Strength in numbers

| December 12, 2008

Small fleet owner-operators have a big choice: Go independent, or lease to a larger carrier. Those who lease their trucks receive overall stability and other benefits that can mean the difference between success and failure. In return, they give up a share of the revenue and the independence of running under their own authority.

Leasing with a larger carrier eases cash flow problems and the financial burdens stemming from cargo and liability insurance and high-cost fuel. Other benefits can include discounts or other assistance with maintenance, breakdowns, tires and other parts, permits, base plates, dispatch, sales, fleet management, mileage tax, truck purchases and health insurance. The small fleet owner-operator is usually responsible for most, if not all, maintenance and employee training and testing.

“It’s pretty much a no-hassle start-up,” says Jeff Meeves, owner-operator relations manager for Werner Enterprises. “Basically, no up-front money has to be placed in bond. We pay for the base plates, permits and insurance and get them rolling. They’re getting the benefits of running their own business, but they’re getting the support of a very large corporation.”

For this, the large carrier takes about 15 percent to 25 percent of the owner-operator’s revenue. To some operators, it’s not worth it. “It’s like milking the cow and giving the cream away,” says Patrick Lucash of Lucash Trucking in Petersburg, Ohio.

There’s also the possibility of being ripped off on the revenue split by a disreputable carrier. “We’ve had carriers with two sets of books,” says Paul Taylor, attorney for Truckers Justice Center in Minneapolis.

For some small-fleet owner-operators, the worst part of leasing to a large carrier is giving up independence. This affects management matters such as hiring, uniforms and dispatching, but also critical business decisions about what hauls to accept, both currently and in the near future. Some carriers demand a non-compete agreement that prohibits the small fleet from hauling for the large carrier’s customers for a certain period, Taylor says.

“Some guys won’t go any other way than under their own authority because then they can say, ‘No,’” says Linda Schriner, who operates ODD Enterprises in Corona, Calif., with her husband, Dale Dunn. Their operation is leased to FedEx.

“It’s given me a little bit of freedom,” says three-truck fleet owner Bruce Arnold of Rincon, Ga., who has remained independent. “I do have to answer to some people, but then again, I don’t have to answer to other people.”

That independence is every owner-operator’s dream, but is the extra freedom worth the hassle?

Choosing to run under your own authority “might mean 25 percent more to the bottom line,” Taylor says, “but you’re going to have more overhead: log books, photocopiers, drug tests.”

Arnold, for example, pays $70 for each drug test. “The DOT requires a pre-employment drug screen and that you test 50 percent of your employees once a year,” he says. He pays a certified public accountant both $50 weekly and $2,800 annually to handle his payroll and taxes, but he does most of the other paperwork himself. Permits, mostly for oversized loads, cost him $46,000 last year.

“If you give your drivers 25 percent [of revenue] and then factor in all the hidden costs of staying independent, you just can’t compete with the large carriers,” Lucash says.

Some larger carriers will sweeten lease deals for small fleet owners. “We do have a program in place for fleet owners where if they have between five and 19 trucks, they get a half penny more per mile per truck, and over 20 trucks pays a penny more per truck,” Meeves says.

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