IRN talks to Edmondo Colliva, founder of Italian rental franchise company Italnolo.

Edmondo Colliva is the driving force behind the Italian rental franchise business, Italnolo. He tells Murray Pollok about the advantages that franchising brings to rental and gives an update on progress at the new franchise store in Spain.

Once Edmondo Colliva starts talking about his Italnolo rental franchise it's difficult to get him to stop. Part sales pitch, part genuine enthusiasm, it's a mix that is hard to resist, which partly explains why he has managed to build a franchise network with 45 members throughout northern and central Italy.

For Mr Colliva - speaking to IRN through a translator during the SAIE exhibition in Bologna - the franchise system is perfect for a market like Italy, where rental of small tools and equipment to local builders and private citizens is still very immature.

Italnolo, he says, makes it easy for people to enter the business, providing members with an exclusive territory, store designs, a rental catalogue, advice on how to run a rental business, as well as a rental software system (‘nolo xp') to manage the operation.

In return, Mr Colliva's company, Tecnologie Commerciali Srl (Te.Co.), gets a flat €35000 signing on fee and a 2-6% royalty on rental revenues (see box story for more on how to become a franchise member).

Franchisees also benefit from Mr Colliva's creative streak, with members able to offer customers a wide range of imaginative options all designed to increase customer spending. A ‘Rent for Rent' option, for example, allows customers to obtain hefty discounts if they drive to the store and then take the rented machine away in the store's own truck and have it back before a certain time (50% off if it returned before 11.30 am).

‘Noleggio last minute', meanwhile, applies to well established customers - those with the ‘Go Card' loyalty card - and provides discounts for equipment rented out just before public holidays. This, says Mr Colliva, is to exploit the demand for machines from professional trades people who may want to work on their own properties during holidays.

Beyond these promotional techniques, Mr Colliva argues that being part of a franchise brings other benefits, such as greater control on pricing. The franchises all have a catalogue and price list supplied by Te.Co. This, he says, makes it much easier for rental stores to maintain pricing, since they can simply say that prices come from the franchise head office and cannot be changed. He likens it to trying to negotiate a price reduction with the check-out person at your local supermarket - you don't do it.

If Italnolo has been a growth success story over the past decade, then there is no denying that it has been affected by the recession like every other business. Mr Colliva says he stopped trying to sign up new franchise members when the crisis started - there wasn't any appetite for investment at that time - but says that he has started to sell the idea again, and has several new locations opening up at the end of this year, including one in Schio, near Vicenza in the north of the country, and another in Latina, south of Rome.

He says the recession has had an impact on business levels, but says activity has been reasonable. Ever the optimist, he argues that the recession will actually provide a boost for the rental sector: "Up to last year, 800 out of every 1000 person or business would buy before renting. I forecast that 10% of that 800 will consider renting in the future." Only time will tell on that one.

The proportion of private rentals has certainly increased over the last year, he says, and now puts at around 35% the proportion of private business. A typical Italnolo store will have annual rental revenues of around €500000.

Other symptoms of the recession have been a greater outside interest in Italnolo's approach to renting, with its wide range of equipment encompassing tools, party and events related products, aerial platforms and mini-excavators (the latter through a formal arrangement with Volvo Rents - see more below).

Mr Colliva says he has been getting enquiries from rental specialists, including some aerial platform rental companies, who are interested in diversifying and using Italnolo as the way to do it. He says this is possible, but franchisees have to agree to stock the entire range of equipment and not become too focused on any one product category.

Italnolo has also been approached by one major European builders merchant/DIY store operator to provide in-store rental operation at its Italian sites. Mr Colliva says he turned down the offer in order to protect the exclusive territories of his existing franchise holders.

However, Mr Colliva, ever open to a new idea, seems to have taken that ‘in store' concept and given it his own twist: he is now offering Italnolo ‘Corner' franchises to smaller, local retail stores who sell equipment, building materials and garden related products.

The ‘Italnolo Corner' campaign is now underway and is being sold as a way "to increase the turnover of hard pressed retail stores", says Mr Colliva. These corner stores will not be established where there are existing Italnolo branches.

Italnolo is also well known in Europe as the partner for Volvo Rents in Italy. Volvo, having a tough time trying to establish its own rental franchise network in Europe eventually hit on the idea of piggybacking on Italnolo's existing franchise, and 38 of the 45 Italnolo stores now have a small range of Volvo excavators from 1.6 t up to 5.2 t. In total, the Italnolo network now has around 250 Volvo machines in their fleets.

Many of these stores have prominent Volvo Rents branding, as does the Italnolo catalogue. Mr Colliva says he is hopeful that the contract with Volvo Rents, signed in December 2004, can be extended when it comes up for renewal in 2011.

Another initiative has been the establishment of a pilot store in Spain, in the town of Terrassa, a northern suburb of Barcelona. Mr Colliva says the location - established by entrepreneur Simone Barli - has been up and running for a year and has been performing well; "It is close to break even after one year." He says that he has other requests from Spain to open franchises but will not establish further locations until economic conditions improve.

Meanwhile, the task of extending the number of franchise holders in Italy continues. Southern Italy is still not well covered, although there are stores in Salerno and Avellino, both close to Naples. Mr Colliva says he hopes that the existing franchise members in the south will open additional stores. In addition to Mr Colliva's own efforts, four ‘master' franchisers in Parma, Massa, La Spezia and Sarzana are also able to recruit new members.

With IRN's translator tiring fast, the interview comes to a close and Mr Colliva heads off for a quick tour of the SAIE exhibition, no doubt looking for new ideas. No doubt he'll find them.

BOX STORY
Becoming a member

To join the Italnolo franchise members have to pay a joining fee of €35000 and invest anything between €250000 and €500000 in an equipment fleet.

The franchiser, Te.Co., specifies that rental stores need a minimum 400 m2 internal area and the same outside, although that rule may well be modified for Italnolo's new ‘Corner' store initiative.

In addition to the joining fee, the franchisee has to pay a royalty of between 2% and 6% of rental revenues to Te.Co. The franchise contract has a duration of 8 years.

For the investment, franchise holders get the use of the brand, store design plans, a rental catalogue, rental software system, advice on rental best practice, a price list and marketing assistance.