Chapter 1: “Wreck-O-Nomics”

 

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David Schwartz; Entrepreneur extraordinaire.

“Are you serious? This is a business?”

“Yeah, really,” maintained Richard, my sister’s boyfriend at the time.

“They rent these junkers?” I asked, shaking my head. “To whom?… As a gag?”

“It’s for real,” he insisted. “Come on, you’ve got to meet the guy who owns this place. It may not look like a business, but you’ll be surprised.”

I looked around. The place was located on a corner on Pico Blvd. in West Los Angeles. It really did look like a junk yard. Old cars were everywhere, covered with dust. Rent-A-Wreck was certainly an appropriate name for a dump like this.

We walked up a few steps into a small office, which was also a catastrophe.

“Dave’s out there with a couple of customers,” said my companion, gesturing toward the car lot. “He’s the guy with the red hair and the baseball cap.”

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No caption needed.

There was no one else in the office at the time, just an ornery-looking grey cat lounging on a pile of old newspapers. There was a poster with a picture of President Richard Nixon on the wall. The caption read, “Would you buy a used car from this man?” Dave and his customers, a man and a woman, came into the office. He asked them a few rather personal yes or no questions. I didn’t catch all of the conversation that passed between them, though it seemed to me that they were selling Dave rather than the reverse.

“How about that pink Mustang over there?” the man asked.

“It’s reserved,” replied Dave.

“How about that blue Buick?”

“Sorry, it’s reserved too.”

“And the grey Falcon wagon?”

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1970s era very used rental fleet

“Let me check,” David responded, leafing through a notebook on the counter. “No luck; but I do have a suggestion. I can let you have that grey Plymouth,” pointing in the direction of a dusty vehicle on the far side of the lot. “It doesn’t look so good, but it runs great. All it needs is a wash job. I can recommend a drive through service station not far from here. It takes regular.”

“I’m sure that will be fine,” said the husband to his wife who was nearing exhaustion.

I couldn’t believe what I was witnessing. Customers were begging this proprietor to rent them a car and grateful to drive off in a dusty old clunker, which needed gas and a car wash.

A lot boy moved some cars for the “lucky couple” as Dave turned to his new visitors, Richard made the introduction.

I sized up Dave Schwartz. He was about my height, probably 6 or 8 years younger and in pretty good shape with a welcoming smile. We spent a few minutes sharing mutual acquaintances. Despite his blue jeans and baseball cap, this guy seemed plenty sharp. I found out later that he was a UCLA business school graduate.

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“There’s a car wash up the street.”

That was it. A couple of new customers came into the office. Dave excused himself, began his professional negative sell, and we left.

“What do you think?” asked Richard as we walked back to the car.

I just shook my head. “Only in Los Angeles.”

I went back to my office and did indeed “forget about it.” However, a few days later I was driving home late one afternoon on the Pacific Coast Highway when I was waved down by a motorist carrying a gas can.

“Can I be of any help?” I asked. “Car trouble?”

Man filling gas tank

“Watch that gas gauge.”

“Not really,” said the man. “I just ran out of gas. Could you give me a ride to the Chevron Station? It’s just up the road. It’s my own fault. Dave warned me. He said that when the fuel gauge reads empty, it means it.”

“Dave?” I repeated.

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Renter’s port in a storm

“Yeah, Dave Schwartz. The guy at Rent-A-Wreck.”

“Really?” I said. “How long have you had the car?”

“Well,” he replied, “I’ve had this one for about two weeks. It drives great. It’s my fault about the gas.”

On that short ride to the Chevron Station and back I asked him all about his experience at Rent-A-Wreck. He explained that he and his wife gave their second car to their son who was away at college, and rather than replace it, they rent from “Dave” on an as-needed basis.

It was as if the proverbial “light went on.”

The car the guy had rented was an early 70s model Chevrolet, maybe 6 or 7 years old. I didn’t get a good look at the body, but it appeared to be OK. After all, the car he gave his son was probably no “cherry.”

On the drive home all kinds of promotional ideas went through my head, including slogans like “America’s Second Car” and “Don’t Let the Name Fool You”… Why Not? I thought. That sales pitch would work anywhere in this country. Folks in Des Moines couldn’t care less about new car status.

A couple of weeks after my first visit, the Los Angeles Times carried a big story about Rent-A-Wreck, featuring a picture of Dave Schwartz holding his cat and a small dog surrounded by his fleet of old cars.

I called Dave the next morning, and we went up the street to a little short order place for a lunch that turned out to be the beginning of a new adventure.

It was never clear to the public as to where Dave’s fleet of cars came from. I do know that he ran a big ad in the yellow pages under another name offering to buy “wrecked cars.” I also knew he owned a repair garage up the street in what was an old Shell station. He also owned or leased two other large lots where he stored the cast-offs, some of which could be rebuilt. The rest he would cannibalize for parts.

I learned one important thing; Dave would never put any car on the road unless it was trouble-free. Though he owned his own tow trucks, he didn’t want the aggravation. Positive word-of-mouth from customer to customer was his best means of advertising (Yesterday’s “Yelp”).

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Dave’s gas-stingy Beetles

The pride of Dave’s fleet was his collection of Mustang convertibles and Volkswagen ‘Beetles,’ some of which were as much as 20 years old. The former he kept in mint condition. Some of the Mustangs were actually pink, and supposedly reserved for his show business customers. A pink Mustang may mean nothing to someone renting a car in Duluth, but in LA it was a status symbol.

As for the VW ‘Beetles’? They were trouble-free, used regular gas, and got 30 miles to the gallon, a meaningful economy considering the size of “Greater Los Angeles,” which encompasses an area of 4,800 square miles. Dave also had a couple of limousines and a small fleet of pick-ups, which were always busy.

To my knowledge, the only advertising he ever purchased was in the yellow pages. Before I came along word of mouth and that story in the Times were Rent-A-Wreck’s only public exposure.

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Go figure!

Dave’s regular customers included the movie studios and the Los Angeles Police Department, the former to be driven in so-called “period pictures” or used as curbside props. An older model “beater” made a perfect disguise for LA’s undercover police surveillance teams. There were also stories about celebrities driving up to the Beverly Hills Hotel or the Beverly Wilshire in a 12-year-old Ford or Chevy and handing the keys to the shocked doorman. (Great fodder for the tabloids.) Actually it was one of Dave’s actor friends who suggested the name “Rent-A-Wreck.”

I asked Dave why he appeared to make it so difficult for people to rent a car, putting his customers through a virtual ‘third degree’. “Was it for show?”

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Not in Dave’s cars

“Not necessarily,” he replied. “I don’t want any trouble. It takes only a few minutes to vet a prospective customer. For example: A man comes in to rent a car. He’s accompanied by a teenage boy. I know right away that he’s going to use my car to teach his son how to drive, or worse yet the kid was planning to drive my car to his Senior Prom. Bad idea. Believe me, I’m operating from experience.”

Dave also wouldn’t rent to house painters, for obvious reasons, and he tactfully turned away Arabs and Israelis (no explanation given) repeating, “I just don’t want any trouble.”

Most of Dave’s business was replacement rentals for customers in need of a vehicle while their own was in the shop, or for people who needed a second car on a temporary basis. Unlike the major auto rental companies that require an airport location, RAW billed itself as a local or neighborhood rent-a-car.

Of course I was fascinated by the guy and his unique concept, but my practical, naturally pessimistic self thought, “How could I sell Dave and his unique business practices to a prospective franchisee in my home town of Minneapolis, or Toledo, Ohio, or Norfolk, Virginia, or Memphis, Tennessee, or the rest of the country, where renting an old car was anything but a status symbol?”

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Leave ’em to Hertz.

On the other hand I thought, “What’s really wrong with renting a used car? We all drive used cars at home. Rent-A-Wreck doesn’t compete with Hertz or Avis whose customer is primarily the travelling businessman who needs a car for a day or two when he lands at the airport.”

Though Dave did offer limited pick-up and drop-off service to established customers at LAX, his ideal renter was usually a local family whose car was being repaired or needed an extra car for a visiting friend or relative. His average rental ran a week or ten days. Less turnover meant less unproductive downtime.

The Deal

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Winning partnership

Our arrangement was very simple. We formed a corporation, the purpose of which was to franchise and market the Rent-A-Wreck name, emphasizing Dave’s used car rental concept. I would finance and run the new company.  My staff would supervise all sales and marketing as well as day-to-day coordination with our proposed network of Rent-A-Wreck franchisees.

Dave agreed to participate in the training of the new candidates and make himself easily available for advice by phone on an as-needed basis. Most important however, was Dave’s participation in the new company’s efforts to promote the name Rent-A-Wreck and lend his unique persona to our publicity and public relations efforts.

Dave was a reporter’s perfect interviewee. His laid back demeanor, his unique persona, and his “wrecks to riches” story made great copy. He did guest spots on the TV networks, and Rent-A-Wreck and Dave were featured in magazines and newspaper articles all over the world. I hired a top notch PR firm, who did a great job putting the Rent-A-Wreck name on the map.

Rent a Wreck makes a “Deal.”  Click play below.

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The media loved Dave’s story.

Like many start-ups, Rent-A-Wreck’s growth was gradual in the early years. We sold our first franchise in San Francisco. A retired Hertz executive read Dave’s story in an automotive trade magazine and opened a Rent-A-Wreck in Cherry Hill, New Jersey. A VW dealership owned by a former race car driver bought a franchise in Phoenix. My retired father opened an office in Palm Springs.

I did a little checking. Very few new car dealers provided loaners to their customers when they brought their vehicles in for service, and then only for a day or two at most. A dealer’s big problem was insurance. I thought that if David was renting clean late model used cars, he might get more referral business from new car dealers in the West Los Angeles and Santa Monica area.

Dave mentioned receiving a call from an Oldsmobile dealer in Columbus, Ohio inquiring as to where he got his insurance. Dave, who was self-insured at the time, couldn’t help him.

I did a little research and uncovered what I thought would be a niche opportunity. If we could offer liability coverage from a legitimate insurance carrier, we could provide a prospective car dealer-franchisee the protection he would need to rent a car off his used car lot. “Who knows, maybe his rental customer could be interested in buying that particular vehicle, or perhaps even one of his current model new cars.”

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.

Then we got lucky. One of the biggest insurance carriers in America, agreed to fill that niche. Someone at Liberty Mutual saw an opportunity to open up a whole new market. We made a deal.

Insurance would prove to be the key. I could conceivably offer a franchise to every new car dealer in America. We may have discovered an under-served niche, assuming of course that the new car dealer could live with the name “Rent-A-Wreck.”

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Our secret weapon

As it turned out, Dave had received inquiries from several new car dealers as a result of an article in People Magazine. I gave them all a call, mentioned the name Liberty Mutual, and the response was, “Where do we sign up?”

A Ford dealer from Norfolk Virginia flew out, met Dave, spent a day with us and bought two franchises. A Chrysler dealer from Madison, Wisconsin stopped by Dave’s office while vacationing with his wife in Santa Monica. Dave sent them up to my office. Both dealers returned with their general managers to attend our “Rent-A-Wreck” school. That Oldsmobile dealer in Columbus bought four franchises.

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Rent-A-Wreck meets America’s auto dealers

We set up a Rent-A-Wreck booth at the NADA (National Auto Dealers Association) Convention in Las Vegas where we met hundreds of new car dealers. Stories appeared in the auto industry trade magazines. That’s when our franchise program really began to take off. Incongruous as it may seem, we actually sold franchises to a Cadillac dealer in Akron, Ohio and a Mercedes dealer in Rochester, New York at one of those NADA Conventions.

We received a call from the owner of the Yellow Cab Company in Binghamton, New York. He figured that adding a rental car franchise was a natural. He mentioned it to a fellow Yellow Cab operator in Memphis, Tennessee who in turn introduced us to his buddy in Miami, Florida.

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A perfect partnership

Our franchise in New York City was purchased by a man who owned a chain of parking garages in Manhattan. Because parking on city streets was and still is virtually impossible and, space in garages terribly expensive, many people choose to rent cars on an as-needed basis. We staged a big grand opening in Manhattan. It was covered by the city’s newspapers, the three network TV stations and featured in Time, Newsweek and Playboy. The Sept. 3, 1983 edition edition of the New York Times profiled 5 Rent-A-Car companies in Manhattan: Hertz, Avis, National, Budget, and newcomer, Rent-A-Wreck. Every Rent-A-Wreck vehicle in New York City was usually booked on the weekends.

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One auto dealer led to another.

The September 1985 edition of Franchising Magazine listed Rent-A-Wreck as one of the fastest growing franchises in America. That same year Venture Magazine named Rent-A-Wreck among America’s most profitable franchises, ahead of such stars as Fantastic Sam’s, Seven Eleven, Pizza Hut, and to our delight, Budget Rent-A-Car.

By that date we had 322 rental offices in 41 states and 6 in Australia. Five were company-owned locations in Los Angeles, San Francisco and Chicago. It seems as though we were making headlines everywhere.

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“Knock-offs”

Of course, notoriety was bound to attract competitors. A fellow in Phoenix came up with the name ‘Ugly Duckling Rent-A-Car.’ Another man in Oregon opened up under the name ‘Rent-A-Dent.’ These were followed by more would-be used car rental entrepreneurs under names like ‘Hire-A Heap,’ ‘Rent-A-Relic,’ and ‘Lease-A-Lemon.’ One entrepreneur actually called his business ‘Polish Rent-A-Car.’

Rent-A-Wreck had a head start, however. All that publicity was paying off, as was the momentum we were generating with our growing network of new car dealers and Yellow Cab companies. Our unique relationship with Liberty Mutual Insurance Company was certainly a contributing factor.

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One auto dealer franchisee led to another

American automobile manufacturers encourage their dealers to form small coteries and hold periodic meetings to compare ideas, experience and business strategies. I was often invited to fly out and attend some of those meetings to talk about Rent-A-Wreck and the advantages of providing rental vehicles to their customers on a short-term basis. I learned as much from those dealers about their business as they learned about mine.

Enjoying the benefits of a proprietary trade name has its obligations however. U.S. law, as well as laws in most countries, require the owner of a trade name or trademark to not only register that name or mark, but go to court if necessary to protect it from unauthorized use.

Most violators of the Rent-A-Wreck trade name usually dropped it after receiving threatening letters from our attorneys. One fellow in New Jersey claimed to have utilized the name prior to Dave. We had to take him to court in Newark. We had a good lawyer, but so did he. To protect our 30 legitimate franchises in that state we had to make an expensive settlement. We had better luck in a small town in Florida. Dave and I flew down there with a lawyer to testify in court in Orlando. The judge ruled in our favor, so the loser simply changed his name to Rent-A-Relic.

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Canadian knock-off

We registered the name all over the English speaking world. Protecting it overseas was a big expense however. We decided not to contest the infringer in Canada who may or may not have had certain legitimate rights to the name in that country. On the other hand, our franchisee in Australia was a big General Motors dealer, and he chose to fight to protect the name. The outcome in most infringement situations however, was usually a favorable settlement.

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Three-wheeled Rent-A-Wrecks… Why not?

Because the Rent-A-Wreck story also received coverage in international media, we had many foreign visitors inquiring about the business and the use of our name. A big auto dealer in Tokyo sent three of his executives over to negotiate for the rights. They spent a day with David and another at our corporate office picking our brains. We actually invited them to join us for a day at Rent-A-Wreck school.

At the end of that visit they thanked us, bowing respectfully. The next day they flew back home and opened a knock-off under some Japanese idiom that roughly translates into “wise old motor vehicles for rent.”

What with our accelerating growth in this country and the high cost of protecting our virtually generic trade name elsewhere, we decided to limit our enforcement efforts outside the United States to threatening letters, most of which were ineffective.

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No wrecks here, just winners.

The name was indeed magic. Two gentlemen from the Dominican Republic came to Los Angeles, bought a franchise for that country, and attended our Rent-A-Wreck school. They returned home, hung up a Rent-A-Wreck sign, and opened up a business renting, of all things, three-wheeled scooters. My wife, Elayne and I were of course delighted to pay them a visit.

Thanks to the outstanding efforts of our public relations agency, Rent-A-Wreck continued to make headlines. In addition to sponsoring race cars, we entered a 1936 Packard in 1985’s highly publicized coast-to-coast Great Antique Car Derby. Rent-A-Wreck finished less than 25 minutes behind the winner.

Click here to read Chapter 2  [Open]

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