Ideal Timing + Ripe Market + Powerful Brand = Ultimate Franchise Opportunity

Volvo Makes History as Only Construction Equipment Manufacturer to Franchise

ASHEVILLE, NORTH CAROLINA (Friday, February 20, 2004) - When it comes to franchising, never underestimate the value of brand equity…or attractive financing options.

When Volvo Construction Equipment Rents (Volvo Rents) announced its history-making decision in 2001 to enter the rental business with a franchise model, the sell job was predictably minimal. The invincible power of the respected Volvo brand, purchasing power and a comprehensive financing program (for qualified applicants) together equaled an irresistible opportunity for independents and entrepreneurs. Almost immediately, serious prospects started to bite.

By the end of 2003, Volvo Rents had grown from 16 to 40 locations in North America, selling more than 400 units of Volvo equipment through the rental channel and tallying up 25,000 end-use customers. Volvo Rents also added experienced professionals to its operations staff to support the impressive achievements of its first venture into franchising. Today, projections call for adding 50 locations a year, eventually topping out at 500.

“We’re looking to the future with great enthusiasm,” said Barry Natwick, President of Volvo Rents who has nearly 30 years of experience in the construction equipment manufacturing and rental industries. “Our franchisees are exceeding performance expectations. Some of our earliest franchisees have opened second and third locations, and one is ready to open a fourth. Our plan is coming into being,” said Natwick, a member of the original development group that organized the Volvo Rents initiative in 2001.

As the foundation for the development of Volvo Rents began to take shape, company executives saw franchising as the ideal growth model, providing a channel to bring the expanding line of compact equipment (such as backhoe and skid steer loaders, compact wheel loaders and compact excavators) to profitable market sections across the country, and simultaneously opening doors of opportunity for entrepreneurs in the equipment rental industry.

“Volvo Construction Equipment could have used its capital to do acquisitions or open its own stores, but instead chose to partner with entrepreneurs and rely upon their high-degree of intelligence in the local market, instead of pursuing a 'corporate model',” Natwick said. “This is a significant shift for a major manufacturer who is pursuing a highly organic, adaptable and enduring business model.”

Millions in Financing
Not surprisingly, Volvo Rents pulls out all the stops in supporting franchisees. For a one-time franchise fee of $35,000, Volvo Rents franchisees receive use of the Volvo brand, financial assistance through Volvo Commercial Finance (for qualified applicants and if desired), a fleet purchasing program for non-Volvo products, proprietary business planning software, proprietary customer relationship management software, a proprietary point-of-sale operating system, training, facility design, operating manuals, and regional and local marketing, among a host of other perks.

Volvo Commercial Finance will lend, to qualified applicants, a comprehensive financial package including fleet financing, working capital, delivery vehicle financing and leasehold improvement financing. The amount can be significant and can range to several million dollars per store.

“This capital is critical to the launch of a new franchisee, and equally critical is a financial sponsor that understands the construction equipment rental industry and the needs of these types of entrepreneurs,” Natwick said. “Volvo Rents franchisees have a long-term financial partner that can support them in growth, versus a typical bank or other financial sponsor who may not understand or have the appetite. Volvo has committed to hundreds of millions of dollars to financially assist qualified applicants.”

In return, franchisees agree to protect the Volvo brand, both visibly by adhering to an identity program (internal and external signs, etc.) and philosophically by upholding Volvo’s reputation for superior customer service, safety, quality and concern for the environment. A unique mentoring program pairs experienced industry professionals with Volvo Rents franchisees, which ensures franchisees the support and guidance they need to fully enjoy the advantages of the Volvo brand.

“Our mentors are operation specialists who have considerable rental service experience,” Natwick said. “They don’t tell our franchisees what to do or how to do it, rather they guide and support them individually so they can realize their optimal potential for success.”

`Equipped’ for market demand
The franchised rental centers carry Volvo’s Construction Equipment’s comprehensive line of compact excavators and wheel loaders and its backhoe and skid steer loaders, and provide small-to-medium sized construction equipment and tools for the commercial, industrial, and consumer/homeowner marketplace. The focus is on daily, weekly and monthly rentals to construction, industrial, commercial and homeowner customers.

According to Natwick, Volvo Construction Equipment, one of the largest manufacturers of construction equipment in the world, began its franchise rental initiative as part of a distribution strategy for its growing line of compact construction equipment. In 2001, consolidation in the rental industry had cooled. Independents were re-entering the business, and entrepreneurs were exploring the idea of rental startups. Managing asset utilization, maximizing capital allocation, and optimizing seasonal versus year-round equipment needs, has contributed to a sharp increase in contractors renting greater numbers of machines.

“As the rental industry saw phenomenal growth, so did the demand for small and mid-size machinery,” he said. “As a world renowned manufacturer of this type of equipment, Volvo was in the ideal position to capitalize on the growth of the rental industry and the demand for our product. Contractors in 2004 are projected to spend three times more on rental in 2004 then they did in 1991, and rental of equipment to homeowners has also taken a fast turn upward,” said Natwick, further noting that rental revenue in North America is projected to be $24.5 Billion in 2004 (Source: J. P. Morgan, November 25, 2003).

Allies for a cause
Franchisees or customers? That is the question. With Volvo equipment making up approximately 40 percent of the dollar cost of a Volvo Rents franchisee’s inventory (but less than 5 percent of the items), Volvo’s existing authorized dealers are an integral part of the new rental system, providing equipment, comprehensive service and parts support for franchisees.

“In technical terms, our Volvo Rents franchisees are major customers for our dealers,” Natwick said. “It’s a unique situation in that our franchisees and our dealers are allies for an increasing market share in the industry. They work together to a mutual end that will financially benefit both of them.”

While many of Volvo Rents franchisees are former contractors or managers of major rental companies, some are previous owners of rental businesses. Other likely candidates are professional investors seeking a franchise opportunity or existing Volvo equipment dealers who want to start a rent-to-rent company as a separate business unit.

According to Natwick, the ideal Volvo Rents franchise candidate is somebody with an entrepreneurial spirit, traditionally with a rental industry background who understands the urgency of the rental business, who clearly understands customers’ needs and who has what it takes to service and exploit the marketplace. Current managers of a rental company, individuals who may have sold to one of the consolidators, and contractors are prime candidates for consideration.

“We want individuals who want to operate their own business but at the same time leverage the advantage of being associated with one of the strongest brands in the world,” Natwick said. The Volvo name and brand opens doors. Volvo represents core values in the marketplace that both our franchisees and our customers come to rely upon.”

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Volvo Construction Equipment is a major international company developing, manufacturing and marketing equipment for construction and related industries. Its products, leaders in many world markets, include a comprehensive range of wheel loaders, hydraulic excavators, articulated haulers, motor graders, compact construction equipment, and backhoe and skid steer loaders. Volvo Construction Equipment is part of the Volvo Group, one of the world’s leading manufacturers of trucks, buses, construction equipment, marine and industrial engines, and aerospace components and services. The Group also provides complete solutions for financing and service. The Volvo Group, a publicly held company headquartered in Gothenburg, Sweden, had sales of $22 billion in 2003. In the United States, Volvo shares are listed on NASDAQ and are traded as ADRs (symbol: Volvy).

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