Obit: Taxi Company's Zeal for Service Backfires
BY Mike Hofman
When Yellow Cab owner Raymond W. Stubbs exiled cab drivers who wouldn't adopt his stringent customer service policies, the cabbies went solo, taking their customers with them. A business obit.
The Business: Taxicab operator Opened: 1922 Closed: February 1998 Causes of Death: Policy promoting drivers' direct relationship with passengers; replacement of independent drivers with employees
Reg Hardwick's life as a taxi driver has had its ups and downs, but one constant has been the color yellow. For the past 16 years he has driven either for Yellow Cab -- once the leading taxi company in Idaho's capital city, Boise -- or for his own company, Airport Yellow Cab.
His business now has nine taxis on the road. Hardwick says that he had no burning desire to start a company or manage employees. He still loves the six hours a day he spends behind the wheel. ("You drive around and talk to people, and they throw money at you.") But in April 1997, Hardwick, along with several other drivers, quit Yellow Cab in a dispute with company owner Raymond W. Stubbs Jr. The exodus was devastating. Stubbs had urged his drivers to cultivate "personals" -- regular customers who request the same driver each time -- and ironically, his fervor for that level of personal service contributed to his undoing.
Stubbs, 51, had driven for Yellow Cab before buying the company from Richard Kelly in 1995. The price was $151,000, financed by Kelly and by loans from the First Security Bank of Boise and the federal Small Business Administration. Yellow Cab then had about two dozen taxis, representing roughly half of Boise's total. Most were owned by drivers who paid Kelly about $200 a week per vehicle for dispatch service.
By October 1996 Stubbs's zeal for personal service was in high gear. "If you don't have the service, you aren't going to make it," he told the weekly Idaho Business Review. Responding to Stubbs's entreaty to treat passengers "as good as gold," his drivers supplied their own cell phones to answer passengers' calls and distributed business cards listing their individual cell-phone numbers, recalls Hardwick.
Meanwhile, Stubbs was selling discounted vouchers to customers. He ended up losing money on the voucher system, and his drivers did, too -- a circumstance they protested. To assert greater control over the drivers, he set out to buy all the taxis operating under the Yellow Cab banner, according to several of his former employees, but some drivers refused to sell.
In April 1997 Stubbs ceased offering his dispatch service to cars he didn't own. The exiled drivers went solo, joined rivals, or, like Hardwick, began increasing the number of taxis they owned and operated. "These drivers had a small business built to the point where they could split away," says Roger Moore, a former driver for Yellow Cab. "Customers went right with them."
Facing greater competition and hobbled by breakdowns in his expanded fleet, Stubbs found it harder to deliver the sterling service he valued. "He ruined the customer relationship," says Susie Stertz, Kelly's daughter and the company's former manager. "The name Yellow Cab became a dirty name." In October 1997 Stubbs filed for bankruptcy, dissolving the company. "I'm sure, in retrospect, Ray would say that he should have looked harder at the books and the income statement before he bought the business," says Howard Foley, Stubbs's attorney. Stubbs could not be reached for comment.
At an auction of Yellow Cab's former assets last spring, Hardwick bought two cabs. His business is flourishing. Personal service is a virtue that he, like Stubbs, extols to his drivers. But Hardwick is quick to add, "I own the cell phones. If the drivers ever quit, their customers will stay in the company." --Mike Hofman
Last updated: Dec 1, 1998
MIKE HOFMAN was previously editor of Inc.com and a deputy editor at Inc. magazine, which he joined in 1996. The site was nominated for a National Magazine Award for Digital Media in 2010, and was named the best business website by Folio Magazine. In 2006, Hofman was part of a team of writers nominated for a Webby Award for best business blog. He lives in New York City. @mikehofman