This is an old article, originally from pre-2010. The national school rate as of late 2022 is £30-plus. And BSM is now part of the same group as The AA.
There’s an argument going on on one of the forums at the moment. Actually, there’s always an argument going on on one of the forums somewhere on this subject: lesson prices and special offers.
The aim of any business is to make as large a profit as possible, by charging the highest price the market will stand.
The market is different for every business. Smaller players may have to compensate for not having a known brand by charging a lower price for their products – although for luxury items, they can often increase their prices a little.
The biggest players will set the price that others base their own prices on.
And so it is (or should be) with driving instructors. The big national players like BSM and the AA set the base price – which varies from one county to the next – and the smaller schools charge somewhere around that figure for the area they cover. But there is a problem…
Driving instructors are not always the best business people you could meet, and this has become even more true over the last 10 years or so. The huge influx of uneducated people desperate to earn £30,000 (as seen on TV) has meant that good business practice has gone out of the window. Once they had been doing the job for a while, many of these people realised that they could only ever hope to get anywhere near £30,000 if they had bucket loads of work. Therefore, they immediately went out and bought lots of buckets and set out to fill them!
They reasoned that if everyone else was charging £25 an hour, then if they charged £23 or £24 they would attract more work. So far, no problem. This is standard business practice: small price cuts to provide an incentive to consumers (although you have to remember that it also has to be advertised, which also costs money – but this is a worthwhile investment if it gets new work).
However, as more and more people came in chasing the elusive £30,000 and started offering the same price cuts, the baseline being chased was no longer the £25 from the big schools, but the £23 or £24 being charged by direct competitors. In order to maintain a differential as a marketing ploy prices fell further and further. At present, in an area where the national school rate is still £25, I’ve seen people charging as little as £15!
Bearing in mind that most driving instructors have weekly overheads of between £200-300, that original £25 rate would give a weekly income of around £625, based on 35 hours tuition per week. Allowing for 4 weeks holiday a year, that comes to an annual income of £30,000 (or just under £19 per hour). A reasonable salary, really.
If someone is charging £15 an hour, though, their annual income is only £13,200 (or around £8 an hour)! That’s not so good, is it? And bearing in mind that a 35 hour week is hard to maintain, the situation is far worse for those charging low lesson rates.
Anyway, back to the main subject. Fortunately, some instructors realised that price cutting only worked up to a point, beyond which they were cutting their own throats. But they still had to attract work somehow. This is where the Special Offer came in. I suppose you could argue that the current known form of Special Offer originated with the Bill Plant Driving School :
First 5 hours for £56
This was plastered all over their cars right from the start, and was instantly unpopular with other instructors. Why? Well, “first 5 hours for £56” works out at £11.20 an hour, and almost to a man (or woman) everyone assumed that Bill Plant charged £11.20 an hour, when in fact they charge something like £21-22 an hour once the first five lessons are out of the way.
“How can anyone earn a living on that?”, they cried. “It’s destroying the profession” they postulated. “Bill Plant is scum”, they ranted.
The simple fact is that Bill Plant charges £21 an hour. But the school attracts new business by offering the first five lessons for £56 (and there are conditions attached, even then). Even taken at face value – minus the conditions – the offer translates to a £50 investment in each new pupil. If you didn’t have the pupil, you’d earn nothing. If the offer attracts them, all they have to do is a further 3 hours after the offer is up and the instructor is back in profit – and seeing as most of them will do 10, 20… 50, 60 hours… well, £50 isn’t a bad investment in something that would otherwise have earned you absolutely nothing.
The initial hatred and misunderstanding directed towards Bill Plant hasn’t eased much. Some instructors still stupidly believe that Bill Plant charges £11.20 an hour for its lessons. However, the Special Offer idea has crossed over to quite a few driving schools run by people who have a better business head than most. It is now common to see the “5 for £55” type of offer (often worded as “first two hours free” or “£11 per hour for the first five lessons”). Terms & conditions often stipulate that the free/reduced price lessons must be taken at the start and end of the course – presumably to deter instructor-hoppers, who are too stupid to realise that keep changing instructors means it takes much longer to get to test standard, even if you think you’re clever by picking up all the Special Offer deals.
The simple fact is that if you don’t have the work, running a Special Offer is – as long as it works – a brilliant way of getting new pupils.
The big national schools do it, often giving away free lessons in national newspapers or via deals with certain large companies for their staff. However, they finance it themselves, and the instructor working under the franchise usually gets a full hourly rate. The solo ADI (and Bill Plant franchisees, I believe) has to bankroll the offer out of their own pockets, though.
EDIT 30/12/2010: Just a note on that last paragraph – I am now given to believe that BSM franchisees also have to bankroll special offers out of their own profits. This appears to have been since the management buyout a while back. They kept that one secret!