When Uber and Lyft announced they’d be pulling out of Minneapolis on May 1, Murid Amini saw his chance. Amini, a Woodbury-based startup consultant and Carlson School of Management alum, set about to launch the platform MOOV, a rideshare app that he says will ensure drivers receive 80% of each fare, effectively outbidding the two leading ride-hailing companies for labor.
So far, he’s got his sights set on registering about 50 drivers within the next week or two who have signed up online, and he hopes to kick that up to 1,000 drivers when marketing starts in earnest in April.
“I expect to be on the ground by mid-to-late April, actually having drivers on the ground making money,” said Amini, an Afghan refugee who grew up in the Cedar-Riverside neighborhood of Minneapolis, where his father still lives.
He believes he’s off to a promising start, but even if he’s successful, MOOV won’t come close on its own to filling the void left by 8,000 Uber and Lyft drivers suddenly ejected from the Minneapolis market, if the two companies actually retrench at all. Uber has said it will leave the Twin Cities metropolitan area entirely. Uber confirmed Friday that it will close its Richfield service center, where drivers have their cars inspected, on April 15.
Lyft maintains it will stick around, but not service trips beginning or ending in Minneapolis.
What’s next for Uber, Lyft?
Some have likened Uber and Lyft’s saber-rattling to a game of chicken, with both San Francisco-based companies making bold threats in order to exact concessions from the city of Minneapolis, whose city council recently voted to impose sizable wage increases on each service.
The state could, in theory, step in and override that decision, and some Minneapolis City Council members are already calling for a reconsideration vote next month.
“If the state does not pre-empt them, I think they will leave the market, just to prove a point,” predicted Amini, a former consultant with McKinsey & Co. whose clients have included a transportation logistics company. “I think eventually the (state) will step in, but I don’t know that it will happen before May 1.”
Otherwise, the Minneapolis wages, based on per-minute and per-mile rates, would be even higher than those laid out in a recent state study of what it would take to ensure a $15.57-per-hour minimum wage for each driver with benefits, and they surpass a compromise proposal offered by Minneapolis Mayor Jacob Frey.
Amini acknowledged that the higher wages would be a hardship for MOOV, too, though they won’t be a deal breaker. His app would have to record the time and mileage spent by each driver when even a portion of a MOOV trip travels through Minneapolis, and compensate the driver accordingly.
Amini, an electrical engineer by training, believes he can tackle the dual rates, but not every rideshare company may be equipped to.
Speaking of which, how many rideshare “transportation network companies” have applied to the city of St. Paul for licensing in the week or so since Uber and Lyft announced their upcoming departure from Minneapolis?
As of late last week, the answer was officially none.
“We haven’t seen any new TNC applications come in,” said Casey Rodriguez, a spokesman for the St. Paul Department of Safety and Inspections, on Thursday morning.
Amini said he’s now submitted his paperwork to get licensed with both Minneapolis and St. Paul, and he’s nailing down insurance and just about ready to test the MOOV app in real time.
Steve Wright, chief executive officer of Wridz, said his Austin, Texas-based ridesharing app could have upwards of 1,500 drivers in the Twin Cities market by mid-May, whether Uber leaves or not.
“We’re coming there regardless,” said Wright, noting the subscription service charges drivers a flat monthly fee of $100, allowing them to keep 100% of their own fares.
But so far, only Uber and Lyft are officially licensed in Minneapolis.
Startups sprang up in Austin — then disappeared
Some may ask who needs new startups when taxi cab companies have been around for years?
Uber and Lyft’s utility isn’t just in offering rides. Their technology bypasses phone calls, language barriers and the uncertainty of not knowing when or even if a cab driver will arrive by allowing online hailing and vehicle tracking, as well as app-based payments, tips and customer ratings.
For over a decade, they’ve made having to pick up a phone or walk the block to solicit cab company after cab company for a semi-anonymous driver a thing of the past.
When Uber and Lyft left Austin, Texas, for a year, a number of rideshare companies rolled in with hopes of taking their place. The result, according to widespread reports, was a bit of a patchwork quilt of startups, as well as informal, unlicensed alternatives like those advertised on the “Austin Underground Rideshare Community” Facebook page.
Some drivers reportedly copied and pasted their old bios, complete with customer ratings, from their Uber and Lyft pages onto Facebook, creating an ad-hoc “verification” system. Uber and Lyft still serviced areas just outside the city, so some passengers reportedly hired their drivers to get them to the Austin city limits, and then tipped them cash on the sly to take them farther into Austin proper.
The two ride-hailing companies veered back into the market in 2017 after Texas Gov. Greg Abbott overruled Austin’s driver fingerprinting requirements with statewide regulations. Unable to compete, many of the startups gradually disappeared, according to KUT Radio, Austin’s National Public Radio station.
Does that bode badly for Twin Cities ride-hailing startups?
“My guess is they got bought out and they decided to take a profitable exit,” Amini said. “It doesn’t really give me pause. Even if Uber and Lyft stick around, I can still meet those numbers and give drivers more money.”
Compared to Uber and Lyft, “I would assume most competitors have lower operating costs, just because they’re not multibillion-dollar companies and they’re not publicly traded,” he added. “Most of the investors I’m working with are not putting any kind of pressure on me to be profitable any time soon, even though I plan to be. The funny thing is, (Uber and Lyft) created that opening by threatening to leave.”
How much do they make?
How much do Uber and Lyft drivers rake in, anyway? The answer lands somewhere between less than $10.54 an hour and upwards of $50 an hour, depending upon how you figure it. For continuous service, according to the recent state study, a driver could stand to make $53 an hour in the metro before expenses, but most spend a fair amount of time fare-less each hour while waiting for or driving to their next passenger. During that time, they’re not making money.
So average gross hourly earnings are actually closer to $30 an hour. Now subtract for expenses, which can be considerable given the price of gas, wear-and-tear on vehicles, insurance, cellphone/GPS and cleaning. The hourly average then drops to $14.48 in the metro — and that’s just an average.
The state study found that one-fourth of drivers took home net, after-expense earnings, of $10.54 or less, while one-fourth took home $17.51 or more. The net median, which is calculated differently than the average, was $13.63 in the metro. In Greater Minnesota, the net was even lower.
Minneapolis maintains a minimum wage of $15.57 per hour. To reach that level of reimbursement, the study found a driver would need to earn 49 cents per minute and 89 cents per mile. To also cover benefits such as sick time, health insurance, retirement and unemployment insurance, the per-mile rate would have to rise to $1.20.
On March 7, the day before the state study was published, the Minneapolis City Council chose not to wait for the results and approved a much higher driver reimbursement rate of 51 cents per minute and $1.40 per mile, well above the figures outlined by the state study.
Some critics have questioned why a part-time “gig” job would merit a living wage with benefits if it’s primarily supplemental income. The authors of the state study found that almost 70% of all trips were conducted by drivers logging in for 20 hours or more. Drivers who logged in at least 32 hours provided 41% of all trips.
Nearly half of all registered Uber and Lyft drivers worked fewer than 10 hours per week, but those casual drivers accounted for just 11% of all trips, according to the state study.
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