|Industry||Transportation Network Company (TNC)|
|Founder(s)||Logan Green, John Zimmer|
|Headquarters||San Francisco, USA|
|Key people||Logan Green, John Zimmer|
Lyft is a privately held, San Francisco–based American transportation network company. The company's mobile-phone application facilitates peer-to-peer ridesharing by enabling passengers who need a ride to request one from available "community drivers". Lyft's tagline is "your friend with a car" and the company claims that its service generally costs about 30% less than the price of a similar-length cab ride. Lyft drivers are distinguished by a pink, fuzzy mustache placed on the front of their vehicle.
As of April 2014, Lyft operates in 60 US cities, including San Francisco, Los Angeles, San Diego, Sacramento, Seattle, Chicago, New York City, Washington D.C., Boston, Charlotte, Denver, Dallas, Atlanta, Baltimore, Phoenix, Minneapolis/St. Paul, St. Louis, Columbus, Indianapolis, Nashville, and Pittsburgh.
Lyft was launched in the summer of 2012 by Logan Green and John Zimmer as a service of Zimride, a ridesharing company the two founded in 2007. Zimride focused on ridesharing for longer trips, often between cities, and linked drivers and passengers through the Facebook Connect application. Zimride eventually became the largest rideshare program in the United States (U.S.) and some Zimride users developed lasting friendships.
Similar to Zimride, Lyft requires all drivers and passengers to sign up with the service through their Facebook account. Drivers and passengers rate each other on a five-star scale after each ride, and the ratings establish the reputations of both drivers and passengers within the network. Unlike traditional taxis, Lyft drivers do not charge fares and instead received "donations" from their passengers.
In May 2013, Green and Zimmer officially changed the name of the company from Zimride to Lyft. In June 2013, Lyft completed a US$60 million Series C venture financing round led by Andreessen Horowitz, increasing the total amount raised to US$83 million—the other investors were Founders Fund, Mayfield Fund, K9 Ventures, and Floodgate. In July 2013, Lyft sold Zimride to Enterprise Holdings, the parent company of Enterprise Rent-A-Car, to enable the company to focus exclusively on the growth of Lyft.
A promotional stunt was run by Lyft in November 2013, whereby drivers dressed in zombie costumes on Halloween. The promotion only involved 50 San Francisco-based drivers, who also distributed candy and Lyft discount codes. During this month, the company also announced that it planned to discard its donation-based system in the state of California, after a decision from the California Public Utilities Commission (CPUC) rejected the claim that payment for Lyft's transportation services is voluntary for passengers.
In late 2013, Lyft trialled the "Prime Time Tips" concept in the city of Los Angeles, providing drivers with a surcharge of up to 25 percent during peak traffic hours. The company explained that the surcharge concept aimed to provide Lyft drivers with "a greater incentive to drive when the community needs them most".
Following the launch of the "Happy Hour" discount feature on March 18, 2014, a US$250 million funding round was announced by Lyft on April 2, 2014, with pre-existent investors providing further support to the company. New investors were also secured for the funding round and were identified as Coatue, Alibaba and Third Point.
Due to regulatory barriers in New York City, the company eventually decided to significantly alter its business model to establish Lyft in the East Coast location. The relaunch of the company, which had previously attempted to operate in the state of New York, occurred on the evening of July 25, 2014 and, in accordance with the Taxi and Limousine Commission (TLC) and the approval of the Manhattan Supreme Court, only drivers registered with the TLC were permitted to drive Lyft-branded vehicles in New York City. Lyft's signature pink mustaches remained in use for the relaunch.
To address the regulatory barriers and opposition that Lyft has received since its launch, the company employed the services of two lobbying firms with strong links to the Republican Party, an action that was revealed in disclosure forms filed with the United States Senate in April 2014. Lyft's engagement of the two firms—TwinLogic Strategies and Jochum Shore & Trossevin—occurred six months after ridesharing competitor Uber hired a lobbying firm, with both occurring during a period in which ridesharing companies faced intense pressure from municipal boards and state legislators throughout the U.S.
Lyft identifies the following screening processes for the purpose of ensuring safety:
- Department of Motor Vehicle and personnel-type criminal background checks
- In-person interviews by Lyft employees
- Vehicle inspections and a two-hour training and safety session
- Drivers must be 23 years or older and have had a driver's license for more than 3 years
- Zero tolerance drug and alcohol policy
Although Lyft drivers are classified as independent contractors, Lyft also insures each driver with a US$1 million "excess" per-occurrence liability policy. Any driver averaging less than a 4.5 star rating by users is dropped from the service. The company claims that its safety precautions, as well as a community focus, has led to a trustworthy reputation, whereby the majority of Lyft passengers are females aged 18 to 35.
Riders must download the Lyft app onto their iPhone or Android-based phone, sign in through Facebook Connect, and then enter a valid phone number and credit card details. Upon opening the app, a map displays the locations of the nearest Lyft drivers. After a request is made, the app shows the driver's name, the ratings of previous passengers, and photos of the driver and car.
Regulatory issues in the United States
As of July 2014, Lyft continues to negotiate legislative and regulatory issues, and has been criticized by established commercial enterprises, such as taxi services, and government bodies.
In the second half of 2012, the CPUC issued a cease and desist letter to Lyft, as well as ride-share companies Uber and Sidecar), and fined each US$20,000; however, a 2013 interim agreement reversed the Commission's action. In September 2013, the CPUC unanimously voted to make the agreement permanent, creating a new category of service called "Transportation Network Companies" (TNC) to cover Lyft, UberX, Summon, and Sidecar, making California the first state to recognize such services. As part of the September 2013 ruling, the CPUC also rejected Lyft's business model, whereby “payment for rides arranged through their apps is voluntary,” explaining that it believes the company is engaged in compensation-based transportation. Lyft subsequently informed the media that it planned "to move away from a donation-based model in California".
A cease and desist letter was sent to Lyft from the San Francisco International Airport (SFO) in March 2013, explaining that the airport is operated by the City and County of San Francisco and the Airport Commission, and Lyft does not possess a permit to operate on SFO premises. Similar to the CPUC issue, the employment of community drivers who are not licensed by the San Francisco Municipal Transportation Agency or the California Public Utilities Commission was the salient concern. Airport Director John Martin said in May 2014 that Lyft was able to apply for a permit in April 2014, but the application was not received by the SFO. In June 2014, Lyft was a cosignatory to a letter sent to San Francisco Mayor Ed Lee, calling upon him to facilitate a meeting with SFO representative, who had not responded to requests from Lyft. While Lee is an open supporter of TNCs such as Lyft, his response to the letter stated that he decided to defer the matter to "highly respected Airport Director John Martin and the Airport Commission."
In June 2013, Lyft, Uber, and Sidecar were served with cease and desist letters by the Los Angeles Department of Transportation, but all three companies continued to operate and offer their services in the city of Los Angeles.
On July 9, 2014, two days before Lyft's planned debut in New York City, the TLC declared Lyft an "unauthorized service", as the company did not have an operation agreement with regulators to demonstrate compliance with "safety requirements and other licensing criteria" in the city. Additionally, a cease-and-desist letter was received from the New York State Department of Financial Services, in which the agency stated:
Lyft has not complied with TLC's safety requirements and other licensing criteria to verify the integrity and qualifications of the drivers or vehicles used in their service, and Lyft does not hold a license to dispatch cars to pick up passengers.
The company responded by stating that their "safety standards…are more strict than what New York City taxi cabs or hired vehicles go through" and that they still planned to start service in the city by July 11, and Zimmer informed the TechCrunch publication on July 10, 2014 that the planned launch event, to be held in Bushwick on July 11, would proceed. However, city officials threatened to seize Lyft vehicles and took the company to New York Supreme Court on the day of their planned launch. The company then reversed course, promising "to work on a new version of Lyft that is fully licensed by the TLC, and we will launch immediately upon the TLC's approval".
On July 25, 2014, Lyft announced the resumption of the New York City operation, albeit as a service that does not qualify as ride-sharing due to TLC regulations. The company also announced that services in Rochester and Buffalo would be suspended as of August 1, 2014 pending the resolution of insurance and regulatory issues. The company's blog post states that the suspension will remain in place "while we work with the Attorney General’s Office and Department of Financial Services to align New York State’s insurance laws and regulations with emerging technologies of the 21st century." The company informed the media that it still intends to eventually transform their services in New York so that ride-sharing becomes available to customers in the state.
Upon expansion into Virginia in April 2014, the Virginia Department of Motor Vehicles levied a US$9,000 civil penalty against Lyft for failure to register as a transportation broker. The Department previously communicated with the company, informed management that Lyft needed to register to provides services inside the Commonwealth.
Scott Weiss, of Andreessen Horowitz, said that the decision to invest in Lyft was ultimately based on the company's strong community and transparency: "Lyft is a real community — with both the drivers and riders being inherently social — making real friendships and saving money." TechCrunch wrote: "You feel like you're in the car with a friend, and that's no mistake ... Whether it's bringing someone a sandwich for the ride or letting them choose the music in the car, Lyft drivers have their own budding community growing." The Los Angeles Times' review reads: "Lyft's marketing strategy, which is geared toward the young and technologically savvy, draws a relaxed and friendly demographic."
Like other ride-sharing services, Lyft received criticism from state government officials in multiple states for operating a perceived "unlicensed" taxi service. The most vocal opponents in the U.S. have been taxi and limousine operators and municipal taxicab commissions.
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