- WHITE PAPERS
My wife, Leslie, isn't a complainer. But since gas prices in Louisville, Ky., went up to $2.15 several weeks ago, she's been on the warpath.
As a home infusion nurse (meaning she administers medical treatments intravenously), she drives
Steve Coomes, Senior Editor
After some detailed calculation of every cost I could think of — including her monthly payment and depreciation — I figured she comes out losing $1,955 a year driving for her company.
To the drivers reading this, I can say she feels your pain.
To the operators reading this, I say this: Most of you are underpaying your drivers.
Don't believe me? Read the following numbers. They don't lie. My formula works on the following particulars:
* 3-mile delivery area, maximum roundtrip of 6 miles.
* National gas price average on April 19 was $2.24 a gallon.
* 20 runs per shift (6 miles per run, 120 miles per shift).
* Per-run reimbursement rates of 50 cents, $1, $2 and the Internal Revenue Service standard of 40.5 cents.
Note: The last figure in each block is an annualized maximum reimbursement based on the IRS standard.
If a car gets 40 miles to the gallon, it burns three gallons of gas (3 x 2.24 =$6.72).
At 50 cents a run, this driver gains $3.38.
At $1 per run, this driver gains $13.28.
At $2 per run, this driver gains $33.28.
At the IRS reimbursement rate (40.5 cents), this driver gains $41.88.
* Total IRS reimbursement yield for 100 shifts a year: $4,188.
If a car gets 30 miles to the gallon, it burns four gallons of gas (4 x 2.24 =$8.96).
At 50 cents per run, this driver gains $1.04.
At $1 per run, this driver gains $11.04.
At $2 per run, this driver gains $31.04.
At the IRS reimbursement rate (40.5 cents), this driver gains $39.64.
* Total IRS reimbursement yield for 100 shifts a year: $3,964.
If a car gets 20 miles to the gallon, it burns six gallons of gas (6 x 2.24 =$13.44).
At 50 cents per run, this driver loses $3.44.
At $1 per run, this driver gains $6.56.
At $2 per run, this driver gains $26.56.
At the IRS reimbursement rate (40.5 cents), this driver gains $35.16.
* Total IRS reimbursement yield for 100 shifts a year: $3,516.
If his car gets 10 miles to the gallon, he burns 12 gallons of gas (12 x 2.24 =$26.88).
At 50 cents per run, this driver loses $16.88.
At $1 per run, this driver loses $6.88.
At $2 per run, this driver gains $13.12.
At the IRS reimbursement rate (40.5 cents), this driver gains $21.72.
* Total IRS reimbursement yield for 100 shifts a year: $2,172.
All these figures do is calculate gas usage. They don't account for a monthly payment, depreciation, maintenance or insurance. But since I know what it costs to own and operate my wife's car (including a $250 per-month payment, insurance on an excellent driving record, plus regular maintenance, tires, fuel, etc.), let's take a conservative stab at what it might cost each of the four above car owners to drive 12,000 miles a year (a figure based on 100 shifts like the one described above)
40 miles per gallon: - $3,700 + $4,188 IRS reimbursement = $488
30 miles per gallon: - $3,924 + $3,964 IRS reimbursement = $40
20 miles per gallon: - $4,372 + $3,516 IRS reimbursement = - $856
10 miles per gallon: - $5,716 + $2,172 IRS reimbursement = - $3,544
Even in the best-case scenario the driver is walking away with just $488. But based on the kinds of cars most drivers use and the city driving they do, what's the chance he's getting 40 mpg? And what's the chance a delivery driver has a modern-enough car that actually is that fuel efficient? The driver of the 10 mpg beater is taking a bath, and even the driver of the 20 mpg car is flat-out losing money.
And none of this accounts for serious repairs such as new starters, alternators, radiators, etc.
I've heard it time and again from the largest chains to the smallest independents: "Between the hourly wage we pay and the tips they receive, we believe our drivers are adequately compensated."
I don't buy that for several reasons. Delivery drivers have almost no power at all to control their tips. Unlike a waiter, they have almost no opportunity to finesse the sale or give customers much in the way of special treatment. Their job is to bring the pizza to the door quickly, smile, say thanks, and get back to the store and do it again.
Also unlike waiters, drivers' tips don't hinge on check averages -- as well they shouldn't. It takes no more work to bring 10 pizzas to the door than it does one, customers know it and they commonly tip accordingly.
And who else in the customer service end of the foodservice industry has to spend so much on the "equipment" necessary to do the job? Servers might have to buy a uniform and shoes, which might cost a couple hundred dollars. But even the crummiest delivery car probably costs a couple grand, plus insurance.
This is interesting to note: Part of why my wife's boss won't pay her more for mileage is he believes that's all her car is worth to the company. And while that statement is ludicrous, because it's much cheaper to use her car than have the company buy one, at least the boss separates the job from the car. He doesn't say, "Hey, you're paid well, so pay for your car out of that."
Why then, do pizza operators expect low-wage-earning drivers to provide them a cheap shipping fleet for their products?
The right thing being done
Since writing my last commentary on how high gas prices could benefit the pizza industry, I've gotten two messages on the topic of reimbursements: one from an operator who wrote how thrilled he's been since dumping delivery years ago; and another from a multi-store chain franchisee who bucked up and is paying the IRS standard mileage reimbursement. (Currently he wants to remain anonymous, but he said he will soon have his operations manager discuss the results in detail.) He called paying drivers the IRS minimum "a wash" to the bottom line, but more importantly, he believes the move will protect him from burgeoning wage and hour lawsuits expected to hit the pizza industry (yes, he operates in California). Following the IRS standard does require diligent follow-up by store managers, but he said it's worth it.
Oh, and the drivers are pleased with it also.
Time to consider following his lead, operators.