A warm welcome to our listeners from St. Louis University's Boeing Institute of International Business. This is Todd Havermail bringing you Conversations That Matter. In this episode, we revisit a conversation from December 2021. Gene Cunningham sat down with Peter Smith, Vice President of Global Franchising at what was then Enterprise Holdings, to discuss the Mobility Solution Company.
global expansion. In October of this year, Enterprise Holdings announced a name change to Enterprise Mobility to honor their business's 65-year history and mark the beginning of their next chapter. Here is a look back on how Enterprise Mobility expanded from its very successful domestic car rental business into the global marketplace using a franchise strategy. SLU International Business Now Conversations That Matter is a podcast developed by the Boeing Institute of International Business in St. Louis University's Chaffetz School of Business. Special thanks to founder Dr. Sung Kim for his grant to support the launch of this podcast.
A warm welcome to our listeners from St. Louis University's Boeing Institute of International Business. I'm your host, Gene Cunningham, bringing you Conversations That Matter. For this episode, we're going to examine how a very successful domestic company, Enterprise Holdings, parent company of Enterprise Rent-A-Car and Truck Rental, as well as National and Alamo Rental Cars, wrestled with the changes needed to drive their company to become a global market leader. Our sponsor for this episode is GBO, Griner BioOne North America. As an international manufacturer of scientific and medical devices, Griner BioOne provides clinicians and researchers within the world's largest hospitals, pharmaceutical and biotechnology corporations with the laboratory and diagnostic products necessary to improve health.
Learn more at gbo.com. My guest is Peter Smith, Vice President of Global Franchising for Enterprise Holdings. Peter oversees the company's worldwide franchise operations and expansion efforts. He has a bachelor's degree from Duke University and his Juris Doctorate from the University of Richmond. After graduating law school, he practiced corporate and international law in St. Louis, and then he joined Enterprise Holdings in 2004 as corporate counsel.
In 2007, he was lead counsel for the newly acquired National Analymo Brands. Peter was promoted to his current position in 2012. Peter. It's great to have you here today. Hi, Gene, and it's a privilege to be here.
Thank you, Peter. To set the stage, let's take a quick look at Enterprise Holdings. The company's headquartered in Clayton, Missouri, with revenues of $22 billion and operating 9,500 branches across 100 countries and territories. Enterprise is privately held, founded by Jack Taylor in 1957. Jack Taylor's business model was to build and operate a series of local car rental branches, not franchises, to meet local consumer car rental needs.
For three decades, Enterprise expanded across all U.S. markets. By the 1990s, Enterprise entered airport markets, ultimately acquiring the national and Alamo car rental businesses in 2007. Internationally, Enterprise took a more deliberate pace, starting with Canada, then the UK, Ireland, and Germany, next expanding to Spain, France, and beyond. It's at this point, Peter, I'd like to start our conversation.
Enterprise Holdings had been a successful growing domestic business for decades. What prompted the company to look internationally? Was Enterprise seeking measured growth? Was it racing to become a global brand or was it something else? Let me start with an adage that our executive chairman, Andy Taylor, the son of our founder, Jack, always imbues into the organization.
We want to be the best, not the biggest. And while we all know that becoming the biggest was a byproduct, it was never the goal. So there was never a race to be a global brand. Instead, we were always guided by another mantra of Jack and Andy's, which is take care of your customers and create opportunities for your employees until the profits will follow.
And so as we expanded really everywhere in the United States, being within a 15-minute drive of 90% of the population and our... airport presence began to grow because our customers were telling us they loved us in the neighborhood. They missed us at the airport.
We took a decision not unlike what many companies that are going to leave the home market are going to do to go to Canada. And then in the UK and Ireland, of course, it follows. These were strong economies, high GDP per capita, which is very important in the car rental business. But also, they were very...
culturally or geographically proximate to our home country, which is probably in business generally the number one foundational requirement for your next international move. And so we were very deliberate and it was never the intention to globalize at that time. It was just to continue to create opportunities for our employees.
customers and grow the business. But we were never looking to emulate hotels, quick food service, or even our competitors as a global footprint. That evolved with the business naturally and organically over time. So your move internationally was to essentially parallel markets where your U.S. business model worked very well.
That's exactly right. And we did not seek to create a system as we do today. We didn't view ourselves as a travel company.
And so, for example, when we went to Canada, we went into the local market and so we were serving what we call replacement customers because your car is in the shop due to a warranty issue or an accident. And you do transportation and we're going to be there for you. And then it would emanate out into other local use cases. And then from there, as the brand got built, we would move to the airports.
But even if I fast forward to 2007, when we bought the Alamoa National Brands, we were a multinational company, but we weren't a global company in that we had five-cylindered businesses. Even when we were the largest in the U.S. and Canada, We weren't selling marketing or revenue managing to Canadians to rent from us in the U.S. or vice versa. We had so much opportunity utilizing the strategy that had been part of our DNA that we never needed to get to that next stage. Okay.
You eventually did move out of those parallel markets and you ran into... market differences. Can you talk a little bit about those differences and how you adjusted your international strategy to succeed in those markets? Yeah, I can.
And like a lot of companies from the U.S. who are very successful in the U.S. and then go to those regions that are, again, very similar, either geographically, culturally, or often both. We didn't have to learn hard lessons early on in our internationalization, right? So then, at another point in the 90s, we opened in Germany.
Now, Germany is a country that is renowned for being more challenging at the mass retail level. Even Walmart, for example, entered. and then retrenched from Germany. And Germany also has a national champion in the car rental industry that's mainly based there and has expanded gradually around Europe and around the world.
And when we approached Germany, we approached it the same way as the other markets, which is let's look at the so-called replacement industry. And... The German market, like many markets in the world, doesn't have the depth or did not at that time in the replacement market. And so because we weren't a cross-border airport company in Europe, we were only playing over one slice of the pie.
In addition, culturally, we learn new things because in our employment model in the U.S., We hire college graduates, the most college graduates in a typical year of any company in the U.S. And we put them on a career path. While the entire world has continued to increase the penetration rate or the percentage of college graduates, that's not common everywhere.
And Germany is renowned because of its mid-sized companies and is an industrial and exporting power for vocational school. And so that was different. And then there were other innumerable differences and probably the final one was when we deploy, and here I'll foreshadow the globalization and the mode of entry we took, when we were to deploy into Canada or the UK or Ireland, we would take the best of the best from the US and send them.
Okay. Well, the language is important in a way that you can't overestimate, right? So we didn't have a stable of high performers that either spoke German, who understood the German culture, and so everyone well, and it's a thriving business today, but it was a different experience and one that left a mark on us appropriately in terms of wisdom for when we were to take the next step, which was not for a number of more years. You restructured your international business model to include franchising. That became a game changer for your international growth path.
So it Franchising solves some issues for you, but it probably also created some new ones. Can you talk a little bit about both what franchising solved for you and what the challenges were that it introduced for enterprise? Of course.
So the impetus was the acquisition of Alamo and National in 2007, which turned out to be a revolutionary point for our company. And so those brands became as travel brands. Alamo principally for the leisure customer, National principally for the corporate customer.
And going back to the comment I made earlier, listen to your customers and take care of them and your employees and the profits will follow. As a business that was cylinder in five countries, we were not a cross-border travel system. And so we were not where the customers we had required us to be. and we could not reach the customers that we didn't have but wanted. And so that set the stage for the globalization.
And when we took stock about the way to do that, we understood that we had world-class comparative advantages in terms of know-how, our IT, our global reservation system, in that all three brands are multi-billion dollar. reservation or distribution systems in their own right. But we did not have local knowledge. What do I mean by that?
How to operate in society, how to operate in terms of from a regulatory standpoint. We didn't have the relationships from a sales and marketing standpoint. And if we didn't speak German, then we didn't speak Czech. We didn't speak. Bulgarian.
I can't count the number of languages we don't speak, Gene. And so we took the decision, and it was a very bold one for us. Andy said, let's be bold at the time because we had never invested our brand and our reputation, the most valuable things we'd owned, in a third party.
And that took a lot of courage for us because that's a big leap. And so the model of franchising, to your question, Solved the problem of lacking local know-how. And it also solved what would have been another problem of speed to market.
That's another black letter reason to franchise, rather than greenfield the world. About the only reason we didn't choose to franchise was another typical black letter reason that didn't apply to us, which is a lack of capital. That was not the issue. And so, We chose franchising to solve those problems, and that worked.
Now, to the second half of the question, what new problems did that present? Well, first, how to find a franchisee, okay, because we didn't have any. And we had no institutional experience about how to identify one, persuade one to join our system, integrate them, or send them customers.
That's the basic blocking and tackling. And I can remember in the early days of the globalization when I had the privilege to try to understand and figure that out. I remember sitting at my desk in St. Louis and looking at my phone and I'm saying, I wish a franchisee would call up and complain to me because that would mean that we had one. And so we had to learn everything about the business. I can talk about that, but let me pause there.
I will add that another big challenge for a company with a very strong culture that's built, and I would call a vertical model in the field. For example, in the U.S., you come in as a management trainee. You matriculate up through the ranks. Every one of your managers had your job.
You had the job of everyone you manage. So there's almost the oral tradition of learning not just the operations, but the culture. And the culture is so key, our most important comparative advantage, which is great customer service. So how to imbue that culture, how to export it when you're not there every day, another challenge.
Yeah. So let's dive into that one just a little bit. The idea of franchising that comes to mind is.
A McDonald's where the franchise aura is passed on to the franchisee and they follow the model. In terms of enterprise, you were pointing to not disappointing the customer, always wanting to get that consistency with the customer. Were there certain ground rules that you had in place for your franchisees then? Or how did you solve that problem of?
moving the culture that you had created so successful in the U.S. internationally? Well, it starts with, do you have the right franchisee? So what we developed was what I call a definition of a quality partner.
And some of those elements are obvious. Operational excellence, maybe in car rental, maybe in another segment of automotive. Maybe in a different industrial area altogether.
Financial strength to capital-intensive business. We need people who can hit the ball back with us in terms of growth because they own their own fleet. But none of those things matter.
That kind of athleticism, I call it. If there's not a common mission, and within reason, on a global or internationalized basis, common values. Because two great athletes that aren't setting out to do the same thing will not succeed no matter what. And an example I would give in any industry would be, say, an alliance between a privately or it could be publicly held, but long-term operator and A private equity owned operation.
Both are excellent at what they do. They just do different things and then that will manifest itself in the end product. So the quality partner test is something all of our people can recite now. And we explain it to the franchisee and as part of culture building we say, and it's a two-way street. You're welcome to apply a quality franchisor test to us and explain those elements.
And if we meet your needs and you meet our needs, well, then we can do business together. Now, from there, there is a litany of things that we do, both in terms of operations, sales, marketing, revenue management, just the relationships with our franchisees. Frankly, a lot of fun things that we do to build the culture.
And. The best way I have to describe that is, we do all the big things, and we do all the little things, and we do them from hello, and we never stop. And our franchise know that they're full citizens in our system.
They feel 100% of the force and power of our support, and therefore, they understand the obligations of a citizen, and they give back. Those were some of the ways that we dealt with that. So that quality partner test going both ways helped to assure that the values of both enterprise and their franchising partner were aligned so that you then didn't worry about what the franchisee was going to do because you were both looking at things the same way, as you pointed out, two quality athletes that are working together because they've got same purpose. Great example. Thank you very much.
That was the idea, but let me respond with, I did worry. Okay. Because I felt like it was not attainable to go 100 for 100 in a decade.
And of course, I wouldn't know, we wouldn't know where we were going to miss, right? Or sometimes things are out of our control, like there'll be a sale. And while we have a... consent right. The system's an amoeba.
Things are always changing. And so sure enough, I I got it wrong a handful of times. And now on what I call our second orbit, we are continuing to strengthen the network towards the end game, which again is I've captured that adage I described to you earlier.
And so now it's take care of your franchisees and your customers and the royalties will follow. And it's not about a royalty play. It's about, we think in terms of we have owned operations and we have franchise operations, but the customer just looks at the brand and expects the brand promise.
And so did I get it right every time? No. Will I get it wrong again?
Sure. But it's how we react to that then that becomes the important thing. Yeah, I appreciate that and appreciate the candor in terms of you don't always get it right, which is why you got to keep checking. and keep running that test.
Excellent. Excellent advice. This is what we say in customer service, incidentally, to build loyalty to the brand.
We won't have a great brand and we won't have a great reputation for customer service if we don't get it right most of the time, nearly all the time. But the true measure of ourselves is when we don't get it right, how we react. And our customer sales representatives teach us that is the opportunity.
to really grab hold of the heart of the customer. So we've expanded on that throughout internally our operations and our mindset. I appreciate that. This has been just a fascinating conversation and an amazing look into the international strategy that you and Enterprise have been pursuing.
For a future episode, it'd be great to have a conversation with one of your international franchisors. So I look forward to doing that with you in the future. But before we close, do you have any parting comments for the audience?
Only thank you to the audience. Thank you to St. Louis U and the Chaffetz School and the Boeing Institute of International Business. These are incredible assets, not only for St. Louis, but for the wider Billiken community. And it's just a real privilege for me to have been here. And I say that not just for myself, but on behalf of the company.
And then on a more personal note, thanks to Patricio Duran and Todd Hovermail. And then your executive producer, Mary Porter. And then, of course, to Eugene.
This has been just as stimulating for me as I hope it is for your viewers. Well, thank you, Peter. Again, it's been an outstanding conversation.
You've given us some really good insight into this idea of international franchising. Some of the ups and some of the downs that are out there, but the fact that it can really propel a brand like Enterprise to that exceptional global market leadership position. We hope you've enjoyed, as a listener, our conversation with Peter Smith today and this look into the international franchising strategy that accelerated the success of Enterprise Holdings and positioned it to become a market leader. If you've learned something from this podcast, please be sure to leave a review with your podcast provider and join us next time as we continue our global strategy segment with a look at global risk management.
I'm your host, Gene Cunningham, bringing you Conversations That Matter. Thank you for tuning in to the SLU International Business Now Conversations That Matter podcast. We invite you to subscribe to this podcast series so you don't miss any future episodes. To learn more about the Executive Master of International Business Program, please visit biib.slu.edu.
Again, that's biib.slu.edu.