May 12, 2003

Driving ambitions

Entrepreneurs slipping behind the wheel as high schools cut driver's ed

by John T. Slania


Michaels' Driving School, Inc. in Addison, says private operators can compete on price and quality of instruction. Photo: Brett Kramer

Lauren Rennecker wants to get her driver's license when she turns 16 this summer, but her high school's driver's education program has placed a speed bump in her path. Limited class size means Ms. Rennecker can't take driver's ed at school until fall, which would leave her without a license until the semester ends in January.

"That would ruin my social life," says the sophomore at John Hersey High School in Arlington Heights.

So, she is skipping her school's driver's ed class, taking lessons instead from Michaels' Driving School Inc., headquartered in Addison.

"It's faster, it works better for my schedule and it doesn't cost much more than taking it through school," Ms. Rennecker says.

Similar decisions are being made across the Chicago area, literally driving new business to commercial schools like Michaels'. As area high schools pare driver's ed classes and propose hiking fees to as much as $400 per student, a growing number of students and their parents are finding private schools which typically charge $350 to $495 suddenly competitive.

To meet the demand, private schools are opening new branches for classroom instruction and trying to squeeze in more behind-the-wheel appointments. It's not uncommon to see commercial driving school cars mainly sub-compacts with advertising placards on the roof on the roads late on weeknights and even on Sunday mornings.

"The demand is getting stronger as more kids decide not to take it through their high schools. And it's gotten to a point where we can compete with the high schools on quality (of instruction) and price," says Ruby Greenspan, of Michaels', which has four locations.

In Illinois, the number of commercial driving school licenses issued by the secretary of state's office which regulates the industry is growing about 5% annually. Last year, there were 89 licensed private driving schools in Illinois, compared with 71 in 1998. Over the same period, the number of branches these schools operated grew from 105 to 122.

Similar trends are being reported across the country. Some 2,800 commercial driving schools nationwide earn a combined

$1.2 billion in annual revenues, according to the Driving School Assn. of the Americas, a Milwaukee-based trade group.

"Over the past few years, state budgets have been shrinking, and so has the money to subsidize high school driver's ed. This has been a boon to private schools," says association President Bernard Reinhard.

Commercial driving schools began to flourish following World War II, as city dwellers migrated to the suburbs and automobile use skyrocketed. While the early schools catered to adults, today almost 80% focus on training teenagers.

New drivers in Illinois are required to take a minimum of 30 hours of classroom instruction and six hours of behind-the-wheel training and spend six hours observing another driver.

Private instruction has always been a mom-and-pop business, with most schools earning less than $1 million in annual revenues. And it's a low-margin business, with high overhead for vehicles, maintenance and insurance limiting net profits to an average 3% to 5% of revenues, according several area school operators.

It's also been a business tarnished by a small percentage of operators accepting payoffs in exchange for a passing grade, or offering bribes to state examiners to pass students.

The secretary of state's office has tried to crack down on unscrupulous operators by subjecting commercial driving schools to strict licensing requirements, such as annual vehicle inspections and curriculum reviews, and instituting tough regulations for instructors, including criminal background checks, fingerprinting and 48 hours of training.

Meanwhile, industry efforts to clean up its own image include the development of a national evaluation program being tested by the Driving School Assn. of the Americas.

"In every business, there are the creeps. But most of us do a good job," says Kathleen Klausen, vice-president of A-Adams School of Driving Inc. in Morton Grove, which trains some 6,500 students a year at its 11 locations.

Local commercial driving schools are eager to present a more positive image because they are catering to an increasingly affluent clientele with certain expectations of quality service.

"Students in affluent homes are more likely to take private lessons," says Habiba Shallwani, owner of Excel Driving School in Naperville. "Most of them are college-bound and would rather take driver's ed outside of school so they can get an extra math or science class on their transcript. And cost is less of an issue, especially with the gap continuing to close."

High schools once held a huge advantage over commercial driving schools, both in the quality and cost. But today, cash-strapped high schools see that advantage dwindling.

For example, Arlington Heights-based Township High School District 214 once had 33 cars and offered a four-pronged driver's education program, with instruction in the classroom and on driving simulators, and behind-the-wheel training on a parking lot course and on regular roadways.

Today, the district has 14 cars and offers only classroom and behind-the-wheel instruction. Students at its six high schools are offered driver's ed only one semester each year. In some cases, students must wait until the second semester of their junior year to take the class.

Meanwhile, rising teacher salaries, automobile leasing costs and insurance premiums have resulted in the average cost to climb to $400 to $500 per pupil.

High schools are prohibited from charging a fee of more than $50 per student unless they receive a waiver through the Illinois State Board of Education. The number and dollar amount of such waiver requests have been on the rise, says Winifred Tuthill, principal rules consultant for the board. "There's definitely a trend," she notes. "Two years ago, we had six waiver requests. This spring, we have 19."

Batavia Unit School District 101 recently submitted a waiver request to raise its driver's education fee to as much as $400. Meanwhile, high school districts in Arlington Heights, Barrington, Lake Forest, Niles and Palatine are among those that have requested or received waivers to hike fees to $350.

The impetus to raise driver's ed fees is not as prevalent in less-affluent areas. In the Chicago Public Schools, 27,000 drivers-in-training a year pay a $35 fee. The school system may soon seek to boost the fee to $50, says driver's education administrator Lee Miller. "I don't want to cause a culture shock," he says.

Those school districts asking for substantially higher fees say they are only trying to recoup expenses.

"Four hundred dollars comes a lot closer to covering our costs than $50 does," says Joseph C. Yagel, associate superintendent of Batavia District 101.

Mr. Yagel says if the waiver is approved, he expects the fee will be phased in over the next several years. But he has already noticed a 10% drop in the number of students taking driver's ed at Batavia High School.

"Students get anxious. They don't want to wait to be scheduled for driver's ed in school," he says. "So mom and dad are either affluent enough and pay for it, or they make the kids get part-time jobs to come up with the money."

All of which is like the music of a well-tuned engine to the ears of private school operators.

"If Batavia High School begins charging $400, it would be higher than ours. We charge $385," says Lisa Pearson, vice-president of Green Light Driving School Inc. in Batavia, which generates $100,000 in annual revenues.

"Hmm," she says. "Maybe we should raise our price."

2003 by Crain Communications Inc.

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