The car rental industry was birthed and nurtured by entrepreneurs. To be sure, the industry went through ebbs and flows of ownership by auto manufacturers, financial holding companies and multinational corporations for which car rental was a convenient investment.

And today, the majority of the industry has settled into a corporate structure befitting of a $24 billion business in 2013.

It wasn’t always like that. It was the entrepreneurs who put fleet on the road and saw to it that rental cars would become part of America’s transportation infrastructure.

Those entrepreneurs, the ones who are still around, will tell you that they were never the smartest people in the room. They call themselves driven to a fault and lucky, though they created their own luck with a “fire, ready, aim” attitude.

Some made millions, as they washed rental cars in cheap polyester golf shirts with company logos. They wrote the rules because there were none. They weren’t always right, but someone had to figure this stuff out.

This article is by no means a timeline of car rental history or a comprehensive chronicle of key players. It is a collection of stories that highlight the entrepreneurial spirit, along with a few pivotal moments on which the industry turned a corner.

A FAMILY AFFAIR

Morris (Morey) Mirkin started Budget Rent A Car in Beverly Hills in 1958. Budget's rates were about half those of Hertz and Avis, which propelled quick growth, according to Mirkin's son, Jeff.

Morris (Morey) Mirkin started Budget Rent A Car in Beverly Hills in 1958. Budget's rates were about half those of Hertz and Avis, which propelled quick growth, according to Mirkin's son, Jeff.

“I remember being 5 and sitting in the living room and daddy was going to start a new business,” Jeff Mirkin recalls. “We needed a name, so we pulled out a dictionary and ended up with the name Budget.”

On June 15, 1958 in Los Angeles, with $10,000 borrowed from his mother-in-law, Morris (Morey) Mirkin, Jeff’s father, opened the first Budget Rent A Car on Wilshire Boulevard in Beverly Hills.

Budget was a cheaper, local alternative to the Los Angeles Airport rental companies, Hertz and Avis. Whereas those established companies charged $7 a day and 7 cents a mile, Budget’s rates were $4 a day and 4 cents a mile. Soon Hertz and Avis shot up to $10 a day and 10 cents a mile. “That created a differential that allowed Budget to take off from the very beginning,” Mirkin says.

Morey Mirkin wanted to start franchising immediately. He enlisted the help of Jules Lederer, a Chicagoan who was married to Mirkin’s cousin, advice columnist Ann Landers. Lederer brought the fleet financing and business savvy needed to grow Budget as a corporation.

Mirkin, a family man, stayed in Los Angeles to oversee the Southern California franchises while Lederer crisscrossed the country finding businessmen to cultivate the new brand. The headquarters would be in Chicago, while new franchisees would be sent to Los Angeles to learn car rental operations from the master Mirkin.

In its infancy Budget was a family affair, says Mirkin, who helped his father paint the first rental office building along with his mother and grandfather. On the car rental lot, the most important person was the mechanic. “Dad started with 10 or 15 used cars, and you had to keep them going,” Mirkin says. “I remember the mechanic working in the lot, all greasy, sometimes siphoning gas from one car to another.”

Many of the original franchisees were family members. “They may not have been the best business people, but Budget was a good model and a good name from early on,” Mirkin says. “My father made a lot of family members very rich.”

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Dave Schwartz, founder of Rent-A-Wreck, on the lot of his original location in Los Angeles, about 1975. When Schwartz first put up the sign, a television news crew was there to greet him the next morning. He knew he was onto something. Schwartz recently sold that lot and still rents cars at a lot up the street.

Dave Schwartz, founder of Rent-A-Wreck, on the lot of his original location in Los Angeles, about 1975. When Schwartz first put up the sign, a television news crew was there to greet him the next morning. He knew he was onto something. Schwartz recently sold that lot and still rents cars at a lot up the street.


THE RELUCTANT RENTER

A few miles from that first Budget office sat Bundy Very Used Cars. Owner Dave Schwartz had no inclination to rent cars, having carved out a niche in the ’60s by selling cars that “ran great but looked horrible,” he recounts. “I built up a following because I’d tell people what was wrong with the car to a fault.”

It was actually a car sales client, a Harvard student, who nudged him into rentals. The Corvair she bought from Schwartz broke down, but instead of a replacement, she wanted to rent a car for three months instead. Schwartz balked; his business didn’t have the right insurance. She persisted, offering to buy the car for $225, use her own insurance and sell it back to him for nothing.

Why not, he shrugged. “Three months later I thought, wow, I have the money, I have the car and I have a really happy customer,” Schwartz says. “That seemed like a great business plan. I didn’t come up with it, she did.”

The rental business grew through the same reverse psychology Schwartz used to sell cars. It wasn’t until 1973 when a regular rental customer jokingly addressed his checks to “Rent-A-Wreck” that an iconic brand name was born.

Schwartz recounts the day that he changed the business sign on the lot. “When I got to work on Monday, CBS was there with a camera crew wanting to do a story,” he says, adding that the same day an attorney friend implored him to copyright the name. “That happened by accident, too.”

The company with the irresistibly quirky name took off. At the same time, Schwartz’s irresistibly quirky personality generated national publicity, landing him guest spots on talk shows such as Donahue and Tomorrow with Tom Snyder.

After refusing numerous attempts to franchise, Schwartz finally partnered in 1977 with cable television executive Geoffrey Nathanson to launch the Rent-A-Wreck franchise system. In the next few years, Schwartz would remain the face of the company as well as its backbone, traveling the world to teach franchisees the Rent-A-Wreck way.

THE LAP OF LUXURY

You might call Los Angeles the Fertile Crescent of car rental. The city not only begat Budget and Rent-A-Wreck, but it was also the birthplace of Dollar Rent-A-Car. Founded as Dollar a Day by car dealer Henry J. Caruso, the first Dollar location opened in downtown Los Angeles with 18 Volkswagen Beetles with manual transmissions and no air conditioning.

And, not surprisingly, you could call Los Angeles the birthplace of luxury and exotic rentals.

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Ken Kerzner, circa 1993. Kerzner pioneered the luxury and exotic rental model at Southwest Car Rental in the early '70s. Kerzner is now managing partner of Midway Car Rental.

Ken Kerzner, circa 1993. Kerzner pioneered the luxury and exotic rental model at Southwest Car Rental in the early '70s. Kerzner is now managing partner of Midway Car Rental.

In 1969, in a parking lot off Canon Drive in Beverly Hills, a kid named Ken Kerzner looked out at 10 luxury vehicles that had just come off lease. The words of his boss, the multi-millionaire Warren Axelrod, were ringing in his ears: “Can you make me some money on them, Kenny?”

“I said sure,” recalls Kerzner, at the time another long hair trying to avoid the draft. “I was 21 years old. I didn’t know what I was doing.”

Like Axelrod, Kerzner has an entrepreneur’s mentality, and he had luxury and exotic marques such as an Excalibur roadster, a Rolls Royce, a Corvette and a Mercedes sports coupe.

Kerzner also had that personality that would get him into record executives’ offices and pool parties in the Hollywood Hills. So he started knocking on the doors of the rich and famous, and thus began the car rental division of Southwest Leasing.

Kerzner was one of the first to deliver a rental car, less as a result of a genius idea and more out of the demands of his clientele. Kerzner recalls delivering a car to Mick and Bianca Jagger at the Beverly Wilshire in 1971. Jagger proceeded to tell his friends, and they told friends. “I hit a goldmine,” Kerzner says.

Kerzner remembers cold calling the general manager of the old Westwood Marquis. The GM threw him out; Hertz had his business, but Kerzner returned day after day. The GM called one day in a panic when Hertz couldn’t supply a new Lincoln Town Car to actress Lauren Bacall. Kerzner bought the car and delivered it. “I still have the contract today,” he says.

Kerzner found that the Mick Jaggers and Lauren Bacalls of the world demanded not only concierge service but also specific car models. And they would pay for it — but that often meant buying the car, a risky business proposition for the renter.

When George Harrison called and said he “needed” a silver 1971 Mercedes 280 SE, Kerzner marched into Phil Spector’s office at Apple Records and told him he’d need $4,000 to rent the car for a month. “Are you crazy?” Spector fumed. “You’re gouging my guy!” Kerzner explained the uniqueness of his service and told Spector he could buy the car himself if he wanted to. Spector reneged, and Harrison got his car.

Harrison’s case was the blueprint — make enough money on that first rental to allow a cushion if they needed to unload the car in a month. For standard luxury cars, pricing wasn’t hard. Kerzner followed the “7% Rule,” in which a $50,000 car needed to rent for at least $3,500 a month to cover interest, depreciation, labor, overhead and some profit.

By 1973, Southwest Car Rental had 14 locations in three states. For years, Southwest had the luxury market all to itself.

JURASSIC TECHNOLOGY

They were simpler times, but those who worked in the car rental industry during the growing years don’t see it through a nostalgic lens.

In 1958, Betty Murphy was just beginning to date her future husband, Wendell Murphy. A few years earlier, Murphy had bought an Avis franchise at Blue Grass Airport in Lexington, Ky. They started with one used car.

“At the time I smoked, and he said I couldn’t smoke in that car,” Murphy says, adding that her husband would ask her to help wash cars before going out on a date.

The airport was served by Avis and Hertz, though National soon pushed its way on. “We fought them. We didn’t think there was enough room for three rental companies,” she says.

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Mirkin recalls the competitive nature of the first Budget franchisees, family or not. Rental units dropped at other Budget locations were sometimes returned with bald tires or a missing radio. “People were watching every penny,” he says.

Rates were adjusted by getting on the phone and surreptitiously price shopping the competition. Utilization was calculated by looking out the window at your rental lot. Closed rental agreements would be transferred into an old-fashioned ledger book by hand. The Yellow Pages were the default marketing medium.

For calculations, operators used slide rules and the Friden calculator, a transistorized desktop electronic calculator. “It made an unmistakable whirring noise,” says Ken Elder, a former Thrifty licensee.

Reservations were received at local desks via phone calls or Teletype. “You could hear it [the Teletype machine] typing,” says Bob Barbush, who was a 16-year-old car washer at his father’s Avis franchise in Harrisburg, Pa., in 1959. “You’d go over and tear it off for the reservation, and sometimes run up to the train station to pick [the customer] up.”

In what was probably the texting of the day, “I had a relationship with a gal on a National Car Rental counter in Chicago, though I never met her,” says Rod Smith, who started at his father’s National franchise in Indianapolis in 1963. “We’d use the Teletype to send messages back and forth.”

Protections against car theft were less sophisticated, but then again, so were the thieves. “You didn’t have as many bad people, and you didn’t have as many cars,” Barbush says.

Though each major company offered identification cards and then branded credit cards starting in the ’50s, the great majority of rentals were done with cash. “We didn’t necessarily know if they were good renters, but their cash deposit was a very high percentage of the value of the car,” Mirkin remembers.

Rental agents would verify employment by calling the renter’s place of business while standing at the counter, or ask for proof of standing within the community. “We never had a problem with anyone that had a library card,” says Elder.

The phone book was a good fallback. “In my father’s day, you couldn’t rent to people out of town, because you had no way to check the phone book to know who they were,” says Bob Klyce, an Avis franchisee in Birmingham, Ala. (Klyce may be the closest car rental has to landed gentry. The Klyce family started renting cars in Birmingham as the Motor Livery Co. in 1918.)

Fleet tracking was an inexact science. “We had no idea when a car was going to check in, because local rentals aren’t as dependable as airline reservations,” Elder says. “We benefitted from the high fee to change an airline ticket because it kept people to their initial schedules.”

If a car was left in another location, “the only way you could keep up with inventory was by Teletype or mail,” says Klyce. “We would take one page of the rental agreement and file it and take another page and mail it to the city [where the car dropped].”

For Klyce, Barbush, other Avis franchisees and its corporate locations, the fog lifted in 1972.

THE WIZARD OF GARDEN CITY

It was unmistakably Avis red. It resembled an IBM typewriter with a small cathode ray tube display. Attached to it were two printers; one for rental documents and another for fleet management. “It was big, very big,” Klyce remembers.

The Wizard system went live in 1972, and within two years it had been wheeled into 600 Avis locations worldwide. Data was inputted manually using punch cards and assembled once a day at the mainframe in Garden City, N.Y., Avis’s corporate headquarters.

Communicating through a private network over phone lines, Wizard was an online, real-time rental system, and it helped to revolutionize how cars were rented. “Prior to the Wizard system,” says Klyce, “we could not tell you where every car was.”

The original Wizard system, developed by Avis with the help of its corporate parent ITT, went live in 1972. Wizard gave Avis corporate an instantaneous perspective on revenues and renal transactions, allowing for more precise fleet forecasting.

The original Wizard system, developed by Avis with the help of its corporate parent ITT, went live in 1972. Wizard gave Avis corporate an instantaneous perspective on revenues and renal transactions, allowing for more precise fleet forecasting. 

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Wizard was designed in the wake of the SABRE system developed by American Airlines. Wizard’s development can be credited in large part to a team from ITT, at the time the corporate parent of Avis, says Gerard Insall, chief information officer at Avis Budget Group.

“One of the benefits was from the central management perspective,” says Insall. “We had instantaneous numbers on rentals and transactions. [Wizard] formulated the first forecasting methodologies. We could make decisions on where we might open up, where we might advertise, what promotions we might run and what corporate accounts we might set up.”

The Wizard system held customer profile information that was accessible by all Wizard terminals. This enabled the implementation of the Wizard Number, part of Avis’ loyalty program in use today. “Everyone was proud to talk about their Wizard Number,” Insall says.

The other major rental companies were busy networking their locations, too. Predating Wizard, National Car Rental equipped its regional reservation offices with its Telemax computer reservations system starting in 1966. A National print ad from 1969 heralds “Max,” the million-dollar computer that “knows the whereabouts of every car in our fleet.”

This automation of reservations and fleet management was essential to meet the needs of car renters attached to the coming boom in air travel.

GROWING PAINS

Air travel was poised to explode in the mid-70s, though the three major car rental companies serving airports — Hertz, Avis and National — were not about to relinquish their grip on airport rentals.

Two factors changed the landscape. In 1976, Hertz, Avis and National signed a Federal Trade Commission consent decree to allow other rental companies to bid for on-airport desks. And then the Airline Deregulation Act of 1978 allowed upstart airlines to compete with legacy players, driving ticket prices down and allowing air travel for the masses. This opened the door for an exponential increase in airport rentals.

“We only had four corporate stores back in those days,” says Bill Plamondon, who started with the Budget corporate office in 1978 as a regional franchise manager. “Our goal was to get the franchisees committed to going into airports.”

“There was a huge question in the Budget system as to whether it was a smart thing to go into the airports, or whether it was going to kill us,” says Mirkin, adding that Budget’s off-airport costs were lower and served a different kind of customer. “How could we compete with the big guys?”

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Moving on airport was a big commitment, especially for that original group of Budget franchisees brought in by Jules Lederer and Morey Mirkin. But they stepped up to the task. “They were the drivers of the growth,” Plamondon says. “The franchisees in the rental business, at Budget in particular, were very driven entrepreneurs. A lot of the car rental companies built their distribution system to a large extent on their franchise network.”

Roger Gelder bought his first Budget franchise in Atlanta in 1977. He brought 10 years of experience as a general manager of Hertz’s corporate stores, while his partner owned a Lincoln Mercury dealership. The combination of a rental background and dealership background was a preferred franchise scenario for Budget at the time.

Gelder recounts the transition from the corporate world. “In those days [Hertz was] clearly superior in operating controls, accounting and fleeting techniques, though you were really a caretaker of the business that came in the door,” he says. On the other hand, “Budget had fearlessly independent guys. They were swashbucklers — colorful, creative and entrepreneurial. They enabled Budget to go from nothing to something in a few years.”

Budget was sold to Transamerica in 1968, though the company only had four corporate stores 10 years later. The Mirkin family is still the master franchisee for Southern California.

Budget was sold to Transamerica in 1968, though the company only had four corporate stores 10 years later. The Mirkin family is still the master franchisee for Southern California.

Gelder says the newer franchisees went their own way when they saw fit. Gelder created his own “elite fleet” program of Porsche and Ferrari rentals and had a launch party that garnered national publicity. In another decidedly non-corporate initiative, “we put our greeters in hot pants and roller skates until our insurance company found out about it,” Gelder says.

Plamondon says that by the mid-80s, Budget corporate started buying back franchises from some of the original franchisees, who were close to retirement age. Some locations became corporate stores, while the new franchises that were sold — many to new car dealers — came with an updated franchise agreement.

Gelder admits that by the time he signed his franchise agreement the terms were less favorable to the franchisee. This made the original franchisees “look a lot smarter than they were,” Gelder says. But in Gelder’s case, Atlanta was just completing construction of its new airport, and it would become one of the largest travel hubs in the country. “We were in the right place at the right time,” he says.

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A TRUE INDEPENDENT

If buying into a system and making it work is challenging, starting a business from scratch and building it in the shadow of the market leaders is truly a daunting task.

Frank Colonna always wanted his own business, though he was certain he wanted one in a growing part of the country, and that wasn’t upstate New York. Colonna looked into different types of businesses and became intrigued by a newspaper advertisement soliciting Holiday Rent A Car franchisees.

Meanwhile, the area in North Carolina known as The Research Triangle — anchored by North Carolina State University, Duke University and the University of North Carolina — was blossoming with high-tech industries. Colonna moved his family to Raleigh, and in 1978 he hung a shingle out of an old gas station with seven cars to rent. In a couple of years, Colonna shed the franchise mantle, renaming the company Triangle Rent a Car.

In those first few years, 14-hour days were the norm. Starting his own family had to wait. Colonna doggedly pursued local contracts and neighborhood business. “I finally wore them out until they let me have a few bones,” says Colonna. “With all the people relocating to the Raleigh area, I felt that I could call on and get at least some [corporate] business, even if they had a contract with the majors.”

A few core beliefs helped him through. First, he simply believed in what he was doing. Second, he figured local corporations would give a local company a shot. Third, he believed in his abilities to deliver customer service as well as or better than the competition, because he knew he wouldn’t compete with the giants on rates.

“I tell the managers to make sure that when the customer walks out the door, they were happier than when they walked in,” he says.

In 1981, he opened a second location in Wilmington, which took advantage of North Carolina’s nascent movie production business. In subsequent years, he started managing multiple locations and seeing the fruits of his labor. “I could see it happen and started feeling a little more confident in what I was doing,” he says.

Colonna eventually grew his business to 29 locations across four states, though he knows it’s not yet time to rest on his laurels. “Anyone that has had success in any business realizes how fortunate they are,” says Colonna, his New York accent sometimes slipping into the drawl of his adopted state. “The entrepreneur realizes that it can all crumble as fast as it came.”

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GAIN BY ASSOCIATION

Franchisees (also known loosely as licensees) traditionally bought cars from their local dealers, says Dennis Eatman, a former National franchisee in Rocky Mount, N.C.

National Car Rental was born as a group of 24 independent car rental operators after World War II, incorporating in 1959. By the mid-80s, National franchisees were buying 30,000 cars a year, though not leveraging its collective buying power.

“It [the association] was more of a means of arguing with the franchisor than getting organized,” says Rod Smith, a former National licensee from Indianapolis.

As buyers, Eatman and Smith were always invited to the fleet previews held by Detroit’s Big Three. The events were held on three successive days, one for Ford, General Motors and Chrysler, at the Ritz Carlton in Dearborn. “You got to stand for 20 minutes with the representatives of one of those companies while somebody else was waiting at the door,” Eatman says. “It wasn’t the best way to negotiate prices.”

Eatman says that a fellow licensee could pay substantially more — or less — for the same car. “Triple net [pricing] was a virtual unknown to the licensees,” Eatman says. At a licensee association meeting, Eatman complained to Smith, the association’s president, that there must be a better way.

In one of those “back-of-the-napkin” moments, Eatman sketched out a plan to invite the rental fleet representatives from each manufacturer to a golf outing. Smith, not a big golfer, wasn’t convinced they’d come. “We’ll have it at Pinehurst Number 2 with caddies,” Eatman responded. That first event was held in spring 1994. The rental fleet reps all came, and Eatman made sure their trips overlapped. “I wanted them all there so they’d know that we were talking to the other ones intently,” he says.

Smith and Eatman came away with better programs from each of the manufacturers. But both had forgotten to get the blessings of the licensee association’s board of directors. “I presented the board with a bill of $15,600 for the event,” Eatman says. “They raked us over the coals.”

One member suggested Eatman and Smith pay for the event out of their own pockets — until they told them the association negotiated deals that collectively saved the association $1.5 million in the first year. “This was the first annual fleet retreat,” Eatman says, one held each year since.

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Sharon Faulkner owned an Ajax Auto Rental franchise in Albany, N.Y., in 1988, when the car rental industry was blindsided by a law that banned the sale of CDW. Today Faulkner is the executive director of the American Car Rental Association.

Sharon Faulkner owned an Ajax Auto Rental franchise in Albany, N.Y., in 1988, when the car rental industry was blindsided by a law that banned the sale of CDW. Today Faulkner is the executive director of the American Car Rental Association.

 

A LEGISLATIVE WAR

Car rental companies are by nature competitors, until a legislative meteor threatens to destroy the way business is done and take those companies with it.

Sharon Faulkner, who at the time owned an Ajax franchise in Albany, N.Y., remembers that frantic phone call in 1988 from Nick Serafini, a National licensee in Binghamton.

His sources at the New York Capitol had informed him that an amendment to Section 396Z of the general business law in New York State passed as part of a larger insurance bill in the final legislative session. “We all started making phone calls to pull together a meeting quickly,” Faulkner says. “Not that it mattered, it had already gone through.”

The amendment not only banned the sale of CDW (collision damage waiver) in New York State, but it also capped the amount a car rental company could collect from a customer for damaging a rental unit at a trivial $100.

Though that specific law caught franchised and independent car rental companies in New York off guard, it had been supported by Hertz and Avis. The New York law was just one manifestation of the general legislative movement in the 1980s to regulate collision and loss damage waiver products offered by car rental companies.

Some 21 states passed laws during the decade that mandated greater disclosure of CDW or LDW (loss damage waiver), while Illinois and New York passed laws that banned outright their sale.

In New York, that first meeting became the genesis of the New York Vehicle Rental Association (NYVRA) and initiated an 11-year battle to overturn the law.

The law devastated the car rental industry in the state. For companies that couldn’t self-insure, insurance rates skyrocketed. Losses at the major car rental companies grew, even though they had a greater ability to absorb them. In turn, car rental rates reached almost $100 a day at points.

The fact that renters were essentially absolved of responsibility for vehicle damage led some to take advantage of the system. Faulkner recalls situations in which renters would get into an accident and make an agreement with the third party to profit from the rental, while giving the rental company its $100.

“They could have told us who hit the car and we could have collected from that party, but instead they were using it as a game,” Faulkner says. “They were bragging about how easy it was to do this.”

“When a customer returns your vehicle on a rollback [wrecker], and you tell them we can only charge them a hundred bucks, they’d fill out the paperwork with a smile on their face,” says Kris Tucci, who owns a Thrifty franchise in Syracuse. “I can remember my father looking at the car in the garage and going, ‘What the hell?’”

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Initially, the NYVRA was a grassroots affair, made up of franchises and independents. “We were not supported by the major companies,” Faulkner says.

“There were probably at one point 200 plus members, but our numbers started to dwindle as businesses closed. We were losing the funds to be able to hire the lobbyists to make anything happen.”
“We didn’t know what we were doing,” says Serafini. “The whole association started to fall apart.”

In 1995, the cause was injected with new life when Enterprise joined the association. Enterprise had just hired Ray Wagner to handle government and public affairs. Wagner, who came from a senior position in the Illinois state government, first set about overturning the CDW law in his home state. “If we could get the bill changed in Illinois,” Wagner says, “then we could demonstrate that New York was alone at capping CDW.”

In 1997, Illinois finally passed a bill overturning the CDW ban. It was on to New York. “We engaged in retail politics and went to every member of the appropriate committees and lobbied them,” Wagner says.

Since the beginning, Serafini had a potent ally in Sen. Tom Libous, chair of the Transportation Committee. Libous introduced successive bills that passed the Senate but would ultimately fail in the Assembly. “From day one, Tom was on our side,” Serafini says. “I’m good friends with Tom; we’re from the same hometown. But Tom was a businessman before he became a senator, and he truly believed that the law needed to be changed.”

Later the cause gained another crucial supporter in Sheldon Silver, the speaker of the New York State Assembly. Ultimately, the insurance industry — which lobbied hard for the other side — started to back off as legislators began to understand the inherent unfairness in the law and its detrimental effect on car rental businesses.

Finally, in 1999, a bill passed in both the Senate and Assembly to overturn the law. The New York law was written with a five-year sunset clause, meaning that it must be affirmed by vote every five years. It has passed to date.

“We survived, but so many industry friends didn’t,” says Gil Cygler, president of AllCar Rent a Car, who was traveling to Albany regularly. “To see them get their demise because of poorly crafted legislation was very bittersweet.”

Ray Wagner of Enterprise (middle, right) presents the car rental industry's case on the CDW ban to New York Governor George Pataki (middle, left). After a 10-year battle, a bill was finally passed to overturn the law in 1999.

Ray Wagner of Enterprise (middle, right) presents the car rental industry's case on the CDW ban to New York Governor George Pataki (middle, left). After a 10-year battle, a bill was finally passed to overturn the law in 1999.

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A CULTURE CLASH

At the beginning of the new millennium, the entrepreneurial spirit in car rental began to manifest in new business models such as car sharing. The landscape in the U.S. consisted of city-based collectives and two for-profit startups, Zipcar and Flexcar.

Mark Norman, president of Zipcar, announces the launch of Zipcar's car sharing in the City of Austin in April 2012. Zipcar's recent merger with Avis Budget Group has helped it gain more buying power, breadth of scale and a greater global network.

Mark Norman, president of Zipcar, announces the launch of Zipcar's car sharing in the City of Austin in April 2012. Zipcar's recent merger with Avis Budget Group has helped it gain more buying power, breadth of scale and a greater global network.

Mark Norman kept an eye on car sharing as he moved through the ranks at Ford and then DaimlerChrysler, where he became president and CEO of Daimler Chrysler Canada. In 2006, Norman got a call from a headhunter to fill the CEO position at Flexcar. He took the plunge. Though he came from Detroit’s corporate automotive culture, “I was always an entrepreneur at heart,” Norman says.

Car sharing is by nature based on an automobile, but the initial philosophy was not. “Car sharing was so anti-car in the early days; it was all about giving up car ownership, not car rental,” Norman says.

When Norman joined the car sharing ranks, both Flexcar and Zipcar were at a crossroads. There were cultural differences between car sharing’s roots and its direction.

Luke Schneider, who Norman had hired as Flexcar’s chief technology officer, remembers a statistic that close to 40% of Flexcar’s employees served in the Peace Corps. “There were people at Flexcar that weren’t even getting paid — they just loved the idea and wanted to do something that they felt good about,” Schneider says.

But for car sharing to grow, a big idea needed to turn into a solvent business. Months earlier, Steve Case, the co-founder of America Online, took a controlling stake in Flexcar. Case recruited Lee Iacocca and Joe Vittoria, a former CEO of Avis, and Ken Austin, founder of a fractional aircraft ownership company, to join the board.

Norman stepped into this brain trust “to take the hundred different brilliant ideas and navigate a path and a sequence,” he says.

In 2007, in an inevitable convergence, Zipcar took over Flexcar, continuing as Zipcar. The merger was complementary in all the right ways, say both Norman and Schneider, but the cultures within the two companies weren’t completely aligned.

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“When it became clear that Zipcar was on a growth path and marching toward making money, a lot of attitudes changed,” Schneider says. “A lot of people opted out, because that’s not why they were there.”

The prevailing philosophy was morphing into a better way to use a car rather than an anti-car solution, Norman says.

“We were always unashamedly for profit,” Norman says. “If you have no money, you have no mission. We have simple values — obsess about member experience, be the best we can be and drive results based around professional excellence — but now from more of a corporate automotive and rental car culture.”

Zipcar went public in 2011. In May 2013, the company took another cultural turn when it was bought by Avis Budget Group. The merger gave Zipcar the buying power, breadth of scale and global network of one of the largest car rental companies.

“Automotive and rental companies are better at execution and operational excellence, though they can struggle with nimble decision making,” Norman says. “I think that we are doing a great job marrying those things now.”

THE NEW SWASHBUCKLER

The car rental industry in America today is not designed for the swashbucklers in the Gelder mold.

Franchise systems still hold a place within the corporate structure, though no franchisee will ever gain enough power to control the company or even materially influence its direction. The rules have been rewritten to prevent that.

The independent car rental companies with a good niche are surviving — even thriving — in today’s solvent rental market with strong demand. But it’s hard to imagine an upstart challenging the majors, as Budget, Dollar, Thrifty, Alamo and Enterprise did before they became majors themselves.

But there is room for car rental to evolve, witnessed by how technology is allowing cars to be rented for minutes or months at a time with the tap of a smartphone — without a building to pick up from or even a specified place to drop the car off.

The new swashbuckler may be a brash dot-com millennial with a big idea. The entrepreneurs are out there; they’re just waiting in different wings.

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