Dec
Raymond Stubbs Jr. had driven Yellow Cabs in Boise, Idaho, for years. In 1995, he borrowed $151,000, and bought the Yellow Cab franchise. At the time, the company had about two dozen taxis, representing roughly half of Boise’s total. Most were owned by drivers who paid Stubbs about $200 a week per vehicle for dispatch service.
Stubbs personally is a strong believer in customer service. He decided to make that a key element of his new business. “If you don’t have the service, you aren’t going to make it, “he says. Stubbs urged his drivers to cultivate “personals”-regular customers who request the same driver each time. And responding to Stubbs’s motto of creating passengers “as good as gold,” his drivers bought their own cell phones to answers passengers’ calls directly and distributed business cards listing their individual cell phone numbers.
Meanwhile, to increase business, Stubbs was selling discounted vouchers to customers. Unfortunately, he failed to do the math. Both he and his drivers lost money on the voucher system. This created animosities toward Stubbs by the drivers.
The final blow came in April 1997. To cut costs, Stubbs ceased offering his dispatch service to those yellow Cabs he didn’t own. In response, exiled drivers went solo, joined rivals, or expanded their fleets and split off to create their own separate firms. And having followed Stubbs’s dictate to build strong loyalties with their passengers, most customers went with the renegade drivers.
Facing greater competition and decimated fleet, Stubbs now found it harder to deliver his first-rate service. “He ruined the customer relationship,” said one knowledge observer. “The name Yellow Cab became a dirty name.”
In October 1997, faced with high fixed costs and a decimated fleet, Stubbs dissolved the company and filed for bankruptcy.
