Volvo's construction rental unit targets Reno for stores

The numbers tell the story for Volvo Construction Equipment Rents as it targets the Reno market for two franchised stores.

Northern Nevada already ranks 102nd among the nation's construction markets, and its projected growth rate of more than 9 percent annually through 2008 will outpace the national average.

Then figure that about 4 percent of all construction spending is spent on equipment rental, says Nick Mavrick, vice president of global strategy and marketing for Volvo's equipment rental unit.

About 35 percent of all construction equipment is rented, a figure that Volvo expects to grow to 50 percent by 2008 as contractors conserve their capital rather than invest it in equipment.

Multiply the 4 percent of construction spending spent on rentals by

$1.09 billion the projected annual size of the Reno construction market this year and Volvo sees a space in the market big enough to park a few of its dump trucks.

So why doesn't Volvo, the Swedish company with $22 billion in annual sales, simply open stores itself rather than share the wealth with franchise owners? While it's highly unusual for industrial equipment companies to follow the franchise trail,Mavrick says Volvo thinks that the local touch is critical.

"The entrepreneur in the local market is best equipped to work with the local contractors," he says.

It's been a success so far.Volvo got into the construction rental business in 2001, had 40 locations by the end of 2003 and is adding them at the rate of 50 a year.

Opening of the Reno stores,Mavrick says,"is an absolute priority for us this year." He says the company looks for franchise owners with experience in equipment rental, financial management and customer service.

Volvo Rents levies a franchise fee of $35,000 a store and says franchise owners need a liquid net worth of at least $500,000 per store.

On the other hand,Volvo Commercial Finance provides financing for fleet purchases, working capital and the like that typically runs between $2 million and $3 million a store.

That financing from a lender that understands the construction equipment business, Mavrick says, is one of the key sales points for Volvo as it expands its franchise network.

Timing of the new stores in the Reno area, he says, depends on the Volvo's ability to find qualified franchise purchasers