In a deal finalized in late August, the ACE Rent A Car corporate locations have been sold to Avis Budget Group. The terms were not disclosed. The ACE locations will be dual-branded as ACE and Payless Car Rental before transitioning fully to the Payless discount brand, which Avis Budget Group purchased in July 2013.
The sale included ACE’s 3,000-vehicle corporate fleet and 11 locations in five different markets: Minneapolis, Chicago, central Indiana, Dallas and Austin. The entire ACE operations staff was retained in the sale, according to Dick Radzis, CEO of ACE Rent A Car. Radzis and Charlie Mullen, a 50-50 partner in the sale, will retain ownership of the ACE brand and reservation system, which will continue as a stand-alone business.
Dick Radzis and Charlie Mullen sat down with Auto Rental News to discuss the sale, the transition and the plans for ACE.
Dick Radzis talks to investors at the 2014 Car Rental Show.
“It was inevitable that the business would be sold one day,” says Radzis, in reference to the fact that neither he nor Mullen have children who might have continued the family succession of the business. “Then it becomes a timing question; when’s the right time to sell?”
Despite the economy, Mullen says the last five years were ACE’s strongest financially — which made for an attractive offer memorandum.
Two years ago, ACE entered into a letter of intent to be acquired by Ecologic Transportation, who purportedly would have created an independent car rental brand with an environmental focus. The deal did not materialize. The Avis Budget Group deal presents more immediate and obvious synergies when it comes to fleet purchasing power, back-office systems and negotiating power with the online travel agencies, Radzis says.
Regarding the transition, “I feel great,” Radzis says. “I’m still involved in an industry that’s been my life.”
In terms of the future of the ACE Rent A Car brand and reservation system, “Nothing has changed,” Mullen says. “It has always been on a path to grow and now gets the sole attention of the owners.”
With the pressure of daily rental operations alleviated, Radzis says he can concentrate on ACE’s reservations system business — “the fun piece,” he says, adding that he’s looking forward to ACE’s affiliate meeting in San Juan, Puerto Rico in November.
As part of the transition, Kevin Stutz, who handles the day-to-day operations of the ACE reservations system, will be promoted to president of the new stand-alone company, while Radzis will retain the title of CEO. Stutz also handled technology for ACE’s corporate branches. “That’s off his plate now,” Radzis says. “He’s able to strictly focus on the support and growth of the brand.”
Mullen’s main focus at ACE was fleet, and he will continue in this capacity as an adviser to affiliates on fleet planning and purchase decisions. “I have been in discussions with the auto manufacturers, and several have expressed interest in maintaining a group buying program for ACE,” Mullen reports.
ACE Rent A Car was founded in 1966 by Bob Sorensen and Ken Ostrand, who operated three car washes in Indianapolis. The owner duo joined a franchise system, renting Volkswagen Beetles from their car washes in the neighborhood market.
In 1968, the owners started their own car rental system, American International Rent A Car, expanding into the Indianapolis airport and Chicago’s O’Hare. Mullen began with ACE in 1972, and Radzis joined in 1979.
In 1986, ACE Rent A Car was born, along with the ACE Reservations System to capture electronic reservations from the travel agency community. ACE Reservations System affiliates are independent car rental agencies that utilize ACE’s OTA (online travel agency) agreements to connect to travel websites such as Expedia, Orbitz and RentalCars.com for reservations.
A New Initiative
Currently, the affiliate system counts 242 locations in 18 countries. In the past six months, ACE has added six U.S. affiliate locations and 13 international ones, all serving airport markets. Stutz says the company is in talks with another 13 operators — and is looking for more.
Potential affiliate companies should run fleets within the last two model years and with fewer than 40,000 miles, Stutz says. He describes ideal affiliate candidates as “entrepreneurs who look at their operations as investments and as a livelihood ... and obsess over taking care of the customer.”
ACE is also launching a new “white-label” product based on its proprietary software technology, RezPower. RezPower is a central reservation system that can connect small to midsize car rental companies to established counter systems as well as some 30 online travel sites — including CarRentals.com, Kayak, the Booking Group and AutoRentals.com.
The white-label product would allow independent car rental companies access to those sites while keeping their brand names. “While use of RezPower does carry a financial commitment, it works well for companies that have a strategic plan for growing their brand name,” Stutz says. “The ACE Reservations system has always existed to assist in the success and growth of independents operating under the ACE name, and now we can share that philosophy with a whole new kind of customer.”