Enterprise Rent A Car Company Business Information, Profile, and History

History of Enterprise Rent A Car Company

Enterprise Rent-A-Car Company is the parent company of the highly successful Enterprise Rent-A-Car. Avoiding the higher margin, highly competitive travel segment dominated by Hertz and Avis, Enterprise dominates the 'home city' segment of the automobile rental market, catering largely to those consumers who need to rent cars temporarily to replace ones that have been stolen or are being repaired. The replacement car niche tends to be resilient in times of recession and remains fragmented, allowing Enterprise room for growth in the years ahead. In addition to its rental car business, Enterprise operates a number of successful non-automotive subsidiaries that provide coffee and candy services to business, hospitality, and correctional institutions nationwide.

Enterprise was founded in 1957 by Jack Crawford Taylor. An unlikely candidate to father such an ambitious company, Taylor had struggled to finish high school and drifted through two colleges in one year. During World War II he served in the U.S. Navy, becoming a fighter pilot in the Pacific and eventually witnessing the loss of one third of his squadron. When he returned home he found enjoyable work and financial security as a Cadillac salesman for a dealership owned by Arthur Lindburg in St. Louis, Missouri. But before long he discovered that he had a desire to be an entrepreneur. Like Taylor the fighter pilot, Taylor the businessman enjoyed a little risk.

In his position at Lindburg's dealership, Taylor occasionally came into contact with Cadillacs leased out of Chicago by a Greyhound subsidiary. Struck by the apparent ease and convenience of leasing an automobile, he investigated the business, and found that the numbers looked promising. Taylor convinced his boss to set up a leasing business, taking a 50 percent pay cut for a 25 percent share in the new business known as Executive Leasing. In a walled-off section of a body shop at one of Arthur Lindburg's Cadillac dealerships in St. Louis, Enterprise was born.

The company initially focussed on long-term leasing, but in the early 1960s Taylor began to examine the potential for car rentals. At first the short-term rental business seemed more of a nuisance than a profitable business, but Taylor handed operations over to an energetic assistant, Don Holtzman, to see what he could do. Taylor asked how many cars would be needed to get started; Holtzman replied 17, a number that remains a mystery to Taylor. Holtzman took his 17 cars and, realizing that the small company was no match for Hertz and Avis, looked for a niche away from the airports to settle into. He soon discovered that insurance adjusters had a need for rental cars for clients whose cars had been damaged or stolen, and Enterprise directed its efforts at this market, offering more competitive rates than the bigger rental companies. After Holtzman left the company in 1965, Taylor nurtured this 'home city' segment.

In 1969, Enterprise branched out of St. Louis, opening an office in Atlanta, Georgia. Offices in Florida and Texas soon followed. Taylor's national expansion got off to an excellent start in the early 1970s by targeting garage and body shop owners and convincing them to send their customers to Enterprise while their cars were in the shop. Motorists in the 1970s were so accustomed to freedom of movement that they could hardly live a day without a car, and drivers stranded while a car was being repaired were often happy to pay Enterprise's relatively low daily rate. Business improved in the early 1970s when a judicial precedent was set requiring casualty insurers to compensate insured motorists for economic loss due to being without a car.

The energy crisis of 1974 hampered rent-a-car expansion for a short period. Although Enterprise continued to show a profit, the difficult economic conditions inspired the company to diversify. The purchase of Keefe Coffee Company, which provided in-room coffee service to hotel guest rooms, started what became Enterprise Capital Group, which expanded through acquisitions during the 1970s. The next acquisition was Monogramme Confections, a candy maker selling hotels and businesses candies with customized wrappers bearing their own logo. Other additions to the Non-Automotive Group included another coffee service, Courtesy Coffee, and Crawford Supply, a service provider to correctional facilities.

A key ingredient of Enterprise's success in all business segments was its emphasis on customer service. The 'Customer Giveaway Account' was set up to allow any Enterprise Rent-A-Car employee to charge off items up to a certain limit in order to satisfy a customer. A motivated work force was crucial to the operation, and Enterprise instituted a variety of bonus plans that provided incentives to everyone from assistant branch managers on up.

Enterprise Rent-A-Car's growth, meanwhile, continued throughout the 1970s and accelerated in the 1980s, averaging 27 percent annually between 1984 and 1990. A new threat was presented in the 1980s, when Hertz and National entered the home-city rental market. The business was vastly different from business and leisure travel rentals, and Hertz quickly found the profit margins to be too low. Hertz decided to pull out of the market by the end of the decade, and National's operations struggled to stay afloat. Enterprise Rent-A-Car, meanwhile, began cultivating a market called 'discretionary rentals' in the late 1980s. Aimed at families visiting relatives, or kids coming home for the holidays, 'discretionary rentals' offered cars at low prices.

In 1987, Enterprise Capital Group purchased a cellular telephone company. Enterprise Cellular added millions of dollars in revenues. The group's experience with an unprofitable frozen Mexican food subsidiary in the 1980s convinced Enterprise that its success was more closely related to giving superior customer service than to the quality of any specific product they handled. Future diversifications would be made with this in mind. By the early 1990s, the Enterprise Capital Group represented about ten percent of Enterprise Rent-A-Car's revenues.

In 1989, Enterprise began advertising with an eye toward creating brand recognition of their service. With an initial television advertising budget of only about $5 million, Enterprise decided to strategically place their messages so that they would be seen by a demographically favorable group. The company limited its television sponsorship to one network--CBS--hoping to reach the older upper-income audience watching 60 Minutes and Murder She Wrote. The practice seemed to work for the company as Enterprise's revenues hit $800 million in 1990.

By the 1990s, Enterprise's second generation of leadership was looking optimistically to the future. The company was the fifth largest car rental chain--behind Hertz, Avis, Budget, and National--but was the leader in the still fragmented home-city car market, where faster growth was expected. Though successful competitors like Action, Agency, and Chrysler's Snappy Car Rentals had crept into Enterprise's domain, none had the foothold in the market enjoyed by Enterprise.

Jack Taylor's son Andrew, president of the company since the early 1980s and chief executive officer since 1991, picked up where his father had left off. Under Andrew Taylor's guidance, Enterprise's level of customer service was not allowed to suffer through overly ambitious expansion, with expansion proceeding at a pace dictated by the number of qualified managers available. Enterprise already operated in nearly all of the nation's top 100 market centers by 1992, and the company's successful recruitment and training programs promised no delays in growth. Acquisition of other small car rental companies operating in Enterprise's market segment was also planned.

The Taylor family owns 85 percent of the company; Enterprise management holds the rest. Occasionally the company toys with the idea of going public, but the prospects for growth in Enterprise's traditional business segments remains strong. With over 1400 offices around the country, the company does not appear to need additional capital to continue its current growth pattern. It is doubtful that the company will change its successful formula until the home-city car rental segment matures.

Principal Subsidiaries: Enterprise Rent-A-Car; Enterprise Leasing; Enterprise Car Sales; Enterprise Fleets Inc.; Claims Connection; Keefe Coffee and Supply; Crawford Supply; Courtesy Coffee; Monogramme Confections; Enterprise Cellular; SNI Sports Network.