What is the business model of commercial free walking tours?

Question

For instance, Sandeman's runs free walking tours all over Europe. One or two every day of the year, good local guides, and the only payment is tips at the end. I'm sure the tip money is good since they get good crowds, but that seems like it would support one or two guides at a living wage, not a seemingly professional multi-national organization.

Does anyone have the inside scoop on these operators? Where are they making their money?

(I'm asking because I've found it's always good to know what is motivating people who are giving away things for free in order to avoid getting scammed.)

Answer 1

I am not sure if you guys did read well. If a Guide runs a tour with let's say 15 guests and they tip him an average of 4€ per person...
He must pay 2.20 to Sandeman and so earns 1.80€ x 15 = 27€ for a 3 hour tour.
That eans 9€ per hour.
I don't know if you have an idea how much energy it takes to talk 3 hours. To make a living by that is an impossible thing.
To make some extra money as a student might be ok. But the business model is definitely favoring the companies like Sandeman and not the Guide.

Answer 2

There are a number of different types of these "Free" walking tours, with the business models varying dramatically. In some countries you can expect to end up at the guides "cousins" carpet shop, where the guide will take a kick-back for any sales. Some tours are run by the local community and/or volunteers and truly are free (although with the potential for small tips which will often go to the organization rather than the guide).

And then there's organizations like Sandemans.

Sandeman's hit the press a few years ago when German TV station ZDF did an expose on how they operate. Google will give you all of the allegations and counter-claims (search for sandeman zdf), but in short Sandeman's were claimed to be charging their "freelance" tour guides ~3 Euro for every person who was on the tour. The tour guides would then push the guests for "tips", often including repeated comparisons to similar "commercial" tours, and the prices that the guests would be paying if they had taken one of those tours rather than their "free" tour.

If a guest tips 10 Euro, the guide would have made 7 Euro out of them. If another guest tips nothing, then the guide would be out of pocket 3 Euro. Either way the company has made 3 Euro per guest.

Whether this is a valid business model, and whether you should support such companies/guides is something that is probably best left up to each of us individually.

Answer 3

There are two types of free walking tours.

Free ones sponsored by companies. For example, in Berlin - Sandemans has one, where you're offered and told about their other tours while you go on the 'free' walking tour of the city. In addition, you'll have it suggested that you tip your guide. The same occurs in Krakow through another tour group there. This is fine, they're generally up front about it, and there's no actual pressure on you to sign up - at the end of the walking tour you optionally tip, and then walk away if you want.

There's another type - like that in Santiago, Chile, where an international group has formed in various cities, and students buy their own red t-shirts and run the tours for their cities. It's still very good, the students are generally very knowledgeable and our entire group thought the tour was excellent. Again, you tip at the end. (Note I found the website for that but it doesn't have info about how the group formed, but this is what we were told on the day).