“I love that name. You can’t forget that,” says mega car dealer Jack Fitzgerald, referring to the primary reason he bought the company with the funny name in early 2006.
Expertise in car sales was a factor too. Starting in 1966 and selling some 20 brands, Fitzgerald owns and operates 12 Fitzgerald Auto Malls in Maryland, Pennsylvania and Florida, making him one of the largest dealer groups in the U.S.
“We know how to buy cars and sell cars, and that’s mostly what you do in the rental car business. And frankly, it wasn’t very expensive,” says Fitzgerald, in keeping with the down-to-earth, tongue-in-cheek culture that Rent-A-Wreck has cultivated since its founding in 1973.
Fitzgerald is no stranger to car rental. He has owned an in-house dealership rental company since 1985 called NextCar and had been a Budget franchise owner for more than 20 years, until selling in 2007.
Today, Rent-A-Wreck of America Inc. and partner franchise system Priceless Rent-A-Car are run by Fitzgerald’s JJF Management Services. (Rent-A-Wreck Canada, a separate company since its inception in 1976, is a wholly owned subsidiary of Franchise Services North America, owners of the U-Save brand.)
Bill Cash, president, is involved in the upper level management of both the dealerships and the car rental operations. Jason Manelli is director of marketing and communications. Michael DeLorenzo, vice president, handles operations. DeLorenzo has car rental experience dating back to 1969. He was a Budget franchisee and in 1985 sold to Fitzgerald, who then hired him to run the franchises and NextCar’s multiple local market rental stores. “Jack knew instinctively — as did I — that for this deal, the real value was to be at some point in the future, not what we were buying that day,” says DeLorenzo.
The Rent-A-Wreck franchise system needed modernization, tougher standards and better communication with its licensees if it was to survive. The challenge was to maintain the company’s traditionally strong brand awareness while rethinking old business philosophies. The new ownership team had work to do. [PAGEBREAK]
New Standards, Tougher Requirements
To begin fulfilling their vision of a new Rent-A-Wreck, the JJF management team made Rent-A-Wreck’s franchise requirements more selective. This includes a higher capital investment for potential franchisees, as well as a higher net worth and a higher credit score.
“These things are really for the franchisees’ own good when it comes to financing and being able to stay in business,” says Manelli. “It prevents a lot of the franchise issues that we’ve had in the past; supporting franchisees that maybe shouldn’t have been sold to begin with.”
In 2008, Rent-A-Wreck underwent the first logo change in 25 years. All new locations have to conform to the new branding package.
JJF also implemented a set of car classification standards, which ensure that a compact is not called a midsize in different markets.
A key initiative was to revitalize the fleet. DeLorenzo has made a concerted push to educate franchisees on a fleet mix that features newer vehicles, and to recycle them more often. “We’re still going to buy cars at auction, but I have been trying to get everybody to rethink the brand more towards the middle and higher end,” he says. “Some [franchisees] were positioning themselves as the car rental company of last resort.”
DeLorenzo favors two- to four-year-old off-lease units, which would offer another two or more years of rental life. This is a shift from the old management philosophy of buying and holding “until forever came,” which presented customer service issues and overly high maintenance bills.
Renting newer units opens a niche to attract customers who, for instance, would like to rent a three- or four-year-old BMW 3 Series from Rent-A-Wreck for about the same price as a Taurus from a major brand. “The renting public is looking for alternatives to the cookie cutter car rental model,” DeLorenzo says.
The Online Connection
Another major undertaking was an updating of the reservations model. “The philosophy had been that the person at the counter in the local market is better suited to answer the phone and to interact with the customer than someone who sits in a call center,” says Manelli.
While this tenet of customer service still holds true, the model of the local Yellow Pages as the number one draw to make the telephone ring is over. And while Rent-A-Wreck.com has been taking reservations for some franchisees since 1998, the system had little rate flexibility and did not have the ability to take reservations through a global distribution system (GDS) or online travel agency.
A partnership with an Internet portal was essential. On June 24, 2009 Rent-A-Wreck went live on Kayak.com and sister site Sidestep.com.
As with almost all GDS connectivity, the Kayak partnership comes with a cost per reservation, which is borne by the franchisee. “It’s been an investment on both sides,” says Manelli. “People expect most of the cost to come from us, but we’re also asking our franchise owners to invest a little more. There has been some push back, but we’re seeing that it pays off.”
The company reported a 79 percent system-wide increase in Web site reservations since going live with Kayak.
The company also unveiled a new rate management system that moved from static rates to an adjustable factoring system that offers franchisees multiple rate profiles.
A link between Bluebird software’s point-of-sale system and the Rent-A-Wreck Web site should be live in April. By June, a national call center staffed by professional car rental reservation sellers capable of booking reservations for franchise owners should be up and running.
Meetings, Meetings, Meetings
Stricter franchise requirements and a higher buy-in come with enhanced support from the parent company. “We’ve been emphasizing meetings, meetings, meetings ever since the ownership changed over,” says Manelli. “We’re exploiting every opportunity to bring our franchise owners together to get ideas on the table and really develop those trusts.”
Rent-A-Wreck has a corporate training department and a full-time trainer. New franchisees go through a five-day training course at the home office in Maryland.
Another initiative is a “profit group” program for franchisees, similar to a dealer 20 group, which meets three times a year.
The Rent-A-Wreck advisory council, made up of select franchisees, now plays a greater role than it did under previous management. The previous advisory council met once annually to figure out how to spend the national ad fund, says DeLorenzo. The advisory council now meets more often and tackles a range of issues. Advisory council meetings can get contentious, but the consequence is beneficial.
“When you really vet ideas two or three times and fight about it, you end up with the best possible ideas,” DeLorenzo says. “We had push back when we were trying to build this reservation system, but there were a lot of really good ideas brought up that I hadn’t thought of.”
JJF has also instituted a team of area development managers (ADMs), who come with 20 to 30 years experience with the major car rental brands. ADMs work one-on-one with operators to manage and grow their fleet, even visiting banks with operators to gain funding, while making sure that corporate identity and policies are adhered to.
Financing Help, Buying Power
Many franchisees were hit hard by the financial crisis. DeLorenzo says some lenders have changed requirements, which has created problems for new franchisees without experience in the car rental business. “Our next big push is to come up with the right formula for financing inventory,” says DeLorenzo.
The team is working on new funding sources, including piloting an internal leasing program.
After attacking the financing problem, DeLorenzo has a vision to create a buying team for his franchisees. “Our guys don’t have the time to really get immersed in the used car market,” he says. “We can do some things for our franchisees at the central office more efficiently that allow us to work better together.”
The buying team concept focuses around a group that has day-to-day knowledge of the market, can deal in volume and can more efficiently coordinate transportation of sold units. The franchisee would be able to put in an order from a selector list and the buying team will find the best deal, then purchase and deliver the car.
A Deal with Dealerships
As Fitzgerald’s primary business is dealership car sales, the JJF management team sees the value of an in-house rental division for car dealers. “It’s not in the dealer’s best interest to have some third party come into their service department and remarket used rental cars to their customer base down the line,” says DeLorenzo. “The dealer is really losing control of that customer service experience.”
However, while franchisees within Fitzgerald’s dealership footprint enjoy competitive purchasing terms with the parent company, JJF is strict in keeping sales and rental as separate profit centers. This is especially necessary with dealer rental operations, in which the rental division is often used as a dumping ground for units that aren’t selling.
NextCar, Fitzgerald’s dealer rental brand, has its own fleet buying and remarketing component. Fitzgerald and DeLorenzo see the Priceless brand working similarly. Many Priceless franchisees are car dealers; more are planned. “With our Priceless brand, we’re going to start focusing on the dealer marketplace as an opportunity to compete with the manufacturers’ car rental companies,” says DeLorenzo.
Changes Open Up New Markets
With stricter franchise buy-in requirements along with stronger franchisee support, newer cars, a uniform car classification and greater connectivity online, JJF is ready to approach a new class of franchisee and expand into new markets.
DeLorenzo says the updated franchise system can accommodate the licensee who wants to operate multiple stores in larger markets with fleets of 500 to 1,500 cars, including airport locations. “Now that we’ve built a reservation system, we can start trying to be competitive in the airport rental market,” he says.
Expanding the insurance replacement market is also in the works.
A Clear Future
The Rent-A-Wreck management team feels it is well positioned for viability and growth in this new era of fiscal responsibility. “The Rent-A-Wreck brand is a terrific value-play brand, and the economy is really working to drive customers to us today,” says DeLorenzo.
DeLorenzo points to a 26 percent increase in calls to the company’s national toll-free numbers, comparing 2009 to 2008.
The Rent-A-Wreck system has come a long way in four short years since the ownership change.
“It was not overseen well; brand development was non-existent and there was little standardization. You got what you paid for, and it was a wreck,” says industry consultant Neil Abrams. “The challenge here is retaining qualified franchisees by creating a standard and then holding the licensees accountable to performance. They [the new ownership] seem to be operating as a real business in trying to upgrade the brand.”
“Our former management was made up of professional managers who didn’t care whether the company sold widgets, built airplanes or rented cars. The complex relationship between a public company and its stakeholders and board took crucial time and attention from our core business of being a car rental franchisor,” says Manelli, who worked under both ownership teams. “The Fitzgerald leadership works relentlessly to improve their operations and have turned that same focus to constant improvement of Rent-A-Wreck and its franchises.”
“They’re doing a great job. They really care for the franchisees,” says Dave Schwartz, the founder of Rent-A-Wreck. “Jack Fitzgerald is a real straight-shooting guy. I have a lot of respect for him.”
It is perhaps ironic that the company survived at all, knowing Dave Schwartz’s original intent. “The reason I changed the name to Rent-A-Wreck in 1973 was actually to discourage business,” says Schwartz, who still rents used cars from the original location on Pico Blvd. in Los Angeles. “I really had all the business I wanted at the time. I figured 5 percent of the people would love it and 95 percent would stop coming in.”