Car rental consolidation is inevitable. In the U.S., it’s been a 20-year process of the larger brands engulfing smaller complementary pieces like encroaching lava from Mt. Vesuvius. Last week, one of the last pieces fell.
We were waiting for this moment for over a decade, ever since Fox Rent A Car began growing into an airport player in major U.S. sun and snow destinations.
Sixt could’ve bought Fox back in 2011 when it entered the U.S. market, but instead decided to grow organically. Hertz left the “deep-value” market in the U.S. when it abandoned Firefly. Avis Budget Group found its chess piece in Payless in 2013. After creating sizable airport share upon acquiring National and Alamo in 2007, Enterprise Holdings was looking more into consolidating the local market with purchases such as Triangle Rent A Car in 2015.
The sale was inevitable for Fox. In an asset-heavy business such as car rental, cost of money is everything, particularly in the commodified airport market. Without the financial guarantees of a larger corporate parent, Fox would’ve been at an increasing disadvantage in its ability to finance against the big boys moving forward.
Europcar was the obvious suitor, as the last truly global brand without a presence in car rental’s largest market. When Sixt first made its move to the U.S. it was vocal regarding the realities that global success is dependent on having a brand flag planted in America.
Simply put, Europcar needed to keep all those international inbound reservations to the U.S. — both leisure and especially corporate travelers — within its brand. Reservation referrals wouldn’t cut it.
Europcar has a longstanding referral agreement with Advantage Rent A Car, so purchasing Advantage and its discount brother E-Z Rent A Car (AEZ), would’ve seemed a logical choice.
But AEZ is owned by The Catalyst Group, a private equity firm. Private equity has different profit thresholds than those required by the private owners of Fox, particularly if the firm has pumped money into the purchased company to spruce it up for the eventual sale.
In Fox, Europcar gets greater airport market share than AEZ in competing cities and more on-airport counter space. Did Fox’s profitable Payless franchise at LAX come with the deal? That’s doubtful — which would also bring a more attractive sales price.
What happens now?
In the U.S., Fox’s corporate locations will stay Fox stores for the near term. Avis Budget Group will surely be happy to have LAX Payless in the fold as a corporate store.
Globally, Fox has built a substantial affiliate network with independent car rental companies in Latin America, Eastern Europe, and far-flung locales such as Jordan and Australia.
Consolidation is never clean, as evidenced by other sales involving franchises that compete under a new corporate umbrella with their new franchise brothers and corporate stores. Affiliate agreements aren’t as ironclad as franchises or as long term. The Fox affiliate future is unclear.
Looking longer term, what happens to the Fox name? From this outsider’s perspective, there is a logical answer.
Europcar already has two discount brands, InterRent and Goldcar, in non-U.S. markets. Why not a third specifically for the U.S.? Europcar, InterRent, and Goldcar had already competed in many global markets before being acquired, so it makes sense to leave them alone. Yet in the undiscovered country that is the U.S., Europcar needs a place to send corporate customers. Airport counter space is at a premium, and Fox isn’t a corporate brand.
If the green and yellow ultimately ends up adorning U.S. airport counters, does Europcar then compete against mid-tier brands such as Alamo and Budget? As no company can survive on international inbound alone, is there any room left in that segment?
Go ahead and ding Fox for their long lines at airports or their locations that define brand fashion as “Spartan” at best. But they have customers, thousands and thousands of them.
And Fox knows how to buy and sell cars. Fox knows the auctions, seasonal market fluctuations, and residual values — better than anyone. There’s an unspoken adage in car rental: “Selling your car for $500 more will cover a lot of rental days.”
That’s brand equity that the public will never know, but buyers sure do.
Three immigrants from Iran, not long out of college — Allen Rezapour, Mike Jaberi, and Mark Mirtorabi — started Fox in Los Angeles in 1989 when they bought six Nissan Sentras. From its humble roots, all they did was make Fox grow. It’s an American success story.
Europcar seems poised better than any to usher car rental through this transportation disruption into its next era. But for right now, we can salute Fox as one of the last great independent car rental companies in America.