RAC dismisses patrol franchising rumours
17/06/1998 in NEWS
The RAC's patrol fleet is a costly overhead and one which a more profit-driven owner may seek to dispense with. Cendant already owns national breakdown company Green Flag which operates via a network of independent recovery operators, thereby restricting its overheads to little more than a sophisticated call centre and back office functions. Significantly, Green Flag's ratio of profit to turnover is massively higher than that of the RAC's.
In 1997 Green Flag achieved pre-tax profits of £17.3 million on turnover of £144 million, compared to the £4 million 'surplus' achieved by RAC Motoring Services on a turnover of £271 million. One way for the RAC to improve its profit performance without damaging its high brand profile would be to turn its patrols into a franchise operation. In this way it could remove the heavy cost of the fleet from its balance sheet, while ensuring franchisee patrols maintain RAC livery and quality standards.
A spokesman for the RAC insisted the issue of franchising patrols had not arisen, but said if the proposed takeover by Cendant was approved then reviews would be conducted of all areas of its business to see how these fit in with the operations of its new sister companies.