Kakao Sets Taxi Reform Within the Year... But a Long Road Ahead

Franchise Fee Below 3%... Taxi Industry Reform Kicks Off
Complex Franchise Structures to Solve... Operator Conflicts Also a Challenge

Kakao Mobility has firmly stated that it will prepare a taxi business restructuring plan within the year. First, it will start by lowering the actual commission rate of franchise taxis (Kakao T Blue) to below 3% and simplifying the dispatch system. Kim Beom-su, Kakao founder and head of the Future Initiative Center, showed a progressive will by declaring a "re-examination of all businesses from the ground up." However, since the commission reduction and other issues are intricately intertwined and there are disagreements among taxi operators, there is still a long way to go.

Franchise commission below 3%... Dispatch system also restructured

On the 13th, Kakao Mobility held a relay meeting from 2 p.m. to 8 p.m. with four taxi organizations (National Taxi Labor Union Federation, National Democratic Taxi Labor Union Federation, National Private Taxi Transport Business Association Federation, National Taxi Transport Business Association Federation) and the Franchise Taxi Council (Korea Private Taxi T Blue Council) to discuss the taxi business restructuring plan.

[Image source=Yonhap News]

First, Kakao Mobility decided to lower the franchise taxi commission rate from the current maximum of 5% to below 3%. Kakao Mobility, through its subsidiary KM Solution, takes 20% of the franchise taxi operating revenue as commission and returns 15-17% to taxi drivers as partnership fees. The actual commission rate paid by franchise taxis is up to 5%, which will be reduced to below 3%. Additionally, to improve the call allocation favoring franchise taxis, the dispatch system will be simplified.

Besides this, Kakao Mobility and the four taxi organizations agreed to discuss ▲ changes in franchise operation structure ▲ improvement of working conditions. They will form a Taxi Development Win-Win Council to coordinate detailed matters and hold additional meetings within this month. Through this, they plan to prepare a taxi business restructuring plan within the year and apply it in earnest from next year. Kakao Mobility reportedly expressed a progressive attitude, stating that if necessary for business restructuring, it will invest financial or research and development (R&D) resources.

On the day, before attending the meeting, Ryu Geung-seon, CEO of Kakao Mobility, said, "I will listen with the mindset of re-examining Kakao Taxi from the ground up," and "I will coordinate various opinions and quickly come up with a plan." Since Kim, the center head, announced earlier that day, "We will review all businesses and services from the ground up," Kakao Mobility's business restructuring has become the group's first reform task.

The taxi business itself is a complex equation... Operators already have disagreements

Although Kakao Mobility has shown a proactive will, there are many hurdles to overcome. First, not all franchise taxis will be subject to the commission reduction. Currently, more than 50,000 drivers operate Kakao franchise taxis. It is practically difficult to change this all at once. To lower the commission, the franchise operation structure based on the payback method must be changed first, which is another issue. Therefore, Kakao Mobility plans to release a new franchise product with a commission below 3% by the end of the year. Initially, the new product will be applied to new franchise drivers, and existing franchise drivers will be guaranteed the option to switch.

Simplifying the dispatch system is also not an easy task. Franchise taxis and regular taxis differ starting from whether the destination is displayed. To eliminate dispatch discrimination between these two types of taxis with different service characteristics, many factors that make up the dispatch algorithm must be examined and a clever solution found.

Moreover, conflicts among taxi organizations must be resolved. The four taxi organizations have stated that they cannot include the council in discussions on the business restructuring plan. This is why Kakao Mobility held separate meetings with the four taxi organizations and the council. On the other hand, the council demands that their voices be reflected in the restructuring plan. They argue that to maintain the quality of franchise taxi services, other cost burdens should be lowered rather than the commission. Jang Gang-cheol, chairman of the Korea Private Taxi T Blue Council, warned, "If the demands of franchise taxi operators are not accepted or if the positions of other taxi organizations are prioritized, we will take collective action." Ultimately, to uniformly lower commissions, the franchise structure must be addressed first, and for this, discussions with the council, the business entity, are necessary. The operational structure cannot be changed without involving the franchise business parties. From Kakao Mobility's perspective, it means solving a complex equation where all issues are intricately intertwined.

This content was produced with the assistance of AI translation services.