Rideshare startup Alto plans big Bay Area expansion

On a recent Friday afternoon, a lobby in nearby Belmont filled with prospective drivers, many of them refugees from Uber and Lyft, who spoke perfect English. Nearby, trays of sandwiches and bottled water sat on long tables. The job prospects chatted with interviewers, or filed outside for a basic driving test.

It was the first hiring open house for Alto, a fledgling rideshare company that, in contrast to the rideshare giants, classifies its drivers as employees. Alto’s business model is a throwback to the taxi and car services that imploded with the advent of Lyft and Uber. Suddenly, the new rideshare companies offered flexibility, and made the old model appear dated. Now, Alto is bringing that model back. 

“They’re doing something old,” said Graham Hodges, author of “Taxi! A Social History of the New York City Cabdriver” and a professor at Colgate University. Up until 1979, he pointed out, all cab drivers were employees, except those who had their own cabs. 

For many drivers disillusioned with Uber and Lyft, Alto, which describes itself as “The world’s first employee driver rideshare” represents a new possibility. 

It’s unclear if this will work, as many outstanding questions remain. Do enough drivers want to be employees? Will riders pay for a premium service? Will the U.S. Courts of Appeals affirm or throw out a lower court’s decision that Prop 22, which classified rideshare drivers as independent contractors instead of employees, was “unconstitutional” and “unenforceable”? This is a matter that could well wend its way up to the U.S. Supreme Court. 

In the meantime, Alto is positioning itself to become an alternative. 

“I would think the odds are in their favor, actually,” said Edward G. Rogoff, a professor and former dean at the Long Island University Brooklyn School of business, who has long studied the rideshare industry. “From a business point of view, good for them: If the market accepts them on both sides, they have a business model to survive and to be more profitable.”

Founded in Dallas in 2018 by Will Coleman, Alto now operates in six markets, including Los Angeles and Washington, D.C. It entered the Bay Area in the middle of 2022. Its user base remains exponentially smaller than Uber and Lyft; around 400 total vehicles on the road, providing about 2,000 rides per day nationwide, according to a June, 2022, Wall Street Journal story. But it offers an experience comparable to Uber Black, the company’s premium luxury car service. With a $119 annual membership fee, Alto wants to provide its members with additional services, including pre-scheduled rides, priority bookings at peak hours, and members-only discounts. 

“People’s ears perk up when you tell them, ‘Well, actually, we have W2 employees who qualify for benefits and get paid hourly,” Luis Rodriguez-Martin, a general manager at Alto and head of Bay Area operations, said at the event. Alto, he said, aims to hire 50 new drivers, which would expand its fleet in the Bay Area by 25 percent.

Rogoff said Alto closely resembles the Black Car services in New York City. While the company could succeed, it remains too small to make a definitive guess right now.

For some drivers, however,  Alto has “a significant appeal,” Rogoff said, referring to the benefits. He sees it, also, as an attractive alternative in metropolitan areas for riders who want upscale and consistent services.

If the courts rule against Uber and Lyft’s definition of a contract worker, the rideshare companies, Rogoff said, will have a tough time. The drivers’ status as independent contractors is an essential part of Uber and Lyft’s business models.

Hodges, who knows his history, said that Uber and Lyft could fine-tune their models as well. “If Alto begins to cut into the market share for Uber, Uber could also say, ‘Well, we’d like to negotiate with the union, and the union could provide those kinds of benefits,” he said. “They’re all free to do whatever they want, and that would leave Alto out in the cold.”

Alto’s offers of sick leave and a 401(k) plan may also appeal to some, but the actual quality and benefits of these plans remains unknown, according to Hodges.

Additionally, Alto requires drivers to be fluent in English, an immense obstacle to the first-generation immigrants who make up the majority of Uber and Lyft drivers. The drastically increased contact and monitoring between the driver and company (including two in-car cameras, as well as almost uninterrupted contact with a dispatcher who monitors and assists them on the job) can be dissuasive to some.

More importantly, while the company-provided vehicle might be attractive to drivers who don’t own their own cars, the wages, which range between $20 to $28.50 per hour, depending on the shift, may not be attractive enough. Uber and Lyft drivers can occasionally make much more per hour. Still, some studies have indicated that these drivers sometimes make as little as $6.20 per hour, or even lose money, after costs.  

Perhaps the biggest indicator will be how quickly Alto expands in the Bay Area, a place it believes has more potential than its home city of Dallas, according to Rodriguez-Martin. 

To seed that growth, Alto plans to shift its core service area from Silicon Valley to San Francisco, where the company believes residents’ lower rate of car ownership might lead to more customers.

Alto, he said, is “preferable, certainly to what the other model is, which I think is wholly exploitative.”