# Taxis..



## donald (Apr 18, 2011)

So i had to use a taxi this mourning and i started talking with my driver.

In winnipeg to buy a taxi(license,from the board)costs 450k!,my driver was telling me 2 yrs ago they costed about 180k,the guy he works for owns 10 taxis,each taxi runs 24hrs a day between 2 drivers 7 days a week,so the owner has 20 people working for him,the drivers have to pay for the gas for the entire shift and give the owner 150.00 for a shift.

So if i do the math,thats 3 grand for a 24hr cycle,with 10 cars,not to mention taxis are rising @ a increadible rate...if the owner has 10 cars,he has a couple million just from his holdings.

Anybody know the scope on this industry?from the outside looking in,it seems like a hidden gold mine for the owners,they all have family working for them,a niche market,thought it was kinda interesting,seems like a hell of a investment for the owners,sounds better than landloarding.


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## Dmoney (Apr 28, 2011)

Quick math at 300*365, not allowing for any days without the 2x$150 payouts would show the owner of each car pulling in $109,500 annually. No idea about what the downtime or reliability of earnings would be, but based on 100% efficiency, and highest tax rate, he'd be pulling in ~60K/year. This is a cash flow of about 13% of the value of the license. 

Would be made more complicated by % downtime for maintenance, % of time the car isn't let out to one of the drivers for whatever reason etc. Also, on top of the 13% return, you'd have to look at the appreciation in the value of the license.

The downside would be regular maintenance of the vehicles, replacing the cars etc.

Also, where I live there is a huge underground taxi economy. No need for a taxi license so they can charge way less for the same service. I would expect this to increase as the license gets more and more expensive. 

I wouldn't mind seeing more competition in the taxi industry since it can obviously be done more more cost effectively. No clue on the regulation or justification for having a license worth more than a house but I'm sure everyone gets their cut from the top on down.


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## m3s (Apr 3, 2010)

Sounds like it takes 4-5 years just to pay off the initial $450k, not to mention the repairs and maint and replacement of the actual cars and the interest or opportunity cost on $450k etc. So 10 years at least to double investment not including the cost to borrow $450k... Sounds just like landlording!.. Except the drivers get the rent instead of you! It's easy passive income if you have the money and time horizon but it's no hidden gold mine at all imo

You should look into dairy farm quota if you want to see expensive. Basically it's impossible to make a living in dairy farming in Canada unless you inherit quota, even then it's pretty hard


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## donald (Apr 18, 2011)

Its a strange business,just seems like a owner has to do very little,once your capital is down on the licenses,i know the drivers make next to nothing,the guy driving me was telling me he sometimes only makes 75 dollars a shift,after he pays for the gas and the owners stake.(12 hrs)

Where i live its heavily dominated by east indians,they have the entire taxi market and control the board,thinking about it more ,maybe it aint that lucrative.

He was telling me most of the taxis are being bought up from the wealth in india,and india investors are the ones driving up the price.

If a owner was to liquidate,i think thats when a roi on cabs would be huge in the current market,the mark up on them is most likely triple in the last decade it seems.

But yeah,probably sounds better on paper than reality.


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## MoneyGal (Apr 24, 2009)

mode3sour said:


> You should look into dairy farm quota if you want to see expensive. Basically it's impossible to make a living in dairy farming in Canada unless you inherit quota, even then it's pretty hard


I was going to use egg quotas as my example; you beat me to it


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## m3s (Apr 3, 2010)

I didn't know eggs had quotas too but I suppose they would

So who pays for the taxi dispatchers? If you need 1 on shift then you need at least 4 employees on the payroll just to dispatch. Salaries are a huge expense and I'm sure there's more. Just like real estate, a lot of hidden expense come with hidden gold mines!

If I had 10x $450k to invest, instead of $150/driver I'd build several multi-million-dollar hotels and charge $150/room + restaurant. Actually I would think of something more creative because I'm sure hotels are saturated


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## financialnoob (Feb 26, 2011)

Can't speak for everywhere but in Toronto, part of the reason the license is so expensive is because it's limited by the city and there's a wait list for one. Toronto is a bit screwier than most cities (as usual) in that it has two different types of licenses, but the ambassador license looks like it will be phased out so ignoring that for now.

The plates system was used to weed out random people trying to make a buck part-time who didn't keep their cars in good condition or had no clue where they were going.

But it's turned into a bit of a scam, with the same people getting the plates and then refusing to sell them. Instead, they lease them to drivers at huge costs. Roughly 1/3 of the licenses are owned by corporate entities. Drivers who are willing to buy the plate first have to find one available, otherwise they are forced to lease.

As the license is matched to a car, the owner buys the car as well. This also means the driver has to pay fleet insurance rates, which are significantly higher than personal or business insurance rates. Rates can run around $10K with a $10K deductible. 

There's certainly some money to be made as an owner assuming you can get some plates. You'd probably need multiple though.

http://www.showmetoronto.com/blog/is-torontos-taxi-industry-a-hotbed-of-corruption.html

http://www.thestar.com/news/article/991840--here-we-go-again-next-battle-in-the-taxi-wars


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## MoneyGal (Apr 24, 2009)

mode3sour said:


> I didn't know eggs had quotas too but I suppose they would


Asparagus, pork, grapes, tender fruit, chicken, beans, turkey, potatoes, sheep and I know there are more. I only really know dairy and eggs though; my family got out of farming in Ontario before the introduction of quotas here - we stuck to hobby farming post-quotas.


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## andrewf (Mar 1, 2010)

This system is supposed to protect drivers, a goal at which it utterly fails. By all means, license taxis and ensure minimum safety standards are met, but don't artificially restrict the supply. The licenses should not be worth substantial sums of money.


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## kcowan (Jul 1, 2010)

Other services cost extra. There is a monthly fee for dispatch. Meters cost extra. They charge a % for every credit card transaction that gets processed, often at fees as high as 8%. Paper chits cost more than phone-ins. GPS services are often extra if not offered by the dispatcher.


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## peterk (May 16, 2010)

I don't know if it varies by place to place, but most cities I've been to cab drivers will often cut you a deal (quite often at their own suggestion) that they stop the meter at $10, you give them $15, for a cab ride that would otherwise cost $20. A transaction that I can only assume is sticking it to the cab company owners. You might want to look into the workings of the taxi companies in your city if you want to run a system like described in the OP.


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