THE RENT-A-CAR JOCKS WHO MADE ENTERPRISE #1 FORGET HERTZ AND AVIS. ENTERPRISE'S QUIET INVASION OF SMALL-TOWN AMERICA--ALONG WITH QUIRKY HIRING PRACTICES AND A GENEROUS SUPPLY OF DOUGHNUTS--HAS MADE IT THE NATION'S BIGGEST RENTAL CAR COMPANY.
(FORTUNE Magazine) – The flight attendant told you to keep your seat belt on until the plane comes to a complete stop, but you're an achieving kind of person, so you grab your luggage, squeeze past the fat guy in the third row, and now you're sprinting down the concourse like O.J. Simpson in the good old days, heading right for your favorite car rental company. No second-biggest, try-harder company for a numero uno like you. You want a car from the biggest, most profitable car rental company in the land to plop your little overworked butt into.
You, pal, may want to change into a pair of running shoes. Because if you really want the top car rental company in America, you will probably have to sprint several miles from the airport, through some small towns, down a minor side street, and up to an unimpressive storefront in a strip mall in the low-rent district. And there you will find not Hertz, not Avis, but the biggest of all: Enterprise Rent-a-Car.
Barely heard of them? It's okay; most frequent fliers have never come near an Enterprise office. And that's just fine with Enterprise. While Hertz, Avis, and lots of little companies were cutting one another's throats to win a point or two of the "suits and shorts" market from business and vacation travelers at airports, Enterprise invaded the hinterlands with a completely different strategy--one that relies heavily on doughnuts, ex-college frat house jocks, and your problems with your family car.
In the 39 years since it was founded in St. Louis, Enterprise has blown past everybody in the industry. It now owns more cars (310,000) and operates in more locations (2,800) than Hertz. Revenues have grown between 25% and 30% a year for the past 11 years, reaching $3.1 billion worldwide for the year that ended in July. The company accounts for more than 20% of the $15-billion-a-year U.S. car rental business, vs. 17% for Hertz and about 12% for Avis. Alas for investors, Enterprise is privately held, so earnings are not made public; but the family of company founder Jack Taylor is reportedly worth more than $1 billion.
Enterprise's approach is astoundingly simple: It aims to provide a spare family car. Say your car has been hit, or has broken down, or is in for routine maintenance. Once upon a time you could have asked the missus to come get you and borrowed her car, but she's commuting to her own job now and testy about having to hitchhike. Lo and behold, even before you have time to kick the repair shop's Coke machine, a well-dressed, intelligent young Enterprise agent materializes with some paperwork and a car for you. Typically, you pay 30% less for an Enterprise car than for one from an airport. And your insurance or warranty usually picks up part of the tab. You sign and drive off.
Wow! How simple! So why haven't Hertz and Avis made road kill out of Enterprise? And how come Frank Olson, the fiercely competitive Hertz CEO, concedes he "missed a big opportunity" by letting Enterprise run away with this business? Because the replacement business is harder than it looks, and because years ago Enterprise developed a bunch of quirky but simple hiring and promotion practices that have produced a culture perfectly suited to its part of the industry.
Instead of massing 10,000 cars at a few dozen airports, Enterprise sets up inexpensive rental offices just about everywhere. As soon as one branch grows to about 150 cars, the company opens another a few miles away. Andy Taylor, the friendly, low-key son of the founder and the current CEO, brags that "90% of the American population lives within 15 minutes of an Enterprise office." Once a new office opens, employees fan out to develop chummy relationships with the service managers of every good-size auto dealership and body shop in the area. When your car is being towed, you're in no mood to figure out which local rent-a-car company to use. Enterprise knows that the recommendations of the garage service managers will carry enormous weight, so it has turned courting them into an art form. On most Wednesdays all across the country, Enterprise employees bring pizza and doughnuts to workers at the garages.
Enterprise is also betting that you, stuck, won't be in the mood to quibble about prices. Yes, it has cars for $16 a day--the amount many insurance policies pay for replacement rentals. But those are often tiny GEO Metros; about 90% of people pay more for a bigger car. Enterprise buys cars from a wide variety of American, Japanese, and European automakers. To reduce costs, it keeps its cars on the road up to six months longer than Hertz and Avis do. If your insurance covers a replacement rental, you can get a Chrysler Neon in New Jersey for $21 a day from Enterprise, and a BMW 325 for $49.
Enterprise doesn't just wait for your car to break down to capture you as a customer. A huge chunk of its recent growth has come as auto dealers increasingly offer customers a free or cheap replacement while their cars are in the shop for routine maintenance. Enterprise has agreements with many dealers to provide a replacement for every car brought in for service. At major accounts, the company sets up an office on the premises, staffs it for several hours a day, and keeps cars parked outside so customers don't have to travel back to the Enterprise office to fill out paperwork. Says Mike Sabine, the service manager at Schneider & Nelson Porsche, Audi, and Rover in West Long Branch, New Jersey: "The Enterprise people are practically part of my staff."
Unusual hiring and promotion practices drive much of the company's hustle and rapid growth. Virtually every Enterprise employee is a college graduate; in a unionized, labor-intensive industry that seeks to keep wages low, that's unusual enough. But there's more. Hang around Enterprise people long enough, and you'll notice that despite their informal exteriors, most seem to have the competitive, aggressive air of an ex-athlete. It's no accident. Brainy introverts need not apply, says Donald L. Ross, the company's chief operating officer. "We hire from the half of the college class that makes the upper half possible," he adds wryly. "We want athletes, fraternity types--especially fraternity presidents and social directors. People people."
The social directors make good salespeople, able to chat up service managers and calm down someone who has just been in a car wreck. Sabine, the Porsche manager in West Long Branch, says the Enterprise employees are smart and affable enough to put his upscale customers at ease too. The Enterprise employees hired from the caboose end of the class have something else going for them that valedictorians may not have, either: a chilling realization of how unforgiving the job market can be. Jeffrey M. Brummett, vice president for daily rental operations and a onetime semipro baseball player, admits that he and many of his colleagues were ready to work hard after being sobered by the dearth of career opportunities awaiting party animals like themselves. "Nobody ever went to college planning to go into the car rental business," he says, echoing an often-repeated comment among Enterprise employees. "Then a time comes when that's the opportunity that presents itself, and you grab it."
What new employees find is long, grueling hours. Management trainees, as they're called, spend much of their time washing cars, vacuuming interiors, and shuttling vehicles to body shops and customers at home. Starting pay varies around the country but is usually in the $20,000-to-$25,000 range. Employees don't get regular raises; instead, their pay is tied to the profits of their branch office. Many quit in a few weeks.
But Enterprise has found ways to take some of the sting out of menial work. Every employee, including top executives, started the same way. With few exceptions, Enterprise does not hire managers or executives from the outside. As a result, there is a bond--yes, a fraternity--of shared experience that stretches from Ross, the COO in St. Louis, to Fred Sorino, manager of an office in Eatontown, New Jersey. Both can, and do, tell identical tales of getting their neckties sucked into the vacuum cleaner or rushing home to change a shirt stained by motor oil.
To reinforce the kinship, senior officials routinely do grunt work. Says Sorino: "Once I was working at a branch in Cranbury, New Jersey, and a corporate vice president and a regional president showed up for a surprise visit. I was outside washing cars in 20-degree weather, and we were very busy. These two executives offered to help me clean the cars. I felt so awkward that I said I didn't need help, but they did it anyway." Even Andy Taylor, the CEO, has used a vacuum. "We were visiting an office in Berkeley and it was mobbed, so I started cleaning cars," he says. "As it was happening, I wondered if it was a good use of my time, but the effect on morale was tremendous."
With all the jocks around, it was inevitable that employees would start competing with each other. The financial results of every branch office and every region are made available for all to see, and that sparks lively intramural contests. "We're this close from beating out Middlesex," says Woody Erhardt, an area manager near the New Jersey shore. He is grinning and holding his fingers an inch apart. "I want to pound them into the ground. If they lose, they have to throw a party for us, and we get to decide what they wear."
It's not clear whether the Enterprise troops will keep up their enthusiasm if the company's growth begins to slow. But so far, nobody seems worried that the party will end. Says CEO Taylor: "We have studied our prospects and see no sign of a slowdown." Increasingly, he says, people are renting from Enterprise even when the family car runs just fine. "We call it the 'virtual car,' " says Taylor. "Small-business people who have to pick up clients call us when they want something better than their own car. So do people who have to take a long trip and don't trust, or just don't want to use, the family car." Enterprise, it seems, doesn't need a tow truck to keep its car business moving.