OCR F297 (Candy Cabs) - External Influences

The main external infuences affecting Candy Cabs include:

Macro factors
[Note: no international implications at all in this case study]

Labour market & unemployment

- Certainly of interest to Candy Cabs (employs 31 drivers - mixture full & part-time)
- But, no suggestion of significant strategic issues with the labour force (e.g. absenteeism, recruitment, retention, customer service)
- Higher unemployment in the UK during 2009/2010 likely to increase the available supply of potential drivers + limit any pressure on wage increases (good news for costs & growth options)
- Unclear what the impact of unemployment might be on demand for taxis - the recession in general has weakened demand (some reports suggests around 20-30% lower revenues)

Business cycle / economic growth

- The economic downturn will be a concern for Candy Cabs - lower demand & potentially new entrants into the market (depending on the attitude of local authorities to licensing)
- Candy Cabs business model is unusual for the industry. The vast majority of private hire operators are self-employed; Candy Cabs employs its own drivers: implication -the break-even point is much higher and the business is more exposed to a downturn in demand
- Government spending: an indirect link to the financial position of local authories, who are coming under increasing budgetary pressure to reduce costs. More rigorous approach to contract pricing for local authority work can be expected (lower margins?)
- Taxation: indirect taxes will impact Candy Cabs. Fuel duties in particular will affect operating costs, particularly if fuel price increases cannot be passed onto price-sensitive customers. Note - the net margin on revenue from passing trade is estimated at just 10% [line - 100]

Legal issues
Taxi driver contracts: raises several legal issues
Candy Cabs is unusual - it employs drivers directly; they are covered by their contract of employment.
Boddie’s proposal to transfer driver employment status to self-employed has significant legal implications - effectively the drivers would be dismissed (employment rights to redundancy & other protections) followed by being re-employed
Boddie proposal - Candy Cabs effectively becomes a franchisor with the drivers becoming franchisees - will require a legally-robust franchise agreement
Vicarious liability [line 114] - franchisors can still be held liable for the torts of their franchisees

Political & social issues
Nothing significant in the case study
General move towards part-time and flexible working may make it easier to recruit drivers
Some potential ethical issues raised by the proposal to joint venture with Traylen Motors and provide pre-paid vouchers to elderly customers. Some potential there for mis-selling

Environmental issues
Nothing significant raised