Better to own delivery cars?

Discussion in 'Delivery Driver Discussion' started by ajsla, Mar 21, 2010.

  1. ajsla

    ajsla Guest

    New to the business and setting up our first store. I have read a few posts where they state owning the delivery cars was the best thing they have ever done. What are the advantages of owning/leasing the cars vs. drivers own cars? Where I am located the drivers own their own cars vs. using the shops so this is a new concept but with lease rates so low I am thinking I might want to go down this route if it makes sense.

    Thanks!
     
  2. Wizzle Wassell

    Wizzle Wassell Member

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    A few things to consider:

    + you pay directly for the fuel/up keep of the vehicle rather than paying 'mileage' to the driver
    - its not the drivers car so they are likely to treat it as such
    + you need to make sure that you check the car before/after so you can make people accountable for damage
    + if you maintain the vehicle properly there should be little chance of 'I can't come to work as my car is xyz'
    + you can get the logo'd up to your hearts content.

    I'm sure there's plenty more for others to add.....
     
  3. Anonymous

    Anonymous Guest

  4. thepizza

    thepizza New Member

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    My first response would be if you don't have to deliver, then don't. I have been slowly phasing out delivery over the last 10 years or so and can't wait until it is gone. For whatever reason drivers, delivery customers, and everything that comes with delivery is the source of about 90% of all my headaches. 90% of all workers comp claims come from drivers, 90% of all complaints come from delivery customers, and 90% of all problem employees are drivers. Why it is I don't know, but has been this way since day one.

    I bought our own fleet of cars (4 cars) about 2 years ago and I will never go back to the drivers using their own. Overall is saves me about $30,000 per year and would be even more if we drop our drivers down to server wages. We own two of the cars and lease the other 2.



    Here are the pros and cons I have seen.

    + You keep all of the delivery charge
    + Fuel cost per delivery is really not that much - about 20 cents per delivery if that.
    + You can track/monitor the cars in any way you want . GPS, Cameras, etc...
    + Insurance was about 50% less
    + Insurance is much less of a gray area. I now have $3 Million policy covering my liability.
    + You can easily pay tipped wage
    + Easier to hire drivers.
    + Drivers lose all leverage over you


    - Drivers go out of their way to abuse the car, even drivers I never expected.
    - Need to keep up on the oil changes and scheduled maintenance.
    - Without any type of monitoring I got more complaints about reckless driving.

    Good luck
     
  5. Anonymous

    Anonymous Guest

    Per DELIVERY? That sounds low to me. If your cars average 30 MPG and today’s national average for gas is $2.81 then it would cost just over 9 cents per mile just for fuel for your vehicles. That would mean your average delivery is just about only ONE mile away (with a round trip of just over two miles) to arrive at just 20 cents per delivery. Is it possible that you meant to say 20 cents per mile?

    Fuel is just part of the expense of operating a vehicle. Do you have any info on your total cost of operation per mile for the vehicles?
     
  6. thepizza

    thepizza New Member

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    Yes, .20 per delivery. My average delivery is 2 miles round trip.

    Maintenance cost per vehicle, per year for 15,000 miles = 3 oil changes and one scheduled maintenance and lets say a pair of wiper blades and a tire is about $400. $400/15000 miles = .026 per mile. Insurance $1000 per year per car = .067 per mile. Of course you have to factor in car washes, registration and so forth, but all of that together would hardly add up to a penny.
    $3600 per year lease = .24 per mile for a grand total of .866 for a 2 mile delivery, if my math is right. But if it was an owned car then after it was paid for then you would drop the .48 from the equation. Labor and taxes equal about another $1 - $1.50 per delivery. By far the greatest cost in a delivery is the labor and driver induced damage to the cars.

    Owning my own cars I still lose some per delivery.
     
  7. Anonymous

    Anonymous Guest

    Thanks. You must have huge volume to need 4 cars for such a small area! I hope you are doing as well as it seems!

    So your total cost per mile to operate is 43 to 48 cents per mile if I understand you right?

    From my understanding of the industry, the average mileage reimbursement for delivery drivers is about 25 cents per mile. Many drivers get none. The current IRS rate is 50 cents per mile, not very far off from your numbers. Maybe the IRS rate IS a reasonable approximation for mileage costs.

    Aren’t labor costs the about same for in store orders also? Aren’t most damages covered by insurance? At 15,000 miles, $150 of out of pocket damage only adds one cent per mile in additional cost.

    Also, doesn’t the additional volume you gain by adding delivery offset the additional costs somewhat by making your business more labor and cost efficient per hour? (An awkward way of saying that increasing output decreases cost per unit.)
     
  8. paul7979

    paul7979 Well-Known Member

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    Is your cost per mile similar to these rates Gregster?
     
  9. Anonymous

    Anonymous Guest

    Based on AAA's posted rates for my vehicle, mine are higher than the IRS rate.
     
  10. thepizza

    thepizza New Member

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    We will be stepping down to 2 cars next summer. We have moved our delivery sales from 90% 13 years ago to 39% today. And once we complete a dining expansion we will cut the cord completely.

    Most of the competitors in my area including the big guys pay between .75 & $1.50 per delivery and have a delivery radius similar to mine. I used to pay $1.25 for in town and up to $1.75 for deliveries further out and my drivers were still unhappy with that rate.

    Yes, my delivery cost would be about .43 - .48 per mile for a car that I am still paying on. The cost drops in half after the car is paid for. My intentions are to sell the vehicle and replace with a new one once it nears the end of its warranty. If I can get 50% of what I paid for the car when I sell it 3-4 years after I bought it then that drops my cost per mile about .24.

    The damage that is usually done to the cars is not small. For example $500 to replace an oil pan that was smashed when the driver took a railroad track too fast or $1500 x2 for 2 new bumpers that were smashed into the curb. Yes, I could turn this into the insurance, but I would only see my rates go up or see my insurance dropped at renewal.

    But still in the long run, it is much cheaper for me to operate 4 cars that I own vs. paying drivers $1.25 -per delivery.

    As for the labor, I am only taking into effect the labor of the driver when they are on the road not in store productive time. If I was able to eliminate delivery completely and turn just 20% of those delivery customers into pick up customers, I would make the same amount of net profit as I make now with all my delivery sales.

    I am sure it all works out different for each owner/operator but this is just how it all plays out for me.
     
  11. Anonymous

    Anonymous Guest

    Thanks for the thoughtful explanation.

    With regards to your above quote, why do you (or anyone for that matter) think the majority of pizza places, especially the big3 choose to use drivers cars vice company cars? With their insatiable quest to lower costs, why wouldn't they choose to do the same?
     
  12. Wizzle Wassell

    Wizzle Wassell Member

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    I'm sure that it would be cheaper for me to run my own cars but I don't because:

    1) I don't have the space to store 13 cars in one shop and 10 at the other, and if I did I wouldn't leave them outside due to the chances of vandalism/theft out of hours.
    2) based experience - we have some company owned vehicles, drivers don't give a d&mn about a car which isn't their own
    3) The logistics of storing and maintaining 23 cars would be a head ache for me.
    4) For the non-busy time of week most of the cars would be parked up doing nothing.

    Most of my drivers are part time and already have cars which they use for more than just working for me.
     
  13. PizzaAmore

    PizzaAmore New Member

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    I think you also have to consider the value of advertising that a logo'ed car brings. It's worth alot IMHO.
     
  14. Wizzle Wassell

    Wizzle Wassell Member

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    sure, a logo'd car is a great way to advertise.

    For a shop that only has 1 or 2 drivers at most then having company cars is probably a sensible option. Any more than that then unless you've plenty of parking space then its not really viable.
     
  15. E Jay

    E Jay New Member

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    Thank you for the input and valuable information. My dad and I had 3 pizza places 25 years ago and haven't been in the business since. We used to have a mixture of company and driver owned cars. Things have changed a lot since those days and I am looking at starting a new place. I am in a seasonal tourist beach town and feel delivery will be a must to survive.
     
  16. Daddio

    Daddio Well-Known Member Moderator

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    Please note this thread is nine years old so some of the information may not be relevant today.