During the late ’20s and early ’30s, an advertisement for piano lessons read: “They laughed when I sat down to play ...”

The ad has since taken its place among the most effective ever turned out by the advertising fraternity.

Now what does an advertisement for piano lessons have to do with the car fleet industry? Jules Lederer, president of Budget Rent-A-Car System, appreciates the tie-in.

A+ First, Laughs

“When I first came out with my concept of discount rentals at off-airport locations, I am sure that I was in a position similar to that fellow who got laughed at when he sat down to play,” Lederer told AUTOMOTIVE FLEET.

In Lederer’s case, as was the case with the fellow in the early advertisement, the laughter has long since quieted. Whatever the early reaction to Lederer’s concept, Budget Rent-A-Car is today playing a merry tune of profits for Transamerica, the parent company that purchased Budget in 1968.

“When the first Budget franchise opened in Chicago in 1960, we had 48 used cars. During that first year of operation, we maintained about 140 to 150 cars,” Lederer told AF.

As of Sept. 1, 1968, Budget was operating more than 15,000 cars throughout the 500 system locations in the U.S., Canada, Mexico, the Carribean, England, Scotland, Ireland, Switzerland and Belgium. Contracts for franchises either have been signed or are in the process of being signed in Israel, Jamaica, the Bahamas and throughout South America.

And all this as a result of Lederer’s getting into the car rental business through “an accident.”

In 1958, Lederer was president of a Chicago manufacturing company. His wife’s cousin wanted to go into the budget rent-a-car business using only foreign automobiles in Los Angeles. He needed the financing and Lederer provided it.

“I quickly realized that there was a need to be filled in the discount end of the car rental business,” Lederer said. “I felt that a rent-a-car service was needed in which the difference was in the price, not the cars. I saw the metabolism then of what the $5 a day and 5 cents a mile car did consumer-wise and appeal-wise.”

Lederer sold his stock in the Los Angeles operation and began laying the groundwork for the franchise budget system which “is built around the concept of local ownership, local management and off-airport locations instead of on-airport locations with higher fees.”

“To put it very simply, I took the BRAC (Budget Rent-A-Car) system as it had been developed in Los Angeles, bottled it, if you will, and franchised it,” Lederer said.

“When we sign up a franchise, we offer to him constant and religious dedication in order to help him make a success of his operation,” Lederer said. “We do this mainly through direction.”

According to Lederer, each new franchisee is given a “formula” of operation. “We design each licensee’s fleet for him by mix. We also recommend the total number of $6, $7, and $8 a day cars that should comprise his fleet,” Lederer said.

Keeps Close Tabs

Once in operation, Lederer’s office keeps close tabs on each licensee through a weekly report and by supervision by men comprising Budget’s field force.

“We have about 10 men in our operation department internally and externally. These men actually are trouble shooters. They keep in constant check with each franchisee and are available to answer any questions and to offer solutions when and if problems arise,” Lederer said. In addition to weekly reports and checks by the field force, each franchisee submits to Budget a monthly operating report.

Of BRAC’s 15,000-plus units, more than 70 per cent of the system’s world-wide fleet is composed of General Motors vehicles.

Make-up Of The Fleet

“About one-third of our fleet is Buick, Oldsmobile and Pontiac. Ccourse, the biggest percentage here in the United States ... and I guess that would hold true internationally ... goes to Chevrolet. Over-all, I would say that about 90 per cent of our overseas fleet is composed of GM cars.”

Despite the heavy use of GM products, only about 60 of the franchise operators are car dealers. Most of this total is in the United Kingdom, where the Budget system is all dealership licensed.

It is Lederer’s belief that the automobile dealership in the next decade will become increasingly important as a “provider of car rentals ... this is only natural,” Lederer maintained.

When Lederer started the BRAC system, did he start with any single concept or goal in mind?

“My concept, quite simply, was to give the customer a visible value in his rental vehicle. To me, this revolved around price. I haven’t changed my feeling on this at all, Lederer said.

According to Lederer, if BRAC had been founded in on-airport locations during those early years, there would have been no later years for the system.

“When we began, we simply could not afford to operate out of airport locations. In our early years, during the time that Hertz was offering rentals at $10 a day and 10 cents a mile, we were getting $7 a day and 5 cents a mile with the customer buying his own gasoline. The point is,” Lederer maintained, “we have avoided and not sought airport locations and our business has grown at what we consider a very satisfactory level.”

Lederer told AF that during the first four months of this current fiscal year, profits were up 26 per cent over the same period of 1967-68.

“Our growth in units has been extremely good,” Lederer said. “In cities of 1,000,000 population or over, we have grown 141 per cent in the number of total units in the last four years. In cities of less than 1,000,000, our franchisees have increased their fleets 115 per cent during this same four-year period.

“According to over-all penetration of the car rental market, we experienced a 37 per cent increase at the end of 1968 as compared to 1967. This was in the U.S. and Canada. Although the two other companies who followed us in this business are still in the field, to the best of our calculations, we figure that the combined fleets of both these companies equal about 80 per cent of our fleet,” Lederer said.

While BRAC does not have any airport locations in the U.S., it does maintain airport locations in Canada.

Price Structure Affected

“The airports in Canada are run by the Canadian government and this affects the price structure. It has been estimated that Hertz, Avis and National write between 75 to 85 per cent of their business at airports. While this is a great percentage of their business, one must realize that airport costs are extremely high. This higher cost is one of the major reasons why off-airport locations are thriving. It’s cheaper to operate at a fixed rental than to operate with a rental based on a percentage of the business volume,” Lederer said.

If BRAC has no rental counters in airport locations, how does an air traveler get a BRAC car?

How System Works

“We keep a steady stream of 2-way radio operated buses going to and from major metropolitan airports. A customer calls the nearest BRAC office, a bus picks him up, takes him to the office and he is given his car. When he wants to return the vehicle, he takes it to any BRAC office and they bus him to the airport,” Lederer said.

Budget unlike Hertz, Avis and National, does not have a national maintenance program for its vehicles. BRAC relies upon the local dealer for most of its repairs.

“We do have a maintenance shop at some of our bigger locations, but mainly their work revolves around the changing of spark plugs, points or tires. Each installation has its own clean-up men, but in the case of major work, each unit goes back to the dealer.” Lederer said Budget does not attempt to repair body damage but farms all such work out to vendors on a bid basis.

The Budget Rent-A-Car System is divided into nine regions in the U. S. and Canada. Two meetings a year are held in each region. At these meetings franchisees elect a chairman, who is known as an advisory committee member. Twice a year, Budget Rent-A-Car holds a national meeting at which time the advisory committee meets with Budget officials to plan the company’s future programs.

While not among the Big Three of the daily rental field, BRAC does have problems similar to those of Hertz, Avis and National.

“We will not rent a unit to anyone under 21 years of age. We tell our people to try and keep the rentals to those 25 years of age and older.”

And what about the problem of insurance?

“Insurance is plaguing the industry because of inflationary judgments and inflationary costs,” Lederer said. “Essentially, we are with one company, Liberty Mutual. A few of our people are with another. But with our size, it’s a question of trying to manage the insurance and have the technical adjectives in terms of coverage and so forth. Insurance is something that you live with and manage and try to anticipate. We have found, however, that there are no easy answers in insurance. There isn’t for Hertz or Avis or National. And there isn’t for us.”

Are the cars people rent based upon the vehicles they own?

“Not necessarily. You’ll find many people who want to rent the Camaro, or the Firebird and who don’t own one. People might rent a car because they have an interest in it. A fellow might drive an Impala at home and he might rent a Pontiac just to see how a Pontiac drives. He wants to try something different,” Lederer said.

Because BRAC does not operate from airport locations, will the day of the jumbo jets change the off-airport rental business from a profit standpoint?

“On the contrary, I think the jumbo jets will add congestion to the already crowded airport daily rental business,” Lederer said. “I do not mean to imply that these large jets will not mean more business for airport locations. The airport agencies will thrive. But the jumbo jets will also mean more business for the off-airport locations because of the congestion that will result at the airports. This congestion will create overflow and this overflow will go to those agencies operating outside the congestion.

“We feel we can service a customer as fast, if not faster, than Hertz, Avis or National. This is because in many of our bigger airports you can’t get a rental car right outside the terminal the way you could in years past. They bus you to their facility or else you have to wait until a car is brought from a staging area.

“I think the future trend in New York, Los Angeles, San Francisco, Detroit, Chicago and other major metropolitan areas will be that it will be more convenient to have off-airport locations than actual airport locations,” Lederer said.

Now that Budget Rent-A-Car is part of the Transamerica family, what part will the parent company play in BRAC’s future?

“Basically, Transamerica is a company dedicated to the service field. They are a young company with an eye toward future growth. Instead of telling us what we can and can’t do, we have been given an open hand to continue our operations as in the past. We are a completely autonomous subsidiary. There is not one employee here now who was not here before the merger. They installed no watchdogs. They direct all corporate policies out of their San Francisco headquarters, and we handle the actual operation of the business. The only reporting that Budget does is through our financial statements and budgets,” Lederer said.

How about future acquisitions?

“My objective always has been to keep growing. Now that we’re with Transamerica, it opens new horizons for us in this area. We are not going to diversify just for the sake of diversification. I’m interested in synergistic services and/or franchises. I have a couple of things that are pretty close to being consummated right now out-side the car rental industry,” Lederer said.

What does Lederer see regarding the growth of the car rental industry?

“I can really see no factors that would either hinder or halt the industry’s growth,” Lederer maintained. “The only factor I know of that would possibly hinder its growth would be if people stopped driving automobiles.”

“The industry is subject to the same growth patterns as that of the airlines. Essentially, we are talking about the transit traveler and the local growth of an area. These factors affect the airlines. These factors also affect the rental car industry. Basically, the future in the car rental industry belongs to the merchandisers.”

If this is so, can we look forward to any drastic changes in the merchandising of the daily rental market?

“We at BRAC, believe that for a rental company to grow it will take smarter merchandising than the next company. There is no question but that service and facilities have got to be top notch. If they are not, there will be no survival.

“Competition, although very keen in the past, will be even more competitive in the future. If there is any change in the over-all industry, it will be in a change in conditions, and a change in the distribution patterns of car rental offices.

“There will be more car rental offices in high-rise apartments, office buildings, numerous suburban locations and throughout downtown areas. As interesting as the past has been for those in the daily car rental business, the future promises to be even more exciting.”

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