Pitfalls for the Ex-Serviceman in
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PRIVATE HIRE
For the Newcomer, Contract Hire of Coaches Involves Greater Legal Complications than Contract Haulage This Article Explains the Basis of Fixing Charges for Coach Parties and Emphasizes the Fallacy of the Flat Rate
THE difficulty of entering the road transport industry is being brought home to many who, returning from war service, see in it a possible way of earning a living and being, at the same time, their own masters. Notwithstanding all the warnings that have appeared in "The Commercial Motor" and elsewhere, hundreds have been trying to obtain licences to operate, but with little success.
Those who prefer the goods side have discovered that A and B licences are most difficult to acquire, and many have fallen back upon the one branch of goods haulage in which licences are fairly easy to obtain. They have entered into contracts and applied for contract A licences.
On the passenger side a similar state of affairs exists. There are few opportunities to start in business as an operator of bus services and not many more of tours and excursions. The only department in which there appears to be any freedom of action seems to be the operation of coaches on private hire, and a number of inquiries on that subject is being received.
It may be of interest to make a comparison between contract haulage of goods and contract hire of coaches.
How to Enter Contract Haulage
The procedure. for obtaining contract A licences is that the would-be operator must first persuade a trader to give him a contract for transport covering a period of not less than a year. The operator may then apply to the Licensing Authority for a contract A licence, and, in normal circumstances, provided that the Authority is satisfied that the contract of hire is valid and meets his requirements, it is granted. It is, of course, a condition of use of a vehicle under a contract A licence that it must be employed solely for the carriage of goods in connection with that contract.
Conditions governing the operation of coaches on private hire are quite unlike those relating to a contract A licence, and, generally speaking, control of private-hire work is by limitation of the, grant of petrol. There is no objection to a man's obtaining a licence and a vehicle, if he can get one, but his use of that coach is curtailed because he is not granted sufficient petrol to operate it as freely as he might wish.
Legal limitations on the employment of a vehicle for private hire (a contract carriage) are not so simple as those which apply to a contract A licence for goods. There are three classes of use to which passenger vehicles can be put, and that of private hire, although it appears on the surface to be much less strictly controlled than the others, is more rigidly confined than any.
Contract carriages are "motor vehicles carrying passengers for hire or reward under a contract expressed or implied for the use of a vehicle as a whole at or for a fixed agreed rate or sum." This definition needs explanation. The important part is that which states that the contract is for the use of a vehicle as a whole, and the governing condition is that a contract carriage may not be used to carry passengers at separate fares.
To ensure compliance with this ruling a number of regulations has been made. These regulations came into being one by one in order to prevent the operation of contract carriages, in effect, as stage carriages. To those who, like myself, have studied the subject, it has been a matter of great interest to see how, time after time, somebody has discovered a" back door" and then the Ministry of Transport has found means for closing it.
Conditions of Contract Coaching
The conditions were set out in full in an article in "The Commercial Motor" on July 5 last, and I will now briefly repeat them. The arrangement for the use of the coach must be made by someone not having a financial interest in its operation, and there must be no advertisement of the trip to the public and no differentiation of fares. Both the owner of the vehicle and driver must make a record of the journey.
Every public service vehicle must have a certificate of fitness. So long as the vehicle is of a type which has already been approved and is fit for operation, this is not difficult to acquire. Neither is the public service vehicle licence difficult to obtain. It follows almost automatically on the production of the certificate of fitness, provided that the applicant is of good repute. For a private-hire coach no further licence is required.
If, however, a vehicle is to be used either as a stage carriage or express carriage, or employed on tours or excursions, a road service licence must be obtained. Licences of this descriptiorr are just as difficult to obtain as A and B licences to carry goods. The Traffic Commissioners grant them only in case of need.
From financial considerations, the principal difficulty with the use of vehicles for private hire is that in normal times the season of full remunerative use is short. Any reader will appreciate that to make a living out of a coach on private hire only, he must earn sufficient during the peak season to carry him over the/off-season period. In other words, in calculating his rates and charges (I do not refer to fares), he must take into consideration the fact that for a large part of the year his vehicle will be standing idle.
It is difficult to estimate in advance the amount of work likely to be available. For one thing, this uncertain climate of ours is an important factor. A summer like the past one would not encourage the use of coaches for pleasure tours. The fact that last summer was most remunerative in that respect may not be taken as a criterion. The times are unusual. As one coach operator put it to me only the other day, people have been starved of travel for six years and are now taking the fullest advantage of the opportunity travelling by road, irrespective of the weather.
A False Criterion Many other factors, together with high wages and little chance to spend money on anything but pleasure of this kind, have tended to make this past season a bumper one. It would be folly for a newcomer to imagine that this is a normal condition, upon the continuance of which he can safely rely.
What the beginner must appreciate is that some of his oasts are going on all the year round. There is not only garage rent, insurance and licence, but also, in the case of a coach, a heavy item for depreciation.
I am aware that in some cases the coach is licensed for only part of the year. That cuts down some of the insurance and tax, part of the cost of administering the business, and so on. But a man who is entering the business in the way I am contemplating will want to take advantage of what trade there is in the winter. For the time being, therefore, I am going to leave out of consideration those coaches which are licensed for only a few months in the year.
In any event, these fixed charges are important, because much of the working time of coaches is occupied in waiting, and, in assessing his charges, the operator must have due regard to that fact. On most coach trips the vehicle stands for some hours at the outer end of its journey, quite apart from calls that may be made on the way.
No Standard of Work The whole business really comes down to consideration of the remunerative miles per annum over which the total of administrative and overhead charges are to be spread. A complicating factor is that jobs differ so widely. One may involve the use of the coach for a day with a mileage of possibly 50 or less. The next hire may be for only half a day and yet the vehicle may run 100 miles in that time.
It is clearly impracticable to adopt, as so.many operators do, a flat rate per mile. How wrong this procedure is can readily be seen by reference to the two examples just quoted. In the first case, where the vehicle runs only 50 miles yet is used for a day, the charge would appear to the person who hired the vehicle, to be reasonable. In the second case, where the vehicle is only used for half a day, the charge might seem to be excessive.
It may be of interest before proceeding further to try out this method of quoting a flat rate, applying it to these two examples and thus demonstrating its weaknesses.
We must first arrive at some basic figures. First, as regards the vehicle, there are extremes to be considered. On the one hand there may be an operator who buys a new vehicle for £2,500 and sells it for £800 after he has had it for five years. His depreciation account, after allowing for tyres, is approximately £300 per annum, say, £6 a week. On the other hand, there is the man who buys this second-hand vehicle for £800 and keeps it for another five years. His depreciation account, again taking tyres into consideration. is £150. or £3 per week.
The latter operator is not in fact so advantageously placed. in comparison with the other man, as these figures seem to indicate. Vis maintenance costs will be greater and he may, as the result of having to effect repairs, lose some use of the coach and suffer a diminution in revenue.
How to Assess Charges
Perhaps the best thing to do is to endeavour to take a mean between these two extremes, but not a direct mean. which would lie between the averages of £3 and 16 per week (£4 10s.). Instead, I will add something for maintenance, so that £5 per week, or £250 per annum, becomes an approximate figure for depreciation.
The other items of standing charges are: tax, £57 12s.; garage rent, say. £30: insurance, £70; interest (the average of £32 and £100), say, £70; and establishment costs, £150. The total is £627, ignoring the odd 12s.
I have deliberately left out wages, because they are a difficult problem. The coach operator will normally pay about £5 per week as a basic figure. As there is a good deal of overtime to be allowed for, I think a fair way of dealing with wages is to assess that item on the basis of 3s. per hour, and I shall deal with wages in that way in the calculations which follow.
For running costs we can take petrol and oil as costing 20.; tyres, ltd.; maintenance, 21d.; total. 61d. per mile.
Assuming that the expected annual mileage is 24,000. the total of running costs is £650. Add the total of fixed costs. £627, and we get £1.277. The cost per mile is thus about Is. Old., or Is. Id.
At the least a coach proprietor ought to make from 25-30 per cent. profit on his costs, so that his revenue should be at the rate of Is. 5d. per mile if he is going to do as I say he should not do—to take a flat rate per mile for his charges.
For any particular journey, therefore, he must charge at the rate of Is. 5d. per mile and then allow for wages. Wages is assessed at 3s. per hour and to that sum, like the other costs, must be added the profit of 25-30 per cent., so that the operator ought to charge 4s. per hour.
Where the Flat Rate Fails
Now take these two examples. First, in the case of a vehicle doing a day's work. let us assume that it involved 12 hours and 50 miles. For 50 miles at Is. 5d. per mile the charge would be £3 I Is. and to that sum must be added 12 hours at 4s. (£2 8s.), giving a total of £5 19s., say, £6.
On the other hand, take the alternative of the half-day, with the vehicle covering 100 miles. A hundred miles at Is. 5d. equal £7 25., but the time may be as little as, say. six hours at 4s. (£1 4s.); total. £8 6s. If £6 per day be correct for the former example, £8 6s. per half-day is too much, notwithstanding the extra mileage. On the other hand, if £8 6s. be correct for the half-day, £6 is too little for the day.
In a subsequent article I shall reconsider the subject, taking time and mileage as a basis and, at the same time, making reference 'to an agreed schedule of charges.
S.T.R.