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management
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Page 89
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matters by John Darker AMB M
The Budget approach to van rental
LIKE the Budget Rent a Car organization, Budget Rent a Van differs from most rental and hire concerns in that it is a franchise operation. Ownership of the vehicles hired to customers is vested in the dealership holding the Budget franchise.
Budget's early stress has been on light van rental, principally on Bedford and British Leyland vehicles up to 35cwt carrying capacity; managing director Gerry Martin says he's glad the company did not go into the medium and heavy vehicle hiring market in a difficult trading period, though cautious moves in this direction are now mooted.
Under the franchise system the dealer makes all the arrangements with the hirer, using standard methods and documents devised by Budget. In the all-important matter of vehicle maintenance the dealer is wholly responsible, though a customer whose hired vehicle breaks down far from its home base would expect to get prompt assistance from another Budget licensee in the locality. It is a cardinal principle of the Budget vehicle rental system that the local trader who owns the vehicles available for rental will be much more exercised as to their efficient maintenance and deployment than any large centralized organization could possibly be. It is certainly true in road transport that local control of vehicles generally aids efficiency and arguable that a dealer hiring out a relatively small number of vans from a defined territory can supervise the operation more effectively than, say, the traffic or rental clerk responsible for a large fleet of hired vehicles at a regional depot. Budget have national customers with experience of many forms of hiring and the continued popularity of the local franchises, here and overseas, says a lot for the appeal of the Budget philosophy.
Since vans were added to the car rental fleet in 1967 Budget's commercial vehicle hiring business has grown steadily and some 800 vehicles are now available. 25 per cent of franchisies from fleets of 10 or more vehicles. Many large operators have become Budget customers during the recession because slack trade inhibits the purchase of new vehicles; doubts as to future legislative requirements for construction and use also help the van rental business.
Transport operators would be less than human if they failed to seek out a good bargain. The franchise idea is well established in America (where the parent Rent a Car was founded, and where there are at least 65 franchise classifications) and is increasingly popular in Britain. In the transport field franchises relate to diagnostic centres, rental /leasing organizations, spare parts suppliers, transmission repair centres, vehicle washing techniques, products, services, equipment, and travel agencies. There are 'franchises in the US for tree services, sewer cleaning, weight control, credit collection, personal introductions and ' a host of activities in the foods domain.
Reasons for joining Why should a vehicle distributor with a good servicing set-up bother to join a franchising organization which may cost him as much as E2000 spread over five years plus 10 per cent of his gross turnover? Why not "go it alone" and save the expense of joining an organization that proffers advice but which has no direct financial stake in the business risk?
The vehicle hirer is concerned with the efficiency of his business arrangement with the rental firm. Franchising gained its prominent role in the American economy because licensees were able to demonstrate advantages to customers as well as to themselves.
Budget provides complete training courses and refresher courses for the staff of licensees at its Welwyn Garden City headquarters. Further training is given by Budget personnel at the dealership when a hiring department is opened.
Each licensee's operations are supervised by Budget's field managers. At regular visits statistics are compiled and licensees are kept informed of comparative results achieved in other areas. Regional committees of Budget operators meet regularly to compare experience and to liaise with HQ staff. I am assured that very frank speaking is customary if a particular type of vehicle is burdensome to operate! A central reservations office enables licensees to receive and disseminate worldwide reservations from the network of offices in the system. It would be possible for an airfreight consignment from America or elsewhere to be met on landing at a British provincial airport with a van of suitable capacity.
Arrangements can be made for the use of many different credit cards — in fact Budget have one of their own. The facility to check credit arrangements on an international front is a user-benefit for both small and large firms, and, of course, it is of infinite benefit to the firms hiring out vehicles.
The hirer of a Budget van gets associate membership of the Royal Automobile Club with no advance premium. Lists of Budget licensees are provided to hirers in case their vehicle suffers a breakdown and prompt repair facilities — or the supply of a similar vehicle — is an accepted responsibility of all the company's licensees.
Hirers are recommended — though not compelled — to take advantage of the corn pany's special comprehensive insurance cover which includes unlimited passenger liability and unlimited third party bodily injury and property damage, and no deposit is called for.
Licensees who are skillful — or lucky enough — to enjoy a good safety record on their hiring account can .win useful reductions in insurance premiums.
About 70 per cent of Budget's van rentals are for 24 hours, measured from 9 am; but hiring for a minimum of 3 hours or for periods up to six months, can be arranged. On average, van mileage on day hire works out at around 83 miles — rather more than car hire mileage per day, typically.
Although Budget claim to be the largest "discount" car hire network in the world, the word "discount" relates to the rentals charged net. Whatever the size of firm using Rent a Van facilities — even customers doing business in excess of £60,000 a year — no discounts in excess of published rates are approved, though certain licensees may choose to offer "special" rates. Budget claims its own rates are keener than comparable competitors. The company reckons van rental is likely to grow at an annual rate of 25 to 30 per cent.
As part of the Budget insistence on economy, "one way" van rentals are not normally allowed. Customers must undertake to return a hired vehicle to its source unless exceptional arrangements are made. The company believes that its competitors who make a sales point of "collect here, leave at any depot" lose out heavily. The totality of customers has to pay for a facility desired by a small minority.
Utilization is of the essence of profitable operations in road transport. If Budget is right in thinking its hired vehicle utilization is 10 per cent better, on average, than the principal competitors the low Budget hire rates need not prejudice licensees' profitability. Some very prominent commercial vehicle distributors find it pays to be Budget licensees.