[New Wave] 'Franchise Taxi Activation' to Solve Taxi Problems

At the beginning of last year, two taxi drivers took their own lives in protest against 'Kakao T Carpool.' As the situation worsened, the government and the National Assembly launched a 'Social Grand Bargaining Organization' for the mutual development of taxis and platforms. After several discussions, a consensus agreement signed by all participants was reached. In July of last year, the Ministry of Land, Infrastructure and Transport announced the 'Taxi System Reform Plan for Innovative Growth and Mutual Development,' which concretized the agreement.

In the reform plan, the Ministry of Land, Infrastructure and Transport stated that it would institutionalize three types of 'platform taxis.' Among them, the one that the taxi industry and platform operators are most interested in is the 'platform franchise business.' As the word 'franchise' suggests, there is a franchise operator combined with the platform, and taxis participate as a kind of franchise store. It can be thought of as a method similar to chicken or coffee franchises. Currently, platform franchise taxi businesses include Kakao Mobility's 'Kakao T Blue' and KST Mobility's 'Macaron Taxi.'

Franchise taxis aim to have their own brand and differentiate themselves from existing regular taxis. First, franchise taxi drivers are contractually obligated not to refuse passenger calls. Since drivers cannot arbitrarily reject rides, passengers requesting short trips or rides to remote areas can easily use taxis.

Additionally, franchise taxis strive for safe and courteous service. In the case of Kakao T Blue, all drivers receive mandatory and regular training before starting full operations. To provide passengers with a comfortable and convenient boarding experience, air purifiers and smartphone chargers are even installed inside the vehicles.

Meanwhile, franchise taxis are leading the shift from the 'daily quota' system, where drivers pay a fixed amount to the company daily, to a 'salary system.' The salary system for taxi drivers contributes to providing uniformly high-quality service to passengers.

As a result, passenger satisfaction with franchise taxis is higher than with regular taxis. According to the '2019 Kakao Mobility Report,' the average passenger rating for regular mid-sized taxis was 4.74 out of 5, while the rating for the franchise taxi Kakao T Blue was 4.81.

The Ministry of Land, Infrastructure and Transport also announced in the taxi system reform plan that it would ease related regulations to promote franchise businesses. It plans to encourage diversification of taxi models, vehicle exteriors, and fare systems different from regular taxis to provide differentiated services. The minimum number of taxis required for franchise taxi businesses will also be adjusted from the existing 4,000 or more to about a quarter of that, 1,000 or more, lowering the entry barrier.

Nevertheless, it is still not easy to find such branded taxis around us. Even for Kakao T Blue, the number of taxis is insufficient compared to user demand, making usage inconvenient at times. From the perspective of taxi company managers and drivers, there is still no certainty whether franchise taxis are a 'sure' way to earn more money than regular taxis. Although the government has the will to promote franchise taxis, related regulations are not improving as quickly as expected.

Kakao Mobility launched 'Waeego Blue' in March last year in partnership with Tago Solutions and acquired Tago Solutions in September to operate franchise taxis in earnest. Meanwhile, KST Mobility entered the franchise taxi business starting with a beta service in April last year and recently received investments from Hyundai Motor Group and NHN. However, there are limits to activating franchise taxis by platform companies alone. Full support and interest from the taxi industry and the government are necessary.

Of course, franchise taxis cannot solve all the long-standing issues related to taxis at once. However, without shaking the existing legal framework, they can be an important first step toward mutual growth and development between the taxi industry and platform companies. It is hoped that franchise taxis will contribute to innovatively transforming the taxi industry by providing consumers with enjoyable and convenient travel experiences.

Jaeho Lee, Director of Digital Economy Research Institute, Kakao Mobility