Fleet Management News & Business Info | Commercial Carrier Journal
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INNOVATORS BAY & BAY TRANSPORTATION Minneapolis Minneapolis-based company found that the majority was occurring in its lease-purchase program and realized it would have to take a fresh look at an old system. "We were seeing too much turnover in the first 90 days of a lease program," says Zach Little, vice president of opera- tions. "Lessees would come in after a couple weeks without a check and throw their keys on the desk and walk away. " A plan for success A Bay & Bay's new lease-purchase program helps owner-operators get off the ground BY JEFF CRISSEY s freight conditions improve and driver demand increases, many fleets have tapped into the owner-operator market to add capacity. Fierce competition for owner-operators has led many companies to ramp up lease-pur- chase programs to convert drivers into independent contractors. However, high initial startup costs associated with conventional lease-purchase programs can put the lessee in a financial hole. Most lease-purchase programs require upfront and monthly lease payments made on time and trucks maintained and operated at the lessee's expense. Often, a lessee can't make ends meet, so they quit the lease-purchase program early, and the carrier leases the truck to the next lessee. A bad lease-purchase experi- ence usually sours a lessee's relationship with the carrier, and they move to another company or leave the industry altogether. The time it takes for a lessee to break even in a lease-purchase program varies, but ultimately a successful lease depends on their business acumen and work ethic. Unfortunately, most drivers have become wary of lease-purchase programs, and the prevailing sentiment is that they're better off walking away from such offers. Looking for a better way Bay & Bay Transportation is among the fleets looking to "grow their own" owner-operators with lease-purchase programs, doing so through various leasing companies. After analyzing Bay & Bay turnover data, the While studying why lessees were failing on the front end of their lease- purchase agreements, Bay & Bay real- ized that if it could help them manage recurring business expenses – including monthly lease payments, insurance, fuel and licensing fees – it could better develop and retain successful owner- operators. Bay & Bay launches Predictable Pay Program to help lessees become successful owner-operators Making it work In May of last year, Bay & Bay cre- ated the Predictable Pay Program to flatten out the early business and truck lease expenses to help lessees become successful. Essentially, the program holds back some of the startup costs and provides the lessee with a weekly settlement based on a specific rate per mile. The settlement isn't typical driver pay; rather, it's an advance on a lessee's earnings. The holding company then is able to recoup these costs over the first several months of the lease-purchase term as the lessee's business becomes profitable. Assume a con- ventional program where a lessee runs 800 miles from Min- neapolis to Chicago and back at a typical COMMERCIAL CARRIER JOURNAL | JANUARY 2012 47