Daily rental franchises: Getting the balance right

HAVING a comprehensive nationwide network of branches is vital to rental companies wanting to reach as many customers as possible.

But developing such an infrastructure can be a huge task – which is why, as well as setting up fully-owned branches run by their own staff, firms also establish franchises, where branches are separate businesses that licence the company name.

Each method has its own advantages and disadvantages, but the way a company sets up its network could have an effect on the way it does business with fleets.

Some firms eschew franchised branches, preferring to keep everything close.

Don Moore, vice-president of sales at Enterprise, says: ‘We have chosen to fully own our 300-plus UK branch network because it allows us to ensure all locations offer the same levels of service.

‘The quality of franchised sites can vary, but corporately-owned branches have consistent standards, company culture and approach to business. It also demonstrates that UK-wide coverage can be achieved without resorting to franchises.

‘This means a large nationwide fleet will get the same service levels whether the driver is in Glasgow, Nottingham or Exeter.

‘Meanwhile, regional businesses have the comfort of dealing with local branches that have a strong brand ethic and company culture behind them.’

Mr Moore’s view is shared by Andrew Way, managing director of TLS.

‘We only operate owned points and, as a result, have complete control over almost every aspect of our fleet operations. We source all vehicles, we decide how they are operated, we maintain the service levels offered across the network and, because we carry out our own service and repair, have absolute control over the way our vehicles are maintained.’

But other firms say the advantages of a wider network make franchising a viable choice, as long as the correct controls are in place to ensure fleet customers get a consistent standard of service.

‘Over our 23 years we have tried both managing locations and franchising,’ says Graham Lond, managing director of Practical.

‘In our experience when you appoint ‘owner-led’ franchises established over a number of years in a particular town or city, their knowledge and contacts vastly outweigh the need to control and manage a corporate site. Where a level of investment has been made by a particular franchisee the drive to succeed generally exceeds that of an average salaried rental manager.’

Problems only occur when the wrong partner is signed up, Mr Lond says.

‘That’s when it is hard to ensure a regularity of service nationwide. The potential pitfalls of dealing with a network such as Practical’s are that most franchisees don’t have the working capital or finance lines available to run large rental fleets and are generally able to pick and choose which rentals they want to take on.

‘This generally excludes low-margin, high-volume business.

‘But the advantage for fleets dealing with smaller franchised networks like ourselves is that we offer a much higher service level than some of the larger competitors, because we have to try harder to keep corporate clients.’

Thrifty has 90 UK branches, 33 of which are franchised.

Managing director Roger Hancock says: ‘The main advantage for us in having franchised operations is that the franchisee is ultimately responsible for the success or failure of that business; it is their investment that will be depleted if the operation doesn’t succeed.

‘While providing a very high level of service to both retail and corporate customers will assist the success of the individual location, it is also essential, from the Thrifty network point of view, that every single site is doing the same – regardless of whether they are owned or a franchise.

‘We issue a strict customer service charter to every site.’

Regular audits and mystery shoppers are utilised to ensure the franchised branches are up to scratch.

‘We do our best to identify any potential problems before the customer has to suffer,’ Mr Hancock says.

Paul Green, network development manager for National, says the key to deciding whether to franchise or not depended on the circumstances.

‘We have 150 locations, 10 of which are franchised in East Anglia, the south west and south wales,’ he says.

‘The finance comes into play when deciding whether to go down the own or franchise route. We are able to offer the additional benefits of an improved network a lot quicker than if we had to find our own locations.

‘From a control point of view, it’s mandatory to have our rental system operating. A customer walking into the franchised location shouldn’t know the difference.’

Daniel McCarthy, commercial director for Avis, agrees: ‘In more geographically remote locations it can be difficult to make a fully-owned Avis location economically viable, so in order to ensure rapid availability a franchise partner run alongside other businesses such as a petrol station can be used.’

Mr McCarthy had the following advice for fleet operators: ‘When setting up a contract with a franchised or part-franchised network you need to ensure two key things.

‘Firstly, that franchise locations can execute the contract consistently across the network and therefore drivers are not subjected to differing standards and costs.

‘Secondly, IT needs to be integrated in such a way as to provide consolidated management information to the customer, irrespective of where the car was used.’

Franchising can be a perfectly legitimate way of expanding a network, but things can go awry if the correct checks aren’t applied.

Check with your potential supplier to see if they franchise out branches and, if so, that they are subject to close scrutiny before you sign any deals.