VOLVO EYES EUGENE FOR RENTAL FRANCHISE.

Byline: Sherri Buri McDonald The Register-Guard

Volvo Construction Equipment Rents Inc. is looking to open a franchise store in Eugene by early next year, said Nick Mavrick, vice president of global strategy and marketing.

The company, an arm of the $32 billion Volvo Group, based in Gothenburg, Sweden, has pinpointed Eugene, as well as Medford and Bend, as markets to enter.

The Eugene-Springfield area caught the company's eye because of its record of increased construction spending, which is projected to near $5.5 billion in 2007, according to InfoTech Marketing Construction Spending Forecast. And the trend is for contractors to rent more of their equipment, instead of owning it, Mavrick said. The biggest local construction project is the RiverBend hospital in Springfield's Gateway area.

Volvo better be up for a challenge, rivals said, because competition is robust in the Eugene area.

"Creating market share in a mature market like Eugene is going to be a fight; it's going to be difficult," said Pete Kosky, vice president of Star Rentals, a 100-year-old, family owned company based in Seattle. It has 17 branches in Oregon and Washington, including one in Springfield.

"I think that for another competitor to gain market share in a well developed area, such as Eugene - where most rental companies have been there for many years - their only option is going to be through fairly dramatic price cutting," he said.

That could be difficult, he added, "because prices have never really recovered from the recession from several years ago."

Brandon Devers, a local general contractor, said he looks for the newest equipment and equipment availability when he rents.

"There's already three or four major rental companies in town, and so far, I've had pretty good luck with availability," he said.

Over the years, established rental companies have invested in late-model equipment and developed long-term relationships with their customers, Kosky said.

"Rentals has grown into an extremely involved process, and ... it's just like construction work," Kosky said. "If you've been an electrician or general contractor for 10 years, you'll certainly have a leg up on somebody just starting out."

Newcomer Volvo believes it can get a foothold in Eugene by operating as a franchise with a local owner, instead of a branch of a large corporation.

That will give the local owner more flexibility, Mavrick said.

"If one customer needs something different (from) the next customer, they can do it," he said.

Mavrick also said that several large competitors, such as RSC Equipment Rental and United Rentals, are owned by private equity firms.

"When there's a lot of financial players in the market, you begin to wonder about their futures," Mavrick said. "When employees feel uncertain about their future, generally, that translates into a different customer experience," he said.

Volvo set up its franchise program in 2001. Today, it has 76 stores in North America.

About 16 percent of Volvo Rents' customers do 90 percent of the business, Mavrick said. "So we really focus on premium service to VIP contractors," he said.

Volvo has aggressive plans to add 10 to 20 franchises a year in North America, Mavrick said.

It's also expanding in Europe, Mexico and Asia.

Today, 38 percent of all construction equipment is rented in North America, he said. That number is expected to be 50 percent in 2010, Mavrick said.

"If you don't use a piece of equipment more than 75 percent of the time, then you're better off renting rather than owning," he said.

The renting trend began in 1982, with the repeal of a tax law that allowed contractors to use capital equipment as a tax shelter, Mavrick said.

Now, Volvo Rents is looking for someone to own a franchise in Eugene. Candidates must have total net worth of about $1.25 million, liquid capital of at least $750,000, and must pay a one-time franchise fee of $45,000, he said.

Qualified applicants may be eligible for up to $5 million in financing from Volvo Financial Services. More information is available at volvoce.com/ rental.

A typical Volvo Rents store starts out with seven to 10 employees and can grow to 20 or 30 employees, Mavrick said. The company does not disclose financial figures for its franchise operations.