It started with six 1989 Nissan Sentras. Allen Rezapour, Mike Jaberi and Mark Mirtorabi went out and bought two Sentras each, personally guaranteed. They were already running a large and successful limo service in Los Angeles, but the hotel concierges kept asking about car rentals.
“Most of the hotels were already working with the major [car rental] brands, but the concierges would call us for a lower price,” Jaberi says. “That’s how we thought about becoming a discount brand.”
Fox Rent A Car was born.
Forward 25 years later, and the company now stands at 18 corporate-owned locations in seven U.S. states and 53 affiliate locations in 23 countries across Europe, Latin America and North America. With a corporate-owned fleet of more than 20,000 units and rental revenue of $205 million in 2013, Fox stands as the fourth-largest rental company in the U.S.
While those numbers don’t rival the majors, it shows that Fox has not only survived the continental shifts in the industry, but it has also managed to thrive as an independent and solidify its niche as a low-price alternative for the car renting public.
As the company celebrates its 25th anniversary, the three owners of the company sat down with Auto Rental News to offer a look at Fox’s path to the present, their take on the current landscape and the shape of Fox’s future.
A New Channel
Flash back to the early ‘90s. It was before the era of consolidation, and Fox was just one of many independents in Southern California trying to compete with the majors.
The company was growing, in large part due to the efforts of a marketing department that would contact travel agencies for business. But those were tough nuts to crack, because the agencies were already working with the major brands.
Jaberi remembers visiting a wholesale flower shop next to the office in 1993. The owner pulled him over to his computer monitor and showed him his “banner ad” on this new channel called the Internet. He was selling a lot of flowers this way, he said.
For Jaberi, Rezapour and Mirtorabi, it was a revelation. “We were one of the first companies to jump on the Internet bandwagon,” says Jaberi.
In hindsight, they made the right choice. But back then, it was a leap into the unknown.
“It was risky for us,” Jaberi says. “We disassembled our marketing department and discontinued our print advertising. We put all our money — as a small company — into this new channel that many people weren’t believers in.”
Jaberi recounts meetings with owners of other local car rental companies. “They used to make fun of the Internet,” he says. “They’d say you can do a lot better by investing your money to reach the travel agents.”
“When the new Yellow Pages came out and Fox wasn’t in there, everyone was wondering if something was wrong,” says Rezapour. “They had no idea we were investing that money somewhere else.”
While the Internet became the company’s catalyst for growth, Fox had to weather the coming storms along with the rest of the car rental industry. As a discount brand, however, the ripples were less pronounced. “We actually grew when the economy went bad in 2008 and after 9/11, too,” Rezapour says.
The owners learned a lesson of fleet diversification after the Daewoo collapse in 2001. This helped them during the Chrysler and General Motors bankruptcies and later during the Toyota recalls.
The company wasn’t hurt by the skyrocketing fuel prices in 2008 because the majority of the fleet was small cars.
Fox put a flag in the sand in Florida in 2011, and now counts five locations in the Sunshine State. The leisure markets in the Sun Belt states are naturals for growth, Rezapour says.
While Northeast and Midwest cities don’t make sense right now, an anomaly is Chicago O’Hare, one of the largest travel hubs in the country. Fox will be part of the new intermodal facility when it opens in 2016. In 2012, Fox hired Richard Wolff as chief financial officer. Wolff is in the process of consolidating Fox’s debt to one lender.
Where to Grow
Though Fox has been growing by double digits for years, the company made a specific choice to slow the growth in 2014 to concentrate on honing its corporate management and infrastructure.
Fox has looked at acquiring smaller and midsized rental companies, though the opportunities didn’t materialize. Nonetheless, “If we run into an opportunity and the price is right, we’ll go for it,” Jaberi says. “We’re looking around.”
While Fox has been mentioned as a takeover target, Jaberi thinks being gobbled up by a major would not be approved by the Federal Trade Commission. Even if private equity came in with an offer, “the answer is no,” he says.
“There’s lots of interest in Fox, but we the owners think we can materialize our potential on our own in the next few years,” says Rezapour. “We’ve done a lot of infrastructure work in 2014. It’s not the time for us to be in the market to be sold.”
Jaberi says they’ve looked at IPO opportunities. “We don’t believe we’re ready to take that step yet,” he says. “But it’s an option on our plate.”
While standing pat on the corporate side, the Fox affiliate program — in which independent brands partner with Fox for reservations and exposure — has been the biggest area of growth for the company in the last year. “The overseas interest is unbelievable,” Jaberi says.
The key, Jaberi says, is that Fox is positioned as an alternative for companies that don’t want to franchise but do want the freedom to maintain their brand identity locally, while expanding their reservations reach.
In terms of criteria, “We’re looking at the companies that come to us,” and specifically their customer service and pricing structure, Jaberi says. Drawing business from the U.S. is not a requirement, he says.
The Fox Formula
Fox’s marketing formula is to foster some brand recognition and combine it with competitive rates. Then Fox uses a strong loyalty program and other enticements to keep them coming back. While a piece of the marketing pie is devoted to branding, most of it goes into direct sales. “It needs to generate an ROI,” Rezapour says. “You cannot measure the ROI on branding.”
Fox’s website isn’t designed to be slick, for a reason. “Our customer base is not looking for all the bells and whistles that the majors offer,” says Rezapour. “They’re looking for discount rates, good customer service and a quick reservations process. They’re looking for value.”
“We’ll always be a discount brand,” Jaberi says, but the company is always looking to embrace technology — as it had with the Internet — to level the playing field with the majors and expand its customer base.
This tech push manifests in all areas of the car rental process — from expediting the rental process through a counter bypass system and allowing customers to choose their own car to its latest and largest consumer initiative: a car-sharing program.
Rezapour is light on specifics, but says it won’t be patterned after traditional car share. Instead, it will be a combination of different types of car-sharing models. The program is slated to launch in the fourth quarter of 2014 or the first quarter of 2015.
An offshoot of its car-sharing program will be a foray into small to midsize commercial business. “As we use the technology and build the IT infrastructure for car sharing, we see a perfect match,” Jaberi says.
The goal is a seamless rental process for corporate customers, where they can print their rental agreement at their leisure, get off the shuttle bus, go straight to their car and drive off.
A Swiss Army Knife
Key components of Fox’s recent IT development are found behind the curtain.
You could call its fleet optimization module the “Swiss Army Knife” of its car rental operations. “It brings operations, pricing and fleet together in one platform to maximize a location,” Mirtorabi says. “Every part of our operation is dictated by this software.”
Connected to Fox’s counter system, the module measures revenue per unit and customer demand by car class and location to show the makes and models of cars to run to maximize profit.
“[The system] has made my job a lot easier because it tells me when the cars will come out of service so we can order new cars,” Mirtorabi says. “It considers many elements to tell us when to buy, what to buy, how much to pay and when to sell.”
Another module, for remarketing, pulls together real-time market values and sales results, pricing, damage estimates, direct flooring for dealers, current location and status for every vehicle in the fleet. This information is at the fingertips of sales reps to furnish to potential buyers or to populate online auctions and other sales websites.
The system even automates the first steps with the buyer’s lending company to finance the sale.
But wait, there’s more.
Fox’s scheduling tool manages workflow by automatically scheduling staff — greeters, counter agents, shuttle drivers, car washers and check-in agents — according to transaction volume.
The industry-wide buzzword of the last few years has been “consolidation.” For Fox, it’s been mostly positive. “[Consolidation] has generated a lot of excitement in our industry,” says Jaberi. “There are so many investors looking to invest in our industry, which is good for everybody.”
Consolidation appears to be a driver in industry-wide rate increases, which have had a positive effect on customer service, Jaberi says. Avis Budget Group’s acquisition of Payless boosted its customer service, as well.
As Fox is an airport brand, the trend toward consolidated rental car facilities (conracs) presents its biggest challenge for growth. With limited space and three majors jockeying their brands for prime positions, Fox has been in the thick of some tough negotiations.
“Getting into the conracs is very important to Fox,” Rezapour says. “We have our challenges in dealing with only three other companies. We’ve had to do some very hard negotiations to make sure we get a fair space allocation.”
Though airport space is at a premium, Fox isn’t about to stay put. Mirtorabi, Rezapour and Jaberi — with the help of Wolff and Sean Busking, chief operating officer, and Joe Knight, vice president of business development — are poised to take Fox into new domains that fit their model.
“There are 25 to 30 additional airport locations that we could operate from,” Rezapour says. “We still have lots to cover.”
- Locations: 18 corporate stores in seven states, 53 affiliate locations in 23 countries in Europe, Latin America and North America.
- Fleet: 20,000 units (corporate-owned)
- 2013 Rental Revenue: $205 million
- Owners: Mark Mirtorabi, Allen Rezapour, Mike Jaberi
- Chief Financial Officer: Richard Wolff
- VP of Business Development: Joe Knight
- Chief Operating Officer: Sean Busking