New minimum-revenue guarantee program for leased owner-operators

user-gravatar Headshot

The past few years have been a time of growth for the CloudTrucks carrier. The company's core of leased owners running within the self-dispatched "virtual carrier" platform has more than tripled in size, judging by the company's MCS-150 filings, since July of 2021. Then, approximately 70 owners were leased there. Along with the growth has come a degree of stability such that, yesterday, CloudTrucks announced a minimum revenue-guarantee program CEO Tobenna Arodiogbu said it's wanted to offer for quite some time. 

“The freight market can be challenging, and we recognize that many owner-operators need a reliable safety net right now,” he said. “When the market is challenging, owner-operators may feel the need to give up their entrepreneurial endeavors for earnings stability." The company designed the revenue-guarantee program "to offer our drivers a bridge during income fluctuations and support their independence.”

The program intends to backstop revenue for leased owners in what's been a topsy-turvy market for brokered freight, which represents the majority of freight within the CloudTrucks platform. At once, the company's made strides with some shippers moving freight through the network as well as various contracts and technology integrations with brokers that "give us the confidence to launch a program like this," he said. 

CloudTrucks KW pulling a conestogaMost of the mix of freight in the CloudTrucks platform moves on dry vans and flatbeds.CloudTrucks

The basics of the deal for CloudTrucks-leased owners: 

  •  An owner who averages at least 2,000 loaded miles a week over any two-week period will receive a guarantee of at least $4,500 a week, or $9,000 for the two-week period -- for a minimum $2.25/mile in revenue. (The revenue guarantees do not reflect deduction of CloudTrucks' platform-access 18% fee, the standard for leased owners there.)
  • Average at least 1,500 loaded miles weekly over any two-week period: The guarantee is worth $3,250 a week ($6,500 over the two weeks) -- minimum $2.16/mile. 

[Related: Truckers' New Year's Resolutions: Get closer to the customer, and back to basics on costs]

CloudTrucks guarantee for 2000-mile ownersThe company offered this chart showing an example of how the guarantee might apply to a 2,000-loaded-mile/week owner running below the guarantee threshold.CloudTrucks

To discourage cut-rate behavior in the network, terms and conditions in the program require owners to hit or exceed a minimum rate per mile for all their loads hauled in any two-week period covered. If you don't meet or exceed the minimum, the revenue guarantee doesn't apply. For both loaded-miles groups, that minimum is a $1.40/mile average for revenue, calculated for each two-week period prior to CloudTrucks' 18% service fee to leased owners negotiating loads within the platform. 

Few CloudTrucks-leased owners are averaging below that minimum $1.40 today, Arodiogbu said, meaning the guarantee could be meaningful for many during any two-week period where, despite miles run above 1,500, revenue falls short. 

What the company hopes to achieve is no doubt better retention of leased owner-operators. But also better income performance for those owners. "We see a lot of variance in performance" among owners working within the platform, he said. Two owner-operators might live and generally operate "in the same area," for instance, "and one is significantly outperforming the other." 

In developing the program, CloudTrucks looked at its top 25 percent of income-earning owners and compared them to the bottom 25%. "We’re hoping to help the bottom 25 percent of drivers to make better decisions to rise up to the top," Arogdiogbu said.

[Related: In the self-dispatch weeds: How to understand cost/profits in relation to time for better decision-making]

At the same time, "even the best" owner-operators "hits a rough patch, and this is there to support them when they do," he said. Arodiogbu also views the revenue-guarantee offer as a kind of insurance policy against the cascading effects that can start with "one bad day, one bad load that leads to a lot of stress about making money for the week," he said. The rush to make up time and money can lead an owner to make "decisions that are not favorable to you." The program, he hopes, can "lower the stress level to [help owners] make the better decisions for themselves."

The guarantee is certain to come into play for some owners in the network, he said. "This will cost us some amount of money." But he's hopeful that "the benefit of it over time is a win-win for us and for the drivers, once that stress level is reduced." 

CloudTrucks offers a variety of other support programs for owners leased there, from fuel discounts at more 200 independent truck stops to its CloudCare program for insurance, wellbeing and financial coverage through a partnership with Avibra, and self-service maintenance savings funds to help set aside money to address maintenance issues as they arise. 

A press release from the company announcing the guaranteed-revenue program quoted Tory Matthews, owner-operator of Mr. Boone Logistics. “CloudTrucks is helping us out in the tough market,” Matthews said. “We still get the flexibility of maintaining our own business -- picking our own loads, running regionally and being home on the weekends, if we choose to.”

[Related: Clark Transfer: Minimum revenue guarantee for leased owners gaining traction]