates are NOT helping one another on jobs in time of critical need, inconsiderate in offering an affiliate discount, or just unwilling on sharing useful trade information and strategies for collective success. And of course, good useful affiliates are the opposite of useless OAS.
For example, our local affiliate London Town Cars is a very useful and extremely considerate affiliate which works which works with us trip management, offers us and any other affiliate a generous affiliate discount. In addition, they go above and beyond for servicing our clients. And for all of this, we reciprocate the same for this affiliate or any other affiliate of same attitude.
A good example of an unhelpful affiliates is pretty much all the opposite of a good affiliate. No point in elaborating it.
Operator affiliates can also be potential competitors and can also hinder new entrants in given market.s operator affiliates can create price wars in a given market,
However since price wars cannot go on forever, Sensible operators begin to work as an industry collectively for mutual interests.
Operator affiliates are involved and are active in regulatory issues regarding their industry. Operator affiliates understand some of the complex challenges in a given market. By developing good
working relationship with every affiliate in our market, we can minimize price wars and maintain a stable market for all.
Out-of-state affiliates and global affiliates (OAs) can be also useful for an operator because it allows operator to earn additional stream of revenue opportunity while building up a national affiliate network. An operator can offer their clients one stop shop, arrange transportation within the network and earn a markup on jobs.
Out of state/country OA affiliates are not competing within our local market, except they are interested in some discount in order to earn a commission. That is pretty much the same case for a local affiliate and a broker affiliate. It makes sense to offer them some discount because they have to make money.
After discussing operator affiliates, Let us shift discussion over to transportation broker affiliates (TBAs).
Transportation broker affiliates do not own and operate any vehicles. Transportation broker affiliate are call centers that book jobs and distribute them to actual operators. Examples of TBAs are Limo Link, Savoya, Ground Clinks, and many others.
Transportation broker affiliates do not have the actual fleet management experiences, or in depth experience since they do not have much overhead with drivers, insurances, licensing, and garaging. TBAs do not have any much interest in regulation, policies of taxi and limousine commissions except that they have access to vehicle and cover their job with an incentive.
Transportation broker affiliates ultimate goals are to make commissions. TBA 's act as your commissioned based sales team, which works great for operator since it minimizes fixed overhead costs. However transportation broker affiliates can also become potential competitors of the actual operator and as well as potentially damage their market. For this reason I will label transportation brokers as in a category of good and bad TBAs.
Good TBAs -Transportation broker Affiliates are not price pressuring operators and or imposing their own market rates and expecting affiliates to accept them. Good transportation brokers have the ability to find new clients and sell services without pressuring operators about prices.
Good TBAs transportation affiliate brokers honor operators policies and payment terms. Good TBAs transportation broker affiliates will provide the operator with a credit card for billing. While Good TBAs-Transportation broker affiliates can present revenue opportunities, But bad ones can damage our own market. Here is how:
The bad TBAs transportation broker affiliates sells operators services at discounted rates publicly. Here are some examples of bad TBAs: Uber, Black Lane, Ground bLink, and so many to the list. The bad TBA list is pretty long. These TBAs transportation brokers give false promises about a superior service at discount rates publicly. These transportation brokers turn to operators by persuading operators that their work can be used as incremental fill in revenue, or trips can be used as deadheads and even promise high-volume work.
These discounted rates can replace an operators market rate and become the new benchmark for rate reference in a given market. For example a TBA transportation broker who markets, convinces the public and gets the discount jobs covered using good affiliates can mislead public and create a new benchmark for rate reference. Example a TBA announces LAX (Los Angeles airport) transfers to West Hollywood to be $49.00, JFK to NYC $60-$65.00. These bad TBAs transportation brokers only damages the stability of an operators transportation market. These TBA's do not lose with setting low -low rates because they have no cost associating with performing the actual trips.
Since TBAs only have call centers there only real costs are telecommunications and phone answering services and office space.
Most TBA's are more successful with selling limo services at taxi prices and making hidden charges from consumers known as admin fees, reservation fees, and others. We have encountered these bad TBAs more frequently and we continue to be approached them.
Recently we were approached by European TBA just as Uber which operates as "Blacklane limousines". Reading their opening line of their presentation they began to announce and bluff "since 2008 in a recessionary economy chauffeured transportation services has risen but at a bargain price".
This statement is contradictory, and the equivalent as saying "it's a bad economy and people want to eat premium best steak in town and they are paying McDonald's prices".
We quickly realized this TBAs intent and impact on our market and kindly rejected to supply transportation services for this TBA, despite them calling us and requesting additional information about our company. We chose not to participate in this creative, Unscrupulous Transportation broker who made ambiguous statements. In addition exaggerated claims about incremental revenue income.These types of TBAs affiliates only result in us losing money and damaging our own market for chauffeured transportation services in New York City.
In addition these transportation broker affiliates can also become our own potential competitors in a our own market dominating with low prices. Most operators do perceive bad TBAs transportation broker affiliates as potential competitors in their market but rather only see actual operators as competitors. Bad TBAs Transportation broker affiliates can wage longer price wars in the market because they are not affected by lowered rates and rising operational costs. The reasons simply that they are not performing the jobs with their own equipment. BAD TBAs Transportation broker affiliates will make up to 30 to 35% on any run which they can get covered. If they cannot get a trip covered, they are not losing much.
Transportation broker affiliates do not have to worry about rising costs such as insurance premiums, fuel, Worker's Compensation, licensing fees or any other operational costs.
Transportation broker affiliates look at it this way.
30% of $100=$30 still made money
30% Of $70 equals
30% of $25 equals
30% of $15 equals
In either case transportation broker affiliate makes money without worrying about the expense component associated with the trips.
This is why bad transportation broker affiliates can damage a market, wage longer price wars in a any market. For the simple fact that they're not affected by the operational costs in completing trips
The most important part of working with any type of affiliate is to have clear payment terms.
Always obtain a credit card and an authorization form on file. Some large operators promise to pay affiliates by check which can be anywhere between 45 to 60 days.
Getting paid 45 to 60 days is not the ideal Because this can damage and operators cash flow.
In addition some affiliates have habits for not paying affiliates (ranging from hundreds to thousands). We have been victimized by some large OAs and by TBAs. Do not become inspired by the size of the company, and offer to perform work without a credit card. Get payment first!
We have had the experience from local affiliates and TBAs of not being paid for trips. For all of these reason we suggest affiliates to have a credit card on file from all types of affiliates because of bad actors.
Good OAs operator affiliates and good TBAs [transportation broker affiliates] can help operators with you revenue opportunities- however bad OAs [operator affiliates] and TBAs [transportation broker affiliates] can become a nightmare for operators.
It is critical for all limousine operators to understand the affiliate business, the pros the cons, and hopefully develop policies to strengthen and stabilize their chauffeured transportation market.
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