Why "Gig Economy" Franchises Are A Terrible Deal For Entrepreneurs

Why The "Gig Economy" Is Failing Its' Workers

Tax Season 2024

UPDATED November 2024

On St. Valentines' Day 2024, drivers with Uber and Lyft as well as delivery persons for DoorDash and the others went on strike. Meanwhile, your ride and delivery costs have probably went up. So you may be wondering, "Why am I paying more while my drivers are making less?" OK, you're not wondering because you already know the answer.

Gosh, Davey, could it be CORPORATE GREED?!

Let's go to the numbers. 

Here's a view from my Drivers' app. Here's a sample airport run:

Going to LaGuardia is expensive! Maybe not as bad as flying, but still...

What is the "Service Fee"? That's a great question.

Does it involve a tow truck or service truck like the ones that patrol the Hutch looking for stranded motorists? You'd think that would be a service UberLyft drivers need, am I right? No, we still have to call our insurer or warranty for a tow when we get a flat tire.

Does it involve our own rest stops - or at least a guide to rest stops that contains useful information? I was in Hartford recently and was guided to a "highly rated" rest stop that turned out to be a projects gas station that didn't even have a bathroom. Also, the gas station I did use was the wrong brand, but that's a minor quibble at this point.

How about more Hubs or a customer service hotline to resolve issues? Nope, Uber has done away with their internal hotline. You now must text and hope someone notices your issue.

As far as I can tell, the Service Fee goes towards installing the driver version of the Uber app on my car dashboard. Neat, except it's kind of useless. It doesn't show information about incoming ride destination or pay or rating. I still have to squint at the phone which is propped up at eye level on a mount in my car, which is dangerous but that's the job. Also, it doesn't connect to Waze - it only uses their very basic GPS. In sum, very useless at this point.

Oh, and it goes towards those Platinum and Diamond perks for experienced drivers. What does that include? Well, it includes being told this information about rider destination and pickup which all drivers should have anyway. And it includes a lot of useless perks like 7-11 discounts and oil changes, which my warranty already covers.

It ironically includes the ASU Online education program, and discounts on Rosetta Stone - both of which are important for getting a better job, or starting a profitable business.

Anyway, let's get back to the breakdown of this pay. So you're assuming that this is the standard percentages that Uber takes between you and your driver. Well...not exactly. Here's a spreadsheet I compiled of many various rides. All numbers are taken from the Drivers' page results for each ride, but the underlined values are calculated with Google Sheets.

seriously, why aren't you tipping your drivers? What did we do to you?

Can you spot any pattern in the Service Fee percentile and the percentile in what is actually taken out of the riders' fees? I can't. 

Notice how on some rides, the Service Fee exceeds the city fees and/or insurance fee! Am I getting city fees from other rides back?! 

But the worst is where Uber's cut amounts to more than half of what the rider is paying. You don't need to watch Shark Tank to know that when they take more than half of your money, it's not your company anymore. You're now their employee.

Sigh.

While I'm a numbers nerd, at the end of the day, this is not my job. It should not be my responsibility to watch the company I work for to determine how much my pay is fluctuating from job to job.

Of course, when you're entrepreneurial, EVERYTHING is your job. That's why this is ideal for people who have lived a long time and had all kinds of jobs...but the point remains.

ETA

Uber came out with updated grids for drivers showing weekly totals and charts showing how much riders pay, including tips, versus what you make, and what is taken out.

Uber Service Fees average 20-26% of your ride bill. A huge cost is commercial insurance, which now averages 12-13% of your ride bill. Taxes and local fees are minimal.

They claim to not touch tips, but it's worth keeping an eye on that.

It adds up to the equivalent of $25-28 per hour (what you would actually take home when your hourly rate is defined as such). Not bad, particularly given how hard I work, but if Massachusetts drivers can start at $36/hr, what is Connecticut's problem?

It makes sense that more people are going entrepreneurial. Corporations shut out older workers and younger workers and community college graduates and persons from impoverished communities because they can, so we have to go off the rez to afford to live. But companies like Uber are "McJobs" for beginning entrepreneurs. I quote the "McJobs" because, well, McDonald's doesn't make their waitstaff buy a new car to have a job.

So if that's how it is - because obviously, strikes have done nothing - fine. I can at least practice my skills with Upwork, who still take 20% and you don't need a car at all.

It's worth a shot.