Car Rental Q&A: What Does the Franchisor Need From Me?

Photo via iStockPhoto.com/StockFinland
Photo via iStockPhoto.com/StockFinland

Q: I'm looking to become a franchisee. What does the franchisor need from me? — Ron Ramirez, CRC Car Rental, Miami

A: The process has now started once you ask this question. Make no mistake; becoming a franchise is a process.

How much does it cost? This is typically one of the first questions I hear from prospective franchisees. There are differing requirements for minimum net worth and working capital among the companies franchising car rental operations. However, it’s not the most important step in the process.

Franchising starts with your knowledge of car rental, the franchise relationship, and your expectations of the business opportunity. What are your expectations? Why do you want to get into the car rental business?

Do your expectations compare with the franchisor’s expectations and business model? It is critical that you and your franchisor have a similar vision and focus for your business. It doesn’t matter how much your net worth is or how much cash you have if you and the franchisor have differing expectations.

You don’t need to be a car rental aficionado to open and operate a successful franchise, but the franchisor will want to know your business background relative to rental and buying/selling of vehicles. I believe car rental is an extension of the car sales market.

Fleet is your number one expenditure. The more you understand about the ins and outs of buying and selling cars, the more profitable your company will become. Most franchisors will provide initial and ongoing training and support, but in the end, it is your business, and your knowledge will drive your profitability.

Is this a stand-alone location or an add-on to your existing business? If it is an add-on, how will you incorporate the businesses? Where is your rental office going to be located? Will the new office be in the airport or local market?  These are important questions you will want to discuss with your potential franchisor.

Car rental is treated differently for zoning and tax purposes. It is critical to understand how it is treated in your area before you take another step in the franchise purchasing process. Ask your potential franchisor if your territory is exclusive.

In addition to mapping out your specific exclusive territory, it’s also important to ask if the franchise agreement is renewable at the end of the initial term. These are significant aspects to protect your investment.

The application process is next and can be tedious, so prepare ahead of time. Do you have all of your corporate documents, tax returns, and financial information? Are you prepared to submit to a credit and criminal background check?

Now that you have an understanding of your expectations as well as the franchisor’s, your net worth and working capital come into play. Your ability to acquire lines of credit to purchase your fleet is also important. There are many sources for fleet financing, and your franchisor can assist in finding the best source at the best cost.

Whether you have or haven’t rented a car, you need to understand the franchise relationship that you are about to enter. I encourage our franchise owners to be represented by local legal counsel with a background in franchise laws. The process is more than knowing the cost; it’s also understanding all of the expectations of the franchisee and all the obligations of the franchisor.

With a franchise program, you’re not just another number like an affiliate or agency program. You are partnering with a franchisor that is working to drive additional business and make tools available for your protection and profitability. However, your franchisor should also allow you to have the freedom and authority to run your franchise in a way that best fits your market

Comments

  1. pooja [ September 19, 2016 @ 12:03AM ]

    Recall Masters Launches Monitoring Service for car rental Companies https://goo.gl/3CZ1aH

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