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Dallas goes after limousine `bandits'September 5, 1997-Dallas
Business Journal NORTHWEST HIGHWAY -- With limousine services in strong demand in the Metroplex, Joan Wynne of Wynne Transportation Co. of Dallas has seen her limo company buy up two others and gross nearly $300,000 its first year of business. Wynne predicts that the aggressive growth will continue. Expanding from one car when she started to 10 cars today, she expects a year from now to double her fleet again. But all is not rosy in the limousine business. A booming Metroplex economy has limo companies proliferating like rabbits, making competition fierce. At the same time, the city of Dallas has added new regulations to tame the largely renegade industry. Five years ago, said Wynne, there were 75 limo companies operating in the Metroplex. Today, the phone book lists 217. "Every time I look around there's another limo company opening," Wynne said. While mainstream companies are seeing healthy growth, some of their owners complain they are unfairly losing a segment of their business to "bandit" or "gypsy" owners. Bandits, they say, set up shop at cut rate prices without benefit of permits or sufficient insurance, which puts passengers at risk. "The limousine market is getting too crowded," said Bill Stern, president of Five Star Limousine of Texas Inc. of Dallas. "I don't want all the gypsies out there because they erode the price structure." As price erodes, Five Star's growth lags, said Stern. A mid-sized company, the 6-year-old Five Star has a fleet of 17 vehicles that includes limos, sedans and Rolls Royces. "The industry has the potential to be great," he said. "But the gypsies are really a disadvantage to legitimate companies running a good business. We're just not growing at as fast a rate as the city. It hasn't eroded price for us, because we won't take a lower price. But we have to do volume to keep the price down. But it's hard to compete in a market where you open the Yellow Pages and see so many ads." Limo companies are propagating for a couple of reasons. First, limo service has become attractive for more than just weddings. Customers now include travelers going to or from the airport; sports fans wanting to avoid traffic snarls and parking problems associated with Metroplex sporting events; gambling parties headed for the race track; and partiers in Deep Ellum who want to drink without driving. And the business is an easy one to start. "All it takes is a phone line, an ad in the Yellow Pages and leasing a limo for $1,000 to $1,200 a month," said Richard Brown, president of Aircar Inc. of Dallas. "So people do it out of their home. Anytime you have a low barrier to entry you've got many, many people who are not educated entering the business." As a result, bandits are in huge supply. Dallas-based companies are required by law to get a city permit, as are those that serve Dallas/Fort Worth International Airport. In reality, that's hardly the case: The city has sold permits to little more than 100 companies. By not buying a permit, bandits save money. Annual permits from the city of Dallas cost $500, plus $20 for inspecting each vehicle. D/FW Airport also charges $500 a year. In addition, Dallas requires companies to have a minimum of $500,000 insurance, although many long-running companies say that amount is insufficient and thus carry $1 million or more. The city reportedly has been making efforts to crack down on bandits. A new regulation effective Sept. 1 requires that limousine companies be able to prove that each of their cars had a base purchase price of at least $35,000. The idea was to get low-cost, and typically non-permitted, sedans off the road. But some, like Brown of Aircar, find that instead of the bandits, law-abiding companies have been caught in the city's squeeze. The new regulation makes illegal about half the 24 cars in Brown's fleet. Although he's had one year's notice to transition such cars out of his fleet, Brown said he is not able to eliminate all the cars affected and has begged the city, unsuccessfully, for more time. Brown, whose company appears to be respected by other reputable limo companies, runs a niche business serving corporate accounts. With personal security an ever-increasing concern, executives going to and from the airport prefer the low-key, non-ostentatious vehicle, he said. "I think this should be a decision made by the marketplace, not the City Council," said Brown. "If I use less expensive cars and my customers are happy, then that should settle it." Then, too, the city appears to be preaching to the choir. At a city of Dallas meeting held a week ago to remind limo companies of the new regulation, only a half-dozen owners showed up, including Wynne, Stern and Brown. Although he's caught in the crossfire, Brown isn't bothered by the bandits -- probably because he doesn't compete with them for customers. Stern, however, hopes to wage war against the bandits by activating the National Limousine Association of Dallas. The association, which reportedly has a treasury with money in it, has been dormant for years due to lack of interest. Stern believes it's time to defend against the proliferating bandits. "The only way to fight these guys is to band together," he said.
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