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U-Save Auto Rental of America Growing at a Tremendous Rate

22 November 1999

U-Save Auto Rental of America Growing at a Tremendous Rate; CEO Shares Unusual Management Style, Secrets for Growth

    JACKSON, Miss.--Nov. 22, 1999--How do you grow a franchise system expeditiously, in a time where most domestic growth has slowed for other nationwide chains?
    The task is difficult enough, but leaping from franchisee to CEO, gutting and replacing an entire staff and attempting to achieve unprecedented growth is virtually unthinkable. However, this is exactly what entrepreneur Tom McDonnell has done with U-Save Auto Rental and the results after his first few years at the company's helm are remarkable.
    In 1986, when a portion of U-Save was sold, the franchise came under the management of a fragmented ownership and eventually fell victim to the inert, struggling car rental industry. With a thinly spread leadership and lackadaisical approach to achieving growth, the company became stagnant. Executives wound up concentrating more on maintaining status quo than growth.
    As a U-Save franchisee and stockbroker, McDonnell saw the need for better leadership, a major culture change and the potential to grow the company through mergers and acquisitions. Forming a partnership with fellow entrepreneur Joseph F. Tatum, McDonnell bid for ownership of the entire system and the deal to purchase U-Save Auto Rental was closed on November 14, 1996. With the sale complete, McDonnell wasted no time implementing his radical, new ideas and quickly began making changes, starting from the ground up.
    McDonnell moved U-Save's corporate headquarters from Baltimore, Maryland to Jackson, Mississippi and started searching for an entirely new staff. This search, which McDonnell deems "the most critical stage in achieving success," took several years of interviewing and selecting the myriad of competent applicants.
    A spiritual man and devout Christian, McDonnell was intent on merging his company's set of values with his own religious beliefs and convictions. And, after two full years and a lot of prayer and careful selection, McDonnell knew he had chosen the right people to run his organization. "It just felt right. You can have the best vision and ideas in the world, but without the right people, who share your goals and beliefs, you will never achieve your goals," says McDonnell.
    When choosing employees, McDonnell considered a highly qualified number of candidates who had the skills and talents required for each position, but only a handful of these executives also had the unique characteristics the 35-year-old CEO was seeking for his newly acquired franchise. With an open-book style of management, McDonnell was searching for executives who would work well in a trusting environment where micro management was strongly discouraged and ethics and high morals were a crucial part of the company's working philosophy.
    With the idea of an open-book culture, McDonnell hired his staff on the notion that employees thrive by learning about the business and how it functions. He wanted them to see what brings in business and increases cash flow. He wanted employees to openly read financial reports, suggest changes and ask questions about corporate strategies.
    "People like to feel that they have contributed something to their company and community and I want to make sure we provide them with all the tools they need to be successful, including any information they feel they need to know about the company," says McDonnell. "Some of our best ideas have come from people in the shipping department. That department would have never been asked for input before."
    Boasting the mind-set of a typical stockbroker, McDonnell was also interested in acquisitions to boost the company's growth. Under McDonnell's supervision, U-Save's parent company, U-Save Holdings Inc., purchased 110 Practical Rent-A-Car, Freedom and All Star locations in March of this year. This procurement put U-Save into the number two position in the industry, giving the franchise the second largest number of car rental locations in the United States. McDonnell plans to continue acquiring additional locations in the future, keeping in step with the company's lofty growth goals.
    Along with a new staff, open-book management principles and recent acquisitions, McDonnell also made changes in the way the company approached sales.
    "Before I came aboard, the sales force aimed almost entirely at car dealers to buy franchises and develop the brand," says Jay Mitchell, national director of franchise sales for U-Save, and one of the star players brought aboard by McDonnell. "That formula was not an automatic key to success, and we realized that many good business minds were being missed as possible new franchisees. We hired a new sales team from scratch and are targeting those others. This is a growth industry! Smart business minded individuals can see that and want to be part of it."
    Through the first ten months of their fiscal year, Mitchell and his sales team sold 104 franchises, on top of the 70 plus deals posted during Fiscal Year 98. The previous year, before Mitchell joined U-Save's staff, the company sold only 18 new franchises. As a result of the many changes in culture, U-Save is also attracting a new breed of franchisee. They are now growing at a 4-5% faster rate.
    Looking to the future McDonnell has designed a five-year growth plan, which began in 1998 and will end in 2002. Goals include a fleet of 50,000 cars, up from 12,000 today; 900 locations around the world, up from the 540 current locations in the U.S., Canada, Jordan and the United Arab Emirates; annual revenues of $150 million, up from about $20 million today; and earning a pre-tax profit of $15 million. At the end of U-Save's five-year growth, the company expects to make an initial public offering, which will value the company at $250 million.
    McDonnell feels there are several key factors to successfully growing a business:

--   Choose Your People Wisely - You don't want a company of "yes men
     or women" but you do want a team of people with the same ethics,
     values and philosophy about the company's goals. Taking the time
     to choose the right people for your company is critical...it's
     everything.

--   Focus on Your People - The vast majority of people today want to
     work in an organization where they can make a difference, where
     their ideas count, where management listens and then implements
     their ideas for the good of the business.

--   Teach Your Business - Teach your people how their company works.
     Teach them how the company generates cash and earns profits.

--   Compensate For Success - Once they understand how the business
     works, you can work together to create incentive compensation
     plans. Incentive plans make the company stronger and in turn,
     increase the employee's desire to work harder to achieve the
     company's goals.