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Pedicabs Steer a Hard Road

By Amy Tsao On a mild winter day in January, the phone won't stop ringing in the office above George Bliss's garage. Between calls from drivers who want to lease a cab for the day, the 50-year-old owner of Pedicabs of New York recounts the challenges of the past year. He has sold half of his pedicabs to cover the rising insurance premiums, which have doubled from a year ago.

He adds that some of the newer operators mistreat tourists and aren't driving safely, tarnishing the image of pedicabs. "They don't uphold standards," he says. "It's a tragedy."

PEDAL PEDDLERS. The unusually warm winter weather, prime operating conditions for pedicabs, isn't helping his mood, either. Since Bliss is between insurance policies for a few days, he refuses to let drivers ride without coverage, instead directing inquiries to a competing operator.

There was a time, not so long ago, when very little in rough-and-tumble New York could be called good, clean fun. Now, in the amusement-park ambience of Times Square, gourmet popcorn stores have replaced peep shows. Pedicabs, too, have increased in number with the sanitized scene. Some 200 of these modernized, bicycle-powered rickshaws prowl Midtown, up from just a handful 10 years ago.

Their numbers suggest times are good for operators of this novelty transportation. But for all the expansion of the pedicab niche, the business has its share of growing pains -- from rising insurance rates to impending regulation and increasing competitive pressures.

AT THE CROSSROADS. Indeed, Bliss and the rest of the nascent pedicab outfits in New York are at a crossroads. In order to keep growing, operators want to build a reputation as a safe alternative to traditional taxis. But without standard practices and equipment, insurance companies find pedicabs unsavory clients.

"Sometimes underwriters pull pricing out of the air, since there's not much history," says Scott Ziller, an agent at McKay Insurance Agency, based in Knoxville, Iowa, one of the few sellers of pedicab insurance in the country. McKay handles policies for 30 pedicab businesses, representing about 500 drivers, including five outfits in New York.

Operators say they're willing to give up the freedom of not being regulated to bring more legitimacy to the sector. The goal is to find the right balance of ensuring public safety and promoting entrepreneurship. "I'm looking forward to regulations, provided the city doesn't overregulate us," says Peter Meitzler, owner of Manhattan Rickshaw, operator of 13 pedicabs. New York officials are still debating what form those regulations might take.

DIDN'T STAY IN VEGAS. Cities across the country have handled burgeoning pedicab businesses in different ways. In 2002, Santa Barbara, Calif., demanded that drivers apply for city permits. To do so, applicants have to provide a driver's license and proof of insurance. The city also performs background checks on drivers, and it reserves the right to revoke licenses if pedicabs aren't in good operating condition.

Las Vegas last year banned the vehicles from the Strip, where the bulk of the city's pedestrian and tourist traffic takes place. "Pedicabs were causing a lot of conflict," says Sandra Avants, chairman of the Nevada Transportation Services Authority, referring to accidents and various complaints from limo drivers.

The city subsequently granted pedicabs the right to operate in a limited area, as long as they carry insurance. "We didn't want to restrain the business from operating unless there was a public-safety issue of health and welfare of passengers and those sharing the road with pedicabs," says Avants. However, because the Strip ban took away the operators' most lucrative turf, they have virtually disappeared from Las Vegas.

"NEW YORK WAY." Sin City, with its throngs of tourists, bares more similarities to the Big Apple, but banning pedicabs won't likely be the "New York way," says Gretchen Dykstra, commissioner of New York City's Department of Consumer Affairs. "We don't want to go too far, but if there is a fatal accident with a pedicab, then there might be a cry to ban them all together," Dykstra says. For now, it's not clear when pedicabs will get their own set of rules, or what form they'll take. "We are still exploring the possibility of a regulatory scheme," Dykstra says.

Of course, regulations could also have the effect of keeping newer, and sometimes unscrupulous, operators from entering a very competitive market for transportation services. Competition has increased as the city's horse-and-carriage operators enter the trade, along with individuals who own only one or two pedicabs. "We want to keep renegades out," says Meitzler, referring to those who operate without insurance and flout traffic rules.

Bliss says he has trained 100 pedicab drivers over the years, but he adds that only 25 actually took to the roads. Besides customer rejection, drivers have to navigate New York traffic and brave noise, pollution, and bad weather. "It's the selling that's the real challenge," Bliss says.

ROLLING BILLBOARDS. And training drivers doesn't mean they won't take that knowledge to work at a competitor. Bliss, who owns 12 pedicabs now, admits his cabs are older, so drivers he trains often defect to rivals with newer, spiffier vehicles that are easier to drive.

Meitzler, who worked with Bliss previously, has been running his business since 1995, but still hasn't made a profit. "The business doesn't start to turn unless I have advertising" on the pedicabs," says Meitzler, a legal assistant by day. "I couldn't live off of pedicabs," he says. Still, with some additional ad revenue he's hopeful that 2005 will be his first profitable year.

Regulatory changes or not, Bliss and Meitzler anticipate new opportunities down the road. Both are trying to find new advertisers. Altoids paid about $700 per month to advertise on each of Bliss' pedicabs. Meitzler says he has gotten interest from Broadway shows and winemakers. Target (TGT) and Unilever (UN), maker of Axe body spray, placed ads last year. Meitzler helps operators in other cities start their own pedicab businesses.

HERE, THERE, ALL OVER. Bliss is "strategizing around historic tours," planning to charge $50 for a 50-minute guided pedicab ride. He also aims to expand geographically beyond Times Square and Midtown -- to Harlem, Coney Island, Flushing, Queens, and downtown Manhattan. Eventually, he hopes to develop electric pedicabs.

They won't be overrunning taxicabs any time soon, but in a decade's time, Bliss predicts there could many more pedicabs in New York -- up to 1,000. "The city can absorb it, and it's not an inconvenience to other industries," he says. For the time being, though, the pedicab business will have its share of bumps in the road. Tsao is a reporter for BusinessWeek Online in New York

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