This Ride-Hailing Platform is Built Different. What Does That Mean for Drivers?

A new generation of cooperatives is looking to revamp the gig economy by returning earnings and decision-making to the workers. But can the worker-owned cooperative model prevent them from falling into the same pitfalls as established ride-hailing and delivery apps? 

At first, the tech-enabled gig economy looked promising, offering contractors and customers mutually beneficial services based on sharing their vehicles, talents and time. In practice, it allowed companies like Uber and Lyft to take over markets while investing little to nothing in the workers or the vehicles that generated their profit. With that market dominance secured, gig workers say they are earning less and working more, motivating some to look towards worker co-ops as a solution.

“In the beginning, you could work eight hours and make your $200, $300 a day, and that was great,” said AJ Attia, chairman and co-founder at the driver-owned ride-hailing and delivery platform Fare Co-op. “Today, in order to make that $200, $300, you're actually working 12 to 16 hours a day. And that's because of how much they've saturated the market with drivers.”

While Uber told the New York Times last month that it hasn’t increased the percentage it keeps from each fare, the company acknowledges that drivers are taking less money home thanks to higher costs. That’s where cooperatives like Fare come in. The platform is owned by its drivers and not beholden to shareholders, so decisions are made by the people behind the wheel.

“We created a federation, and in each city, we have a local that is attached to that federation,” Attia said. “The locals have the ability to do many different things, such as set their own prices in that area.”

Drivers who buy into the co-op earn 90 percent of the ride fares after fees, though this goes down to 85 percent after the payment platform Stripe takes its cut on instant payouts. This higher percentage means drivers could make nearly double what they do through Uber or Lyft, according to a Fare case study. 

A referral program also allows drivers and passengers to earn income from referrals into perpetuity, meaning those who refer a driver or passenger to Fare earn a cut every time their referral books or completes a ride. Attia credits Fare’s growth in lieu of a major marketing budget to the referral program. A quarter of the company’s net profits are used to pay out on referrals.

When asked about what all of this looks like in practice, Attia gave the example of a co-op member in Redding, California, who joined three months prior and logs five to 10 rides per day. "He's actually making double the amount of money that he would be making with Uber," Attia said. "Then on top of that ... He's making close to another $1,000 a month just from his referrals.”

But what’s to prevent Fare from going the same direction as other apps with too many drivers and too few rides to go around? The company made a commitment to stop accepting new members in a given city when it sees that drivers are logged in for eight hours at a time without reaching a $200 to $300 earning threshold, he said.

As a new operator, the cooperative isn’t at that point yet. Instead, one of its biggest challenges is helping drivers understand the importance of seeking riders through referrals, as opposed to earning through ride fares alone.

“It's going to take a lot of hard work from all the participants who are involved,” Attia said. “You really have to be out there talking to your customers. Building your own little book, as we say, of customers.”

Fare is growing fast. It’s fully operational in California and applied for licensing in Oregon, Arizona and Georgia. It was also contracted as the official ride-hailing platform for both the TCL Chinese Theatre and the Dolby Theatre in Hollywood, California. “We had no idea that we would have been doing that within seven months of us launching,” Attia said. 

The cooperative is also rolling out Fare Eats, Attia said. The food delivery option operates under the same cooperative model, with member businesses charged 5 percent for each delivery. That’s a significant drop from Uber Eats, which takes a 15 to 30 percent commission, raising operating costs for retailers and prices for consumers.

In addition to lower prices, Fare’s 2023 pilot in Canada suggests consumers might get better service as well. The pilot lasted for a year and involved more than 80,000 deliveries with almost no chargebacks, Attia said. He attributes the high accuracy rate to the cooperative model and the ownership that comes with it.

“They really took pride in what they were doing,” Attia said. “They made sure that the orders were right. When they would deliver the food, they said, ‘Listen, just make sure that the food is okay. If there's any problem, I'm going to go and change it for you.’”

The founders hope this model allows gig workers to secure their futures through ownership, higher pay and better working conditions. But it's also in preparation for a future with driverless vehicles. Fare aims to empower its drivers to finance and own those vehicles instead of being replaced by them, while still supporting those who want to drive for as long as they can. Attia said he sees the potential for the Fare model to protect workers across industries in this way.

Danny Golnik, a co-founder and chief operating officer at Fare, agreed. “If we're successful in applying this model to the rideshare and the gig work industry, then it can be applied to many other industries that are affected by automation.”