Taxis have been around almost as long as automobiles themselves. The ubiquitous yellow sedans are synonymous with catching a ride in big cities and urban areas all around the world (along with the famous black cabs of London).
However, several companies have introduced a new business model that is turning the taxi industry on its head. These urban transportation alternatives — which include Uber, Lyft and Sidecar, among others — enable customers to arrange for a pickup in minutes using a smart phone app and then pay for their ride using the same app.
In addition, they enable practically anyone to start their own small business as a driver. Unlike taxi cab drivers, these non-traditional drivers are not licensed by the cities where they operate, nor do they have to pay fees like taxi cab drivers do. All you have to do to become a driver for one of these companies is have a good driving record (including no DUI citations) and an insured vehicle and clear a background check.
Uber became the first taxi alternative to begin operations here in the U.S. when it launched in 2010, with Lyft and Sidecar following in 2012. Uber currently leads the way with operations in 20 U.S. cities, while Sidecar operates in six cities and Lyft is in five. Lyft says they plan to be operating in all major U.S. cities by the end of this year, and Uber and Sidecar are also both expanding as well.
So what is it about these taxi alternatives that’s different from traditional cabs? For starters, it is often much easier to get a ride with one than it is to hail a traditional taxi, especially in cities where taxis are in short supply. Once you have downloaded the app, registered and added your credit card information, you use the app to request a pickup in as little as a few minutes.
The app includes a GPS map you can use to follow your driver, and you will also pay for your ride using the app. Uber offers higher-cost luxury transportation via Lincoln Town Cars as well as lower-priced transportation via normal cars. Lyft and Sidecar only offer transportation via normal cars — though Lyft cars distinguish themselves with a pink mustache decorating the grill.
On its blog, one of the taxicab alternative companies says they offer “high quality, safe, reliable and affordable transportation options.” At another, drivers invite passengers to sit in the front seat if they want, and sometimes even give them a fist bump when they get in. As for cost, the apps include city-specific rates and can provide fare quotes for specific trips. The total cost for a ride could be a little more or less than a traditional taxi fare or about the same, depending on the city and the specific route.
But what about the business opportunity offered by these companies? Should you consider becoming an Uber, Lyft or Sidecar driver? There are definite pros and cons to this job.
On the plus side, you would have the flexibility to work when and where you want to, on a part-time or full-time basis. And there is the potential to earn a lot of money. According to Uber, the current median annual income of one of their drivers in New York City is more than $90,000, while the current median annual income of one of their drivers in San Francisco is more than $74,000. For comparison’s sake, traditional cab drivers in San Francisco earn an average of about $35,000 a year.
However, when you dig deeper into these numbers, it becomes clear that earning this kind of income requires working many hours. For example, one Uber driver in San Francisco who was interviewed by two financial journalists who were investigating Uber’s income claims said he nets about $350 per day after paying Uber’s commission. This translates to annual before-tax earnings of just over $100,000.
To earn this six-figure income, though, the driver said he works 12 hours a day, six days a week. This adds up to 72 hours a week — or nearly two full-time work weeks! On an hourly basis, he is earning about $29 an hour. The financial journalists estimated that most Uber drivers who are working more normal hours earn between $30,000 and $70,000 a year.
It is also worth noting that there is some bad blood between traditional and alternative taxi cab drivers in some cities. Understandably, traditional cab drivers aren’t happy about the fact this new competition does not have to be licensed as they do, nor pay the same fees. In response to these concerns — and to protect municipal revenue flowing from licensed taxi operations — some cities and states have filed lawsuits and cease-and-desist orders against alternative taxi companies.
From a passenger’s perspective, a taxicab alternative might be worth trying out if you live in a city where one operates and need a ride. From a business and income perspective, you should do some more digging to figure out if becoming an alternative taxi cab driver is the right move for you. Being an alternative “hack” could be a fun way to make some more cash, or it could be a literal pain in the rear.