Manila, Philippines
geri@investmoney.com.ph

Business Idea To Explore: Taxi Cab Business in the Philippines

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Interested to be a taxi cab operator? I must admit I am eyeing that too. Some would say the taxi business is already saturated, but for a commuter like me who can’t easily find an available taxi during rush hour or Friday gimmick nights, then there’s still opportunity

Taxi by Ben Fredericson (xjrlokix), on Flickr


As follows are some building blocks as we try to build and understand the taxi business model. Gathered from reading forums on taxi operations, internet research and most especially, interviewing manong drivers.

Find A Franchise

To operate a taxi cab, or any public vehicle for that matter, one must have a franchise issued by LFTRB. In simple terms, this makes the vehicle public (yellow plate), for public and commercial use, and allows it to traverse a certain route, such as say Montalban to Cubao or Marikina to Ayala. If you don’t have a franchise but use it for public transport, then your vehicle is considered colorum. For taxi cabs, the franchise is more or less flexible, such as Within Metro Manila to Any point of Luzon. The franchise is good for a certain number of years, like 5 years, and according to drivers, costs around Php120k to Php150k. The bad news is, LTFRB is no longer releasing new franchises. Maybe it does not want to saturate the market.
So is this a barrier to entry? Slightly. The way to get a franchise then is to locate those who are willing to sell theirs, for various reasons. Like those migrating, no longer interested to operate a taxi cab or to renew, those suffering losses, etc. And there are franchise resellers to be found. Also, some drivers suggest inquiring in bigger taxi companies, those who have dozens and dozens of units because at times, these companies allow small players and star-ups to buy partial ownership of their taxi units and their franchises. Once you have a franchise, this will be transferred to your name. So what will you name your taxi cabs?
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Find a Vehicle

Again there are many ways to do this, either brand new or second-hand. There are lots of taxi cabs for sale in the internet. Car companies also offer basic car models fit for use as taxi cab. Note though that not all car brands allow their models to be used as taxis. One quick example is Honda. Lots of banks offer taxi cab financing or auto loans, but usually for a minimum number of units and for a partial down payment. Similarly, car companies offer financing and leasing services. Your major considerations should include how old the vehicle is, how it looks like and how’s the performance. Older models (no offense meant) may tend to be less fuel efficient, more prone to breakdowns and accidents (hence repair costs) and attracts less passengers as it may come across as unsafe, unreliable, uncomfortable and mahina ang aircon. Watch out too for regulatory policies, I think there is an upcoming rule wherein public vehicles will have a mandatory maximum age, after which it has to be replaced already. In choosing a vehicle, you might want to bring an automotive technician with you for expert assessment.
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Find A Driver

A good, reliable, trustworthy driver that is. Or drivers. This can be the make or break of a taxi cab business, according to cab drivers themselves. If you have good working relationship with your driver, then you can expect him/her to be honest and transparent with you. Likewise, this should translate to good customer service which is crucial. Remember, customers would tend to remember the taxi name and plate number in case of bad experience (more than the driver), which affects your reputation as the registered taxi operator.
Usual daily boundary (or quota) ranges from Php1,000 to Php1,500 net per day, for drivers who use the taxi for 24 hours. If you have a second driver, then they can alternate. The second driver can use the taxi the next day while the first one takes a rest day. Or they can do 12-hour shifts per day. At Php1,500 quota, that’s roughly 15 trips at average of Php100 per trip (some smaller, some bigger especially given the traffic). The rest is his/her take home pay. For those who only have one driver, make sure s/he gets enough rest and does not drive the whole 24 hours. This is risky not just for the driver, but for the business.
The driver shoulders the fuel costs, violation penalties, and what is left is his take home pay. Of the many drivers we have interviewed, they all said that they can easily reach the Php1,500 boundary. Some can even park on the roadside and get some sleep (i.e. 1am to 5am) if they are on graveyard shift and still have enough take home pay before returning the unit by 6am. The operator meanwhile usually shoulders car amortization payments, repair, tune-up and check-up costs, payments in case of accidents (that’s why you need a good driver), regulatory and registration costs.
Operators also have reward systems to encourage good performance from drivers. Some offer a sack of rice or groceries for example when quota was hit daily for the whole month. Or allow lower quota during weekends. In case of deficits, some operators allow make-ups, as long as the deficit gets compensated and paid say within the week. Otherwise, driver cannot use the taxi as long as deficit is unsettled. The trick is to make your drivers, your employees, happy, so they deliver good customer service. Everybody happy.
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Rough Profit Analysis

Assuming you got a second hand taxi unit worth Php400k, on bank auto loan for 3 years at 8%. 

Down payment is say 30% or Php120k. Amortization on the loaned amount (Php280k) is Php8.8k. 


Cost of new franchise, regulatory tests and registration requirements, paperwork, say Php180k. Provisions for repairs, insurance, driver rewards, say Php5k a month. 

Total initial investment is Php580k (Php120k cash out, Php280k auto loan and Php180k franchise costs etc). Quite big initial investment especially if you compare to food carts franchise.

While monthly expense is approximately Php13.8k (Php8.8k amortization and Php5k provisions).

At Php1.4k boundary, 22 workdays = Php30.8k
At Php1k boundary during 4 Saturdays (Sunday as rest day) = Php4k

Total revenue = Php34.8k

Adjusted Revenue = Php31.3k (assuming boundary is only reached 90% of the time, and you’re kind)

Total expense = Php13.8k
Total Net Income = PHP17.5k
ROI in ~33 months

In 33 good months, you have recovered your Php580k investment. Assuming good months.

More inputs? Let us know through the comments box below.

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Photo: Taxi” by Ben Fredericson (xjrlokix)
Creative Commons License

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192 Responses

  1. Nayr says:

    Gud day,anong kuLay po ba ng kotse pwede sa taxi,balak ko po kasi kumuha ng avanza kulay blue.pwede po bang maging taxi po yun..thanks and god bless

  2. JF JF says:

    Plate Number Ending 1 and 2 Monday, 3 and 4 Tuesday and so on, till friday 9 and 0 ending plate, Ano pong unit ang nabili mong taxi? anong year model? magkano po pa boundary mo?

  3. Unknown says:

    ending plate number 1 and 2 is monday, 3 and 4 is tuesday, 5 and 6 wed., 7 and 8 thurs., 9 ,0 Fri.
    magkano po ang pa boundery mo? anong unit at year model ng taxi nabili mo?

  4. Geri says:

    Congrats on your new taxi franchise! Suggest you ask around other taxi drivers too para competitive incentive scheme nyo. Aside from boundaries I heard some who given sacks of rice and groceries pag Christmas, then if no absences or accidents for a period of time may incentive din. Those are just some.

  5. Geri says:

    Wow that's kinda pricey. Baka heavily regulated na ang taxi sa Baguio kaya they discourage new ones, hence limited supply, more demand, high price?

  6. Crissy Kim says:

    Hello!im a new taxi operator plase if anyone advice me about coding guideline incentives for keeping the driver .

  7. Unknown says:

    Hello!im a new taxi operator please recommend me an accountant i want to organize my tax .

  8. Tarakiboyz says:

    Taxi franchise in Baguio City is about P800,000.00!!! And it depends on the price made by seller.

  9. Anonymous says:

    what if you want a taxi cab business in the Philippines while you work in abroad. then you assigned some one to operate your taxi, how much or percent that can get the operator for the boundary if like 1500 a day the boundary.

  10. Anonymous says:

    if u buy 2nd hand franchise and ul change the name, of cors it means new business name and DTI is a pre requisite for acquiring or renewing franchise. its a requirement

  11. Anonymous says:

    using ordinary oil, u need to change it every 8.5k km and it depends what type of unit ur going to use., more volume of oil for bigger units of course.. systetic oil cost around 700/liter. while syntetic oil goes up to 17k km. tires normally last 3 – 6 months. tire cost 3k-5k, depending on brand

  12. Anonymous says:

    yes you can.. but each franchise will undergo hearing. but i suggest you better wait each franchise to expire before you change name so ul process it all in one go.

  13. Anonymous says:

    Hi,

    While I do not have any doubts about your computation and projected income, I think you should also consider unexpected events like when the driver is absent, or when the taxi cannot be taken out when the Metro is flooded, or when the taxi meets an accident, etc.

  14. Emil Casabar says:

    Hi! What are the tests we need to do in spotting a real or fake franchise? Thanks

  15. Emil Casabar says:

    Hi! What are the basic screening we need to take when spotting a real or fake franchise? Thanks

  16. Anonymous says:

    Sir Geri,

    Please elaborate the cost of franchise for OFW.
    http://ltfrb.gov.ph/media/downloadable/MCO2010-021.pdf

    thank you…

  17. Geri says:

    Thanks for sharing Jojo.

    I'm wondering why the franchise cost in Baguio is so expensive? I'm not sure what the current rates are here in Manila but I was thinking rates in Baguio would be cheaper. Unless they are limiting the franchises to avoid congestion there in Baguio.

    If start up costs are that big and payoff period is that long, I myself would think twice or thrice before venturing into taxi business.

  18. Geri says:

    Thanks for sharing Jojo.

    I'm wondering why the franchise cost in Baguio is so expensive? I'm not sure what the current rates are here in Manila but I was thinking rates in Baguio would be cheaper. Unless they are limiting the franchises to avoid congestion there in Baguio.

    If start up costs are that big and payoff period is that long, I myself would think twice or thrice before venturing into taxi business.

  19. Jojo says:

    Hi thanks for the information!

    I have a Taxi for almost a year now here in Baguio (Boundary is usually P700-800 for 12 hours)

    My Experience is this.. Taxi cost New (800k) + Franchise (600k – 2nd Hand)
    Ex.

    700 Per day x 26 Days = Around 18k
    1 Month = 18k
    1 Year = 216k
    Real Income = I have around 180k left a year (change Tire, Monthly Tax, change parts, monthly emission testing etc etc., Maintenance.)

    So 180k /year. So it takes around 8 Years to get my investment back..
    That is why I am thinking twice if it is a good business!

    But after 8 years.. I start to earn.. lets add 7 years until the Unit Phases out!
    After 15 years I earned minus investment of 1.4m is 1.26 million.
    I then need to buy a new unit.. Until then I assume the cost would be 1 million!
    So I earned after 15 years only 260k

    Please correct me if I am wrong

  20. Anonymous says:

    Sir Geri, follow-up lang po. Correct me if im wrong. Ang ibig po ba nyang sabihin 2 TAXI with 1 franchise?

    2 Avanza po kasi gusto ko para mag-umpisa para iwas baha. sana po ay matulungan nyo ako. OFW din po ako.

    salamat sa Article nyo, almost 2 months na ako ng rereseach haggang sa nakita ko eto. laking tulong para magka-idea.

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