Have you got this car rental thing figured out yet?
If you’re enjoying any success, the right answer is no—change is constant, and new challenges arise almost daily. But you’ve got the computer programs, metrics, tools, support staff and the interconnectivity with fellow operators to meet and solve those challenges.
The industry wasn’t always this way. In an era when power was centralized and the channels of information were few, there was one man who was directly responsible for the business health of many car rental operators. His name was Fred Mudgett.
The Franchise Land Rush
Born May 22, 1920, in Waukegan, Ill., Fred Austin Mudgett lays claim to a footnote in history outside of car rental. As a meteorologist for the Army Air Corps in World War II, he made the call to inform General Eisenhower that the weather was clear for the D-Day Invasion.
Prepare yourselves: The next 50 years is all car rental.
Mudgett’s career began in the bustle of postwar America, when licensees from Hertz and Avis were in a land rush for new territories and Warren Avis was convincing airports they needed rental counters.
That push for growth meant that licensees had just as much, if not more power than their corporate parents. Mudgett learned the business of car rental under the tutelage of Dick Robie, a Hertz licensee in New England who bought Avis’s franchise system from him and moved the Avis corporate headquarters to Boston.
“If you wanted to buy a franchise you’d talk to Fred Mudgett,” recalls Kenneth Wright, an Avis franchisee for 53 years.
Wright met Mudgett at an Avis convention in Boston in 1955. Mudgett ran the meeting, which featured as the keynote speaker George Romney, president of American Motors, future three-time governor of Michigan and father of a young son named Mitt.
Mudgett left the licensee side that year to take a job at the Hertz Corporation in Chicago. In 1960 he was tapped by Bob Smalley to oversee the marketing in Hertz’s nascent International division. [PAGEBREAK] The Worldwide Oyster
For a company intent on overseas growth, the world was Hertz’s oyster. Foreign territories were ripe for the picking, if they could get the foreign banks to loan the money.
“The whole concept of renting cars was really just catching on at the time,” recalls Lynn Moore, who ran the financing for Hertz International. “We couldn’t use U.S. funds because the exchange risk was too great. But some of the European banks had never loaned money to buy cars on a commercial basis. They thought it was a bad loan.”
Hertz first bought out some existing operations. “We would go into countries and buy a local company and put Hertz signs up,” says Moore. “We would say to the guy whose company we bought, ‘Here, you’re president and we’ll be back in six weeks.’ It was really a hands-on thing.”
Smalley returned to the Hertz Corporation and Mudgett was promoted to president of Hertz International. Mudgett was based stateside, but was traveling 20 days out of the month and working 15-hour days. They covered at least 30 to 40 countries, by Moore’s count.
Overseas, business competition was sometimes a secondary concern. Moore recounts the story of the British store manager in Israel who dug a trench around the rental location during the Israeli-Arab Six-Day War in 1967.
The Hertz operation in Panama got caught in the middle of an uprising. The American branch manager had buried the location’s financial records and had holed up in the Hilton Hotel. When Moore called he heard shooting over the phone. “It’s okay,” the branch manager assured him. “We’re winning.”
By the late ’60s Smalley had become president of the Hertz Corporation, now based in New York. Mudgett moved back from International to join Smalley as an executive vice president in charge of car leasing and marketing.
Mudgett, Moore and Smalley left their mark on International, an era of wildfire growth overseas. The company had a mere 250 cars in operation overseas at the start of Mudgett’s tenure and more than 30,000 by the time he left.
The Fiefdom on Madison Ave.
Without the interconnectivity of desktop computing and the Internet, the business world in the ’60s was by nature much more centralized. Hertz’s power was generated from 660 Madison Ave.
“We had everyone piled into that building on several floors,” recounts a young general manager named Frank Olson, who worked directly for Mudgett for two years. “Everyone would run into each other in the hallways or the cafeteria upstairs and talk business. It really was a close-knit organization.”
“The 12 zone managers across the country were like the 12 apostles,” Olson says. “The intensity of communication was very strong. We got on airplanes when we wanted to talk to each other.”
Avis introduced the “We try harder” campaign in 1963. The slogan became one of the world’s most recognized taglines and helped Avis eat away at Hertz’s dominant market share.
Hertz neglected to address the campaign for a few years, but finally decided to take on Avis with a competitive spot, Olson says. Mudgett hired legendary adman Carl Ally, who came up with the concept: “Avis has been telling you that they’re number two, now we’re going to tell you why they are,” according to Olson. [PAGEBREAK] The Writing on the Wall
In 1966 Hertz became a wholly owned subsidiary of RCA, who was looking for synergies for its computer business. At the time, it was better business to lease computers, not buy them, and RCA expected Hertz’s leasing expertise would come in handy.
But RCA abandoned its computer division in 1971, and the subsequent year proved to be a tough one for the company. Mudgett, Moore and Smalley got swept up in the parent company’s sea change and were forced out of Hertz.
Moore got out of car rental and ultimately started a successful headhunting firm. Smalley founded Cruise America, which grew into the nation’s largest RV rental company.
Olson was named chief executive of Hertz in 1977, chairman in 1980 and presided over the world’s largest car rental company for 24 years.
An Unpaved Road
In 1972 Mudgett moved to Florida to become president of a franchise system called Econo-Car, a division of Westinghouse.
It was a short-lived marriage. Mudgett never really hit it off with the suits at Westinghouse, says Jim Camissa, who was vice president of marketing at Econo-Car. When Westinghouse decided to move the corporate headquarters from Daytona Beach to Ft. Lauderdale, Mudgett got out.
In the following year Mudgett made a choice that not only shaped the rest of his career, it had a profound effect on the careers of many others.
Mudgett could have taken shelter under another corporate umbrella or set up shop as a franchise or an independent.
He certainly knew the mechanics of both worlds: He saw how the big car rental companies had the benefit of computer processing on mainframe computers, proprietary rate management systems and some form of counter automation.
However, none of this had yet reached the independent or the franchisee. And while car rental companies were continuing to fuel growth through franchising, the licensee, after being trained by the parent company in Car Rental 101, still needed guidance on the day-to-day aspects of running a rental operation.
Mudgett decided to create an opportunity to serve this market as an independent consultant. It was a risky move. A car rental consultancy was not a road less traveled—it was a dense thicket of brush. [PAGEBREAK] Jurassic Days
In the days before computer automation, counter service reps were valued for their ability to translate a local reservation over the phone expeditiously, while writing a legible contract at the counter and selling coverages, recounts Tom Huling, a former Thrifty franchisee in Western Washington and Oregon.
Without calculators, sales tax was figured off of a chart or multiplied by hand. National reservations came over the telephone each evening from Tulsa, Huling remembers.
“It was kind of like the Wild West,” says Huling. “You shot from the hip and tried to garner as much information as you could, albeit it was limited. Fred was a catalyst to bring that information together.”
Many independent operators simply needed basic business help.
“There were franchisees and independents who didn’t know how to calculate depreciation and didn’t get accounting statements other than what their accountant gave them at the end of the year,” says Don Burgner, a Thrifty franchisee in Nashville, Tenn.
“They do teach you a lot at Thrifty,” says Ken Elder, a former Thrifty licensee in the Mid-Atlantic States. “But it’s just different when you’re not getting it from the company store.”
Fred A. Mudgett & Associates hung its shingle in 1974. The consulting service took three forms: an accounting service, educational seminars and a few years later, the Mudgett Group.
Doing the Math
Mudgett offered clients a computerized depreciation run and P&L statement. Clients would mail bills and financial statements to his office, and Mudgett would process the data, generate reports and return it all by mail.
The return package was accompanied by a phone call from Mudgett or his number two, Don Robertson, with an analysis on the health of the business. “Fred could look at someone’s financial statements and in five minutes know exactly what was right, wrong, or indifferent,” says Mark Duffy, a former vice president at General Rent A Car and later a National licensee in Puerto Rico.
Mudgett’s team included Robertson, Dick Stearns, the company’s treasurer, Bert Lipkin, CPA, computer guru Ned Huhta, and Mudgett’s daughter Jane.
The team created formulas on how to manage rates and calculate utilization. They devised a form to list the number of calls per day and use that to predict reservations. They showed what percentage of costs the payroll should be. They created a system to log and control accidents. They explained how to sell used cars. They showed licensees how to reap the benefits of using accelerated depreciation as a form of tax credit, a windfall that went away in 1986.
“A lot of it sounds pretty simple now, but this manual system he developed kept a lot of us in business,” Elder says.
Car Rental 101
Mudgett produced seminars that taught car rental operators the nuts and bolts of the car rental business. He saw operators making many of the same mistakes and became a drill sergeant in a few key areas.
Don Burgner recalls a common theme: “depreciation is not amortization.” What you owe on the car is not what the car is worth. Mudgett taught how to adjust amortization payments to avoid being upside down when it came time to sell. “Don’t assume the bank’s advertised rate is going to work for you,” Burgner says.
Another Mudgett mantra: “It doesn’t matter how many cars you own, it matters how many cars you rent,” says Jim Tennant, former president of Holiday Rent-A-Car and a Holiday-Payless licensee. “Mudgett always thought that independent operators over-fleeted.”
Some operators went to the dealer at new car time like a kid picking out a new bicycle. Burgner remembers Mudgett preaching to operators not to get “an emotional attachment” to a car. “It’s numbers, a revenue item,” Burgner says. “Don’t get excited about the car’s color.”
“Fred understood just how simple the car rental business was if you paid attention to the important things and didn’t get caught up in all the silly stuff,” says Duffy.
Much of this wisdom was captured in a notebook handed out during class.
Burgner recalls a seminar in the Bahia Mar Hotel in Ft. Lauderdale in which a fire alarm caused an early morning evacuation. Hotel guests ended up on the hotel lawn clutching their valuables. One of the seminar participants carried out with him one thing—the notebook. “Fred got a big kick out of it,” Burgner says. [PAGEBREAK] The Mudgett Group
Patterned after dealer “20 groups,” Mudgett created a forum in which independents and franchisees could get together and learn from their collective experience.
The Mudgett Group, a first in car rental, met on a quarterly basis for a frank exchange of ideas, expertise and numbers. Because members opened their books, Mudgett was careful to select operators that did not compete with each other in a certain territory.
“The fact that you could share information on a direct basis with someone that had the same problems as you was really helpful,” says Elder, a founding member.
“Fred was our barometer,” says Huling, another group original. “He gave us enough confidence to make something work. The benefit of the group was to not only give a comparative analysis, but to bring up concerns and problems and have your peers tell you it’s going to be a tough conversation but you’ll just have to make a change. Sometimes you need that extra push over the edge.”
Power to the People
In 1982, Macintosh was still just an apple. Yet desktop computing was set to revolutionize car rental when Bluebird Systems released the first publicly available auto rental system.
Bluebird’s “Automate” was expensive, with a proprietary operating system and hardware. Yet for the first time independents and franchisees had the power to perform inquiries, rent and check in cars, calculate depreciation, monitor car activity and control car sales—all at their fingertips.
Soon after, reservations could be downloaded via modem, at a rate of 300 baud.
Mudgett’s accounting client base began migrating to the new Bluebird system.
Mudgett and Ned Huhta countered with their own computerized car rental system, though it proved no match for Bluebird’s comprehensiveness and resources.
Unlike John Henry versus the steam hammer, Mudgett was smart enough to see the future.
Mudgett became friends with the principals at Bluebird and even helped develop some of the formulas for utilization factors, according to Angela Margolit, president of Bluebird. He was able to use the Bluebird reports to help clients better understand fleet mix and rate yield management.
Passing the Torch
By the mid-’80s Mudgett’s groups were rolling with their own critical mass, while other franchisors had started versions of a 20 group patterned after Mudgett’s model.
The company was in the capable hands of Robertson and Mudgett’s daughter Jane, who handled computer training, seminars and conferences. (The Mudgett Group would pass from Jane Mudgett to Don Robertson, who sold to Mark Duffy in 1995. In 2003 Duffy sold to Jim Tennant, who now runs it as The Tennant Group.)
Mudgett continued to remain active in car rental in various facets: He spoke at industry events and was a key organizer in ACRA and ACTIF. He served on the board of directors of Cruise America for Bob Smalley. He cherry-picked consulting jobs and was often called as an expert witness in car rental-related cases.
In 1985 Mudgett lost his first wife, Joan, to cancer. At this point Mudgett had already stuffed two car rental careers into his life, and improving his golf game held more interest than calculating revenue per unit.
Yet a lifetime in the close-knit world of car rental is not easy to escape, not when businesses aware of Mudgett’s reputation want to pull him back in.
Leaving His Mark
At one speaking engagement Mudgett made such an impression on Rent-A-Wreck founder Dave Schwartz that he courted him to join the company.
Rent-A-Wreck had experienced treble franchisee growth in the early ’80s on the strength of its envious brand recognition and strong customer service. Yet by the time the company went public in 1985 the system had already begun to shrink.
“We understood used car rentals but we didn’t understand the whole framework of the rental car business like Fred did,” says Mike Melville, a vice president of operations who was in charge of training Rent-a-Wreck’s new franchisees. “He had an understanding of both sides of the franchisee/franchisor mentality and how they had to work together to make the whole franchise system viable.”
After deflecting Schwartz’s offer for a couple of years, Mudgett moved to California to become president of Rent-A-Wreck in 1987.
Mudgett brought his expertise to Rent-A-Wreck’s franchise development and brought in capable car rental veterans to run franchises.
Still, growth was not fast enough for Chairman Bill Richter and the stock on Wall Street. Mudgett left in 1989.
Old Friends in New Places
Mudgett’s vast network of contacts would connect with him in new ways. In 1990, Chrysler’s Pentastar Transportation Group, which included Thrifty Car Rental, Snappy Car Rental and General Rent A Car, bought Dollar Rent-A-Car.
Bill Lobeck, at the time president and chairman of Pentastar, hired Mudgett to take over Dollar’s small and struggling licensee operation in Florida and grab more of the leisure business.
Floridians couldn’t drive far without seeing a license plate frame for Lindo’s Car Rental, the biggest independent in the state with a fleet of 20,000 units. Mudgett had worked with Don Lindo in the ’60s when Lindo ran the marketing for Hertz Jamaica.
Mudgett brokered the deal that merged Lindo’s operation with Dollar Florida. With a combined fleet of 45,000 units, Dollar Florida became an instant player in the Sunshine State.
In 1994 Chrysler sold Snappy to a private equity group run by Dick Titterud, another Hertz acquaintance and a Mudgett consulting client. Titterud invited Mudgett to serve on Snappy’s board of directors.
“We had 250 offices and $100 million in revenue, but we were losing money hand over fist,” says Titterud, Snappy’s president and CEO. “With Fred’s help we were able to turn that around and make money in the first year.”
The company struggled in the following year and Titterud sold it to Wayne Huizenga’s group in 1996, though Titterud was grateful for Mudgett’s help.
“When Fred was on the board he was my closest advisor,” says Titterud, “who better than Fred to help me turn around a lemon?”
You Can Do This
Did you have a go-to guy when you were coming up, a Fred Mudgett?
Perhaps you didn’t need one. We’re better connected now, and the rental systems and the rate management programs will tell you how much and how long and at what price down to the penny. Yet none of that can replace the cross-section of contacts, analysis and real-world experience Mudgett brought to every endeavor. An industry is better for it.
And the way he did it won’t be replaced. If Mudgett was here today he’d say yes, you can do this. He’d give you the tools and the straight dope with the charm, grace and calming demeanor of your favorite teacher.