Faced with what they view as an existential threat to their business models in the form of highly restrictive legislation, Uber and Lyft are said to be considering a dramatic shift that will change the way they connect to their drivers.
The background: California has a law that forces so-called gig economy companies like Uber and Lyft to provide workers with employment benefits, as opposed to treating them as outside contractors. Adhering to such legally mandated provisions would, at least in the nation's largest state, put their ability to survive in question; they argue that they are tech platforms, not transportation businesses. So far, California officials have disagreed. And Uber, at least, has said that it could stop operating in California under these circumstances.
Now, the New York Times writes, both companies "are seriously discussing … licensing their brands to operators of vehicle fleets in California … The change would resemble an independently operated franchise, allowing Uber and Lyft to keep an arms-length association with drivers so that the companies would not need to employ them and pay their benefits."
Uber apparently operates with this model in Germany and Spain.
- KC's View:
There is one small problem with the franchise model, the story says - both Uber and Lyft have been so disruptive in California that there aren't a lot of fleets large enough to become effective franchisees.
That said, they have to figure out something … because they can't just walk away from California. It seems that they are being forced to do what we always argue every company should try to do - work on ways to disrupt their own existing businesses. The result may provide lessons and metaphors applicable to other businesses.