Driving schools that partner with Groupon sell driving lesson packages at knock-down prices. Once the VAT and purchase costs are paid at the CBR, sometimes the driving school owner is already making a loss. Then, in addition, he has to give dozens of driving lessons in the package for free. Unfortunately, there is a driving school in every city these days that is destroying the local driving school industry in this way. It is For professional driving schools that follow the rules nicely virtually impossible to compete against this. Groupon is the laughing third, as it earns thousands of dollars per driving school owner.
Moreover, the consumer gets a completely wrong idea of normal driving lesson prices. With that, the damage caused by Groupon offers is many times greater than just the packages sold. Because a normal driving school owner needs about 50 euros per hour (that includes 21% VAT) to be able to practice his profession professionally and pay all the expenses. Then try explaining to consumers why your neighbor drives virtually for free. The driving school industry, which is already under severe pressure, is going downhill in this way.
Driving lesson packages
For example, a common offer is 199 euros for 10 driving lessons, Personal Declaration and a practical exam. Or 399 euros for 20 driving lessons, EV and a practical exam. Participating driving schools make a heavy loss on this, as often half the sales go to Groupon. The driving school can often pay for the exact purchase of the practical exam, EV and VAT from this (Groupon is liable for VAT on the voucher, but often charges the amount to the driving schools). That leaves nothing to cover costs for diesel, teaching car, labor, etc., etc.
For example, DRS Rijopleidingen from Breda currently has such an offer running at Groupon. Suppose someone buys the package of 20 driving lessons for 399 euros from DRS Driving Courses. The driving school gets 199.50 euros from Groupon. He has to pay VAT a 69.25 euros, purchase CBR a 90.90 euros, EV a 23.80 euros. That means that he has 199.50 – 69.25 – 90.90 – 23.80 = 15.55 euros margin on the Groupon package to pay his own costs for 20 driving lessons and one hour practical exam. That’s a paltry 0.75 cents per driving lesson.
According to Groupon, the offer in this case serves mainly as a marketing tool to get new customers. “In addition, the added value is in selling extra lessons and word of mouth. Fast learners need a minimum of 30 lessons to succeed. Students do not transfer to another driving school once they are in,” the Groupon spokesperson informed.
With arguments like these, driving schools are persuaded to participate in the action. But is that right? Suppose a student needs 35 driving lessons until the exam. Should he be satisfied and purchase those separate driving lessons in addition; it costs 37.50 incl. at this driving school. VAT (30.99 euros excluding VAT). So with sales of 15 driving lessons a 30.99, the driving school owner still makes a revenue of 15 x 30.99 + 15.05 margin Groupon package = 479.90 euros. That is for the entire driving course of 35 lessons plus exam an average lesson price 13.33 euros excluding VAT.
If we subtract from that the cost of diesel (3 liters per hour = 3.60 euros), he is left with 9.73 euros per hour. With this, all essential operating expenses still need to be paid, such as various insurances, purchase and maintenance of teaching car, road tax, other operating expenses, etc. That means he himself is left with virtually nothing in salary for full work week. The owner of DRS would not offer an explanation. But everyone understands that this simply cannot be done at a company. At least, not if the driving school owner does everything “white. And has no additional benefits or “other income.
And then we assume that 100% of the enrolled students purchase additional loose lessons. That will not always be the case. The student can also say after 20 lessons, “I want to go on practical exam now. If I fail, I will go to the next driving school.” Although that will no doubt lead to arguments, because of the Groupon terms that the driving school determines when the student may take the exam. And that the package is only valid with a full driving course. But, of course, the student has bought a complete package of, say, 20 lessons + exam. So the driving school is obliged to offer that then.
As of Monday, Jan. 14, the counter at DRS already stands at a whopping 29 driving lesson packages sold. If students on average buy the package of 15 lessons plus exam, it means he will have to give at least 450 free lessons in the coming months. Because the groupon can be used until July 10, 2013. Thus, with a 40-hour work week, he is without income for the next three months. By the way, it is salient that this driving school owner states on his website, “Loose lessons should be paid in cash in the car, unless otherwise agreed with instructor.”
Another example. Verkeersschool Sens from Amsterdam currently has an offer that students can choose from the following package: € 299 for 10 motorcycle driving lessons, AVD exam and Personal Declaration, € 349 for 12 motorcycle driving lessons, AVB & AVD exam and Personal Declaration, € 399 for 14 motorcycle driving lessons, AVB & AVD exam and Personal Declaration. Twenty-six packages have already been sold.
The owner of Driving School Sens confirms that half of the sale price goes to Groupon and he has to pay the full VAT himself. Thus, if students pass after 14 driving lessons (which is not unusual in category A), he suffers a heavy loss. His return is then 399 euros – 199.50 Groupon – 69.25 VAT – 101 AVD – 52 AVB – 23.80 EV = 46.55 euros negative! So the driving school pays tens of dollars, to give someone a driving course. But even if someone needs some extra driving lessons, they can never recoup that with a lesson price of 45 euros.
“The Groupon offer I do for brand awareness,” said the Sens driving school owner, who says he employs three instructors who provide the driving lessons. “I don’t have this driving school for the money. I already have enough of that privately. I have this riding school for fun. I love riding motorcycles.”
In general, one could say that when an entrepreneur runs a business with staff without seeking to make money from it, one almost begins to think of money laundering. By the way, the driving school industry is quite suitable for that. Bring in a lot of students via predatory pricing with Groupon, then sell a few more individual lessons to your student base on paper. And the black money is then white. Try competing with that as a professional driving school by neatly adhering to the tax rules.
Driving school promotions are rife. This kind of offer destroys the professional driving school industry, because there is no way to compete against this in a normal way. Check out some other Groupon promotions of driving schools with knockdown prices currently running: