I recently was helping an AutoSlash user navigate the policies of the rental car company she had selected, and she made a comment in an e-mail that AutoSlash should operate a rental car company. That was good for a bit of a chuckle and I responded that if we had the financial resources to build a global car rental corporation, we would find a better use for those resources than the rental car industry! It's exceptionally capital intensive, highly competitive, and the industry can be impaired by any number of black swan events. And while we would never think of building a rental car corporation, it is possible for individuals to own and/or operate individual rental car stations under the major brand names.
The Rental Car Companies Do Not Appear on "Best Franchises" Lists
Entrepreneur magazine issues their listing of the top 500 franchises. For this year's ranking, the magazine received responses from 988 total companies. Over 150 factors are considered, and then the magazine releases their ranking of the top 500 companies. The factors measured include costs and fees; franchise system size and growth; corporate support; brand strength; and financial strength and stability.
Want to guess how many rental car companies made the Top 500 list? That's right, the answer rhymes with "hero". There are many reasons that no rental car companies are in the Top 500 list -- one of the major conglomerates doesn't offer new franchises (at all), one doesn't offer new franchises in the U.S. or Canada, while the third major conglomerate still offers franchises in the traditional sense. One of the new upstarts on the scene in the U.S. also offers franchises. Yet no rental car company (major or minor) is ranked as a top franchise. Lists like Entrepreneur's are a franchiser's dream -- the magazine's franchise articles and listings are read by individuals who are actively considering opening a franchise. Potentially interested in owning or operating your own rental car location with a major brand? Here are the basics.
No Franchises at All
AvisBudget Group does have some existing franchises, primarily in their Payless trainwreck of a subsidiary. However, the corporation doesn't offer new franchises, instead relying upon an "Agency Operator" model, including my favorite rental station manager in my old home of Kansas City. Agency Operators operate locations using AvisBudget's vehicles. And while the "agency operator" is listed on AvisBudget's "Career" website, an operator is not an employee of AvisBudget and can only apply for existing locations that have an agency operator opening.
AvisBudget's Agency Operator Informational Video.
While there's a low start-up cost for these agency operators ($3,000-$8,000), these operators are responsible for everyday operations and expenses but not the capital cost of a fleet of vehicles. In return, they get a commission on rentals.
As an *Agency Operator you will be responsible for:
- Growth and success of an Avis Budget location
- Staffing your location
- Marketing your operation
- Promoting world renowned Avis Budget Group "We Try Harder" values
- Maintaining a business plan aimed at developing rental business in your local area
- Daily operational costs
No New Franchises in the U.S. or Canada
Looking to franchise with Enterprise Holdings (Alamo, Enterprise, and National)? The first requirement is an interest in a leadership role in a country other than the U.S. or Canada, as the company has focused franchising by country or region (rather than individual locations). Enterprise Holdings even provides a direct e-mail address for the relevant corporate Vice President for those seeking to expand the Enterprise brand outside the U.S. and Canada and provides notes that there are no opportunities in the U.S. or Canada.
Enterprise opportunities do not exist in the Western Hemisphere north of Mexico.
What Franchises are Available?
Really curious about franchising a major rental car name in the United States or Canada? Your options are going to be limited to Hertz Global Holdings (Dollar, Hertz, or Thrifty) or Sixt. And many readers who do quick Google searches would probably eliminate Sixt, which is switching from a franchise to a corporate-owned model. Those four companies have a traditional form of franchising that's remarkably similar. Unlike the agency model of AvisBudget (where AvisBudget owns the cars and operators get a commission), these four companies offer full franchises where franchise owners are responsible for all expenses, including the fleet of rental vehicles.
Question: What does it take, at minimum, to start a franchise with these four organizations?
Answer: A lot of cash and credit.
In addition to the start-up costs, royalties, and franchise fees, a franchisee has to possess the ability to finance a fleet of rental vehicles. Dollar/Thrifty requires at least $150k in liquid assets and a net worth of a half million dollars plus the ability to finance cars. Hertz doesn't list estimated requirements (but are likely at or above the level of their Dollar/Thrifty subsidiary) and Sixt lists an initial fee of somewhere between 20k and 500k euro. And then one has to figure out how to acquire the rental fleet -- none of the four companies help with financing the cars that are rented.
About that Rental Fleet ...
Sixt is silent on the required composition of a franchisee's rental fleet but Dollar, Thrifty, and Hertz do provide insight into the expectations from corporate headquarters. At Dollar and Thrifty, the rental vehicle has to be less than 3 years old and with fewer than 50,000 miles on the odometer. That's more than a bit "old" by modern rental car standards, where cars are acquired new and ordinarily rotated out with somewhere between 18,000 and 30,000 miles on the odometer. Parent company Hertz has a similarly lenient policy on the cars a Hertz franchisee can place on their lots.
Hertz franchisees can acquire cars in multiple ways.
As both a potential franchisee or a Hertz customer at a franchise location, there's a lot of gold (not Gold Plus) in that statement. While a Hertz corporate-owned location is seeking new cars (usually through manufacturers), the franchise locations get a combination of new cars, used cars (such as through auctions/wholesalers), and cars that no longer meet Hertz corporate standards. Yes, "fleet remarketing" is rental car corporate-speak for disposing of rental cars that no longer meet the needs of the corporate parent. In any case, acquiring a fleet is expensive, and while it's good to know what it takes to start a franchise or support our neighbors who run AvisBudget agencies, we're happier doing what we do now!