The year was 1915. The place was Omaha, Neb.
Harris Saunders, a partner with his three brothers in a struggling real estate firm, was out for a spin in his Moline Dreadnaught with his current sweetheart when the car broke down. Harris had to have the Dreadnaught towed back to town where it was determined that it would be inoperative for several weeks. Harris' brother Joe was dismayed when he learned the news as the Dreadnaught was also used for business and without it, Joe realized that it would be difficult to travel around Omaha to sell lots and houses. It was then that Joe came up with the idea that was to launch a billion dollar industry. Why not rent a car?
Vehicle renting has grown so popular in recent years that some may regard it as a recent development. The fact is however, that in ancient Rome, chariots were rented and, down through the ages, many types of vehicles were rented in virtually all civilized countries. In early America, the corner livery stable did a brisk business renting everything from buckboards to broughams. In some cases, a form of rental agreement provided pioneers with the Conestoga wagons which opened up the West. One of the first references to the rental of a car is found in the Minneapolis Journal of July 22, 1904 when a bicycle shop devoted a line of an advertisement to announcing that it offered cars for rent.
It was not however, until Joe Saunders was faced with a major dilemma that the car-for-hire business, as we know it today, got off the ground.
What Saunders did was to go to the company's one employed salesman, a German named Frank Arndt, and work out an arrangement to rent Arndt's Model T. He agreed to pay Arndt six cents per mile on the estimated miles traveled while the Saunders' car was laid up. The miles were necessarily estimated because there was no speedometer on the Model T.
The plan worked so well for the Saunders brothers and Arndt that Joe Saunders proceeded to use up many pads of paper figuring what profits could be made if hundreds, or possibly thousands of individuals and firms would like to rent cars by the mile. There was one drawback, however. There was no money with which to buy a Model T to start the business.
In the spring of 1916, Joe Saunders was married. Upon returning from his honeymoon, he decided to quit the real estate business, if necessary, and get into the rental of cars. Finally, in August of 1916, he managed to acquire a used Model T and on Aug. 20, he put a small want ad in the Omaha World Herald advertising the car for rent.
The car was parked at the curb in front of the Woodman of the World Building in Omaha, and when the first customer came to the Saunders office on the 12th floor, the four brothers gathered around and quizzed him and then Joe Saunders took the customer down to the curb and turned the car over to him.
“Much to everybody’s surprise, he made his trip, came back and paid off,” Harris Saunders told Automotive Fleet. “In a few weeks there were three cars parked at the curb and we all marveled the cash money these cars were bringing in.”
The brothers then went out into a residential district of Omaha and rented an old stable in back of a large home. As Harris Saunders said: “In that location, the business grew rapidly with customers frequently standing in line to rent a car. The real estate business was being neglected, but the drive-it-yourself business was on its way.”
In the meantime, Warwick Saunders, father of the four brothers, was in Birmingham, Ala., promoting some iron ore property and Harris had left Omaha to go to Birmingham and take a job with the American Cast Iron Pipe Co. When Warwick Saunders heard of the somewhat hazardous business that his sons had entered, he went back to Omaha to see what he could do about getting them back into a more sound business. However, the more he watched the operation, the more interested he became and soon he urged Harris to quit his job in Birmingham and come back to Omaha. Harris returned, and the Saunders System, operated by a father and four sons, was launched.
In 1917, the family rented a downtown stable in Omaha and literally ran the horses out. Soon there were 120 Model T’s and a few assorted trucks available for rent. In 1919, they opened a Kansas City office and in 1920 a third branch was opened in Birmingham. In 1922, they established Kansas City as the company headquarters and then expanded rapidly until 1929 when there were 87 branches in the principal cities east of the Rocky Mountains.
Shortly after the Saunders brothers launched their business, another young man with an eye to the future decided what car renting had definite potential. The man was Walter L. Jacobs, former president and chief executive officer of Hertz Corp.
STARTED IN CHICAGO
Jacobs entered the car renting business in Chicago in 1918 at the age of 22. His “fleet” consisted of 12 black Model T Fords. He rented them to motoring enthusiasts for $10 a day. When he wasn’t totaling up account, he was out in the garage with a wrench or polishing rag, putting his “gas buggies” in shape for the next day’s business. An open touring car carrying billboards was one of the merchandising gimmicks Jacobs used to sell the rental idea.
So successful were Jacobs’ efforts that within five years his fleet had grown from 12 to 565 cars with annual rentals totaling $1,000,000-quite a remarkable feat for 1923. Jacobs had first called his company Rent-A-Ford. He changed it to Rent-A-Car and then to the Yellow Driv-ur-self System.
John D. Hertz, then head of Yellow Truck and Coach Manufacturing Co., in an effort to expand his own business interests, bought Jacobs' car rental firm in 1923, hiring Jacobs as his top operating and administrative executive. The business was owned by Hertz until 1926 when General Motors Corp. picked it up. In 1953, GM decided to get out of this sideline and the company was sold to Omnibus Corp. and the present corporate name was adopted.
In the 1920s, it was standard procedure to rent cars at side-street locations. There were virtually no car rental facilities in prime business areas. Transactions were on a cash basis. Credit was rarely extended to individuals, if at all. Typical rentals were usually of short duration and distance.
Jacobs, in reflecting about the early days of the car rental business, told Automotive Fleet that cars were rented almost exclusively to people who could not afford to own a car.
"In as much as vehicle ownership at that time conferred social status, renting a car was an explicit indication of lower socio-economic status," Jacobs said. "However, this situation was to disappear within a few decades."
The renting business has come a long way since the Saunders brothers and Walter Jacobs started out. Gasoline then was an extra cost item. When the car went out, the service man would lift up the front seat, put a measuring stick down into the gas tank to determine the starting gas and do the same when the car returned. The customer would be charged for the difference. When self-starters were put on cars, Harris Saunders said his firm charged extra for them. When gear shift cars came into the picture they also cost extra, as did cars with automatic transmissions. A booming business was also had by renting lap robes, not only with touring cars, but with closed cars as well when heaters were unknown.
"In these early years, the peculiarities of the Model T and of the new business went hand in hand," Saunders said.
By the mid 1920s, the business of car renting had grown to the point where independent operators had already established local trade associations. In 1926, at Chicago's Sherman Hotel, delegates from more than 1,200 cities in 34 states gathered for the first nationwide convention of the American Driveurself Assn., a forerunner of today's Car and Truck Renting and Leasing Assn.
At that convention, Jacobs reported a development that reflected the growing scope of the car rental business. He discussed the possible use by the entire industry of the "national courtesy card that upon presentation at any Hertz station by its rightful owner will warrant granting him the use of a car without delay and without requiring a deposit." In a day when credit cards were a rarity, this was a most significant step toward a nationwide car rental charge card plan.
As America moved toward the 1930's the use of rented cars increased. Autos were more comfortable, more dependable and easier to operate. Nearly all cars came equipped with self starters. Highways no longer presented major obstacles to auto travel-they now linked many cities with a more dependable, all-weather surface suitable for long-distance travel. Travelers were not only taking to the highways for longer trips, but they were also beginning to appreciate the advantages of "rail-drive"-a train trip combined with a rented car, reserved in advance, waiting at the destination depot. As far back as 1926, Hertz' San Francisco office had begun to advertise such a mode of travel, in this case a trip by Southern Pacific R.R. to Del Monte, with a rented car for driving to Pebble Beach, Carmel and other scenic California spots.
While these new travel modes were being promoted, some car rental concerns were also moving their locations from side streets to main streets, business sections and train depots. Still, the car rental industry was a relatively unintegrated phenomenon in the mainstream of American travel and economic life.
During this formative period certain developments were taking place within the car rental industry that at a latter date would facilitate rapid and efficient expansion. Throughout the 1930s and the early 1940s more independent car rental operators saw the advantages of becoming linked to a nationwide system. Increasing numbers of independents were becoming franchisees of nationwide organizations such as Hertz and Avis. In addition, many franchisees were selling their businesses to the licensing organizations, often continuing to manage areas that they had previously served as independent operators.
WAR CURTAILS OPERATIONS
When World War II mobilized every national resource, the car rental industry, like many others, had to operate with sharply limited equipment and supplies. Cars were repaired and kept rolling on retread tires and limited gasoline rations to meet the growing demands of American motorists for rent-a-car service. During the war years many Americans began for the first time to rent cars. Despite wartime limitations, the future scope of the industry was beginning to take shape.
At the close of the war, conditions were ripe for a phenomenal expansion in travel in general and motoring in particular. Almost overnight, Americans found themselves with increased leisure, greater disposable income, vastly expanded personal credit and a greater hunger to go and see places and things.
Under these circumstances, conditions were ripe for the rent-a-car industry to meet America's growing desire for mobility. Hertz, Avis and National offered almost immediate confirmation with rail and air travel. Charge cards of the major rent-a-car firms-and those used nationally for restaurants and hotels-made payment for car rentals even more convenient. The variety of vehicles available for rent had grown to a virtual "wardrobe" of sizes, makes and models from which to choose. Rent-a-car locations had increased in number and convenience, especially at airports and downtown business centers.
As the 1940s ended, a changing pattern in American life became more apparent. Many families were shifting out of the city and into mushrooming suburbs. Turnpikes, expressways and other high-speed, limited-access thoroughfares linked major cities. Business executives and industrial technicians were increasingly on the move both in this country and abroad. The so-called "middle income" group grew to include many millions from lower income categories. Vacation travel was rapidly increasing. And the growing complexity of life in a great "megalopolis" brought conflicting demands from each member of the family for increased personal mobility. One car per family was often not enough. The two-car family became a widespread reality. And, more and more, the second car was rented.
Ownership of cars had so increased by the mid 1950s that the owned car was losing its character as a status symbol. At the same time, the old-fashioned reluctance to admit that one's car was rented became a thing of the past. The most affluent members of society were renting cars at home and when traveling. Since nearly everyone could own a car, it no longer seemed to matter to the average American whether the late-model auto he was driving was owned or rented. What really mattered was the mobility it gave him.
With the advent of the 1960s, the rent-a-car industry came of age. Major organizations now have widespread systems of owned and franchised locations welded into global networks offering uniform high standards of service. The major car renting companies-Hertz, Avis, National and Kinney are now publicly owned. A landmark was reached last year with a major breakthrough on the financing front. For the first time a vehicle renting and leasing company, Hertz, was able to negotiate a long-term loan of $40,000,000 from two major insurance companies without using individual units of its fleet as collateral. The loan was in addition to an existing $75,000,000 revolving credit from seven banks.
The renting industry has come a long way since the day that the Moline Dreadnaught broke down. It has moved from infancy to adolescence but it still has not reached its full potential.