The Next Big Thing: Rental Boat Clubs
In 1956, four men in Austin, Texas started building Glastron boats out of plastic with strands of thin glass in it, instead of the solid wood that almost all other boats had been built from for the last 50,000 years. Some wood boat builders said at the time that these new, white boats looked like frozen snot. A decade later Glastron was selling 50,000 fiberglass boats a year, something that has never been equaled. This was the first big thing in the modern era of boating.
The next big thing came the following year. It was called a “sterndrive” and it captured the imagination of the boating public in the late 1950s, which was tired of smoky, smelly, cantankerous outboard motors. Within 10 years or so, outboards became extinct on sportboats.
Then, over 20 years went by before the next big thing. It wasn’t until January 1989 when the prototype of the first GPS for boaters was demonstrated – it was called Magellan. Chartplotters soon followed.
You get the idea of “the next big thing.” As we survey what is happening in the boat industry, we think the “Next Big Thing” will be organized, well-managed, national rental boat clubs. Rental boats have been around almost since the dawn of power boating in the 20th century, but now they are reaching national scale. Now, they are not Ma and Pa renting out a few jon boats in the summertime on inland lakes. Now, the rental business is rapidly becoming the Next Big Thing.
Boat Rentals: The New Paradigm
A confluence of circumstances seems to have created a ripe environment for the rental boat club concept to finally get traction on a national scale:
1) The cost of new boats is higher than ever before and has outpaced the ability of middle Americans to buy any but the least expensive boats. Sales of sportboats, cruisers, express fish boats, sedans, and convertibles have dropped 50% to 75% over the last 15 years. Only inexpensive aluminum boats, and very expensive large motoryachts have grown in number during that period.
2) Since the Great Recession, easy terms for bank loans and second mortgages are considerably more restrictive than they were pre-economic melt-down. Money for boat buying is not nearly as easy or as cheap to come by as before.
3) Baby boomers, the bedrock of boat-buying since the 1960s, are “aging out” and while they want to keep an oar in, for retirement they need liquid assets, not assets in liquid bobbing on the end of a mooring.
4) The new generation of what would normally be boating’s feed stock, is the peculiar generational category that we call “Millennials.” They live at home and use dad’s boat, are slow to get married and start a family, and are just as sluggish about buying anything more expensive than a smartphone.
All of this does not mean that boat-buying is going away. The siren call of the water is still as strong as ever for our species. It just means that boat ownership may well be taking a new and different form than in the past for many people.
Boat rentals, boat leasing, fractional ownership, and boat AirBnB-type rentals are all being tried. But of them, the one avenue to lower-cost boating that now seems to be working, and is profitable, on a national and repeatable scale, is boat rentals.
Brunswick Places a Bet on Boat Rentals
Further proof that a change is in the air comes from the fact that the Brunswick Corporation, the largest financial entity in American boating, announced in October of this year that it was starting a boat rental operation. It is called OnBoard, and is being marketed to boat dealers and marina operators. Brunswick sees it both as a market for its boat lines, including Sea Ray, Boston Whaler, Bayliner, and Harris pontoon boats, but also as a new profit center.
The Freedom Boat Club Has The High Ground
But the company that staked out the high ground first is the Freedom Boat Club. It was founded in 1989 in Sarasota, FL., but like a lot of things that ultimately became the next big thing, it took time to catch on and reach critical mass. Also, it is one thing to have a good idea, and quite another to execute it so that it actually becomes the next big thing.
Man With a Vision
The man that accomplished this feat at The Freedom Boat Club (FBC) is the current president and CEO, John Giglio, who bought the enterprise in 2011, and bought out his partner in 2012. Giglio has a vision, passion, experience with 17 boat rental outlets, and the entrepreneurial “touch” that it takes to turn a good idea into a successful one.
By selling franchises, the Freedom Boat Club (FBC) has been able to leverage the assets of hundreds of people to make the capital investment necessary to provide what Giglio says is a 1,600-boat national fleet.
FBC recognizes customer service, local knowledge, and a passion for boating are essential ingredients at each rental location for success. The only thing that works over the long-haul is for local operators to have skin in the game. And since Giglio owns 17 of the clubs himself on the West Coast of Florida, he intimately knows of the obstacles and opportunities of his franchisees.
Today, the Freedom Boat Club is the biggest game in town with 170 locations in 30 states, three provinces in Canada, and as of next summer, all along the French Riviera, and possibly in other European locations as well.
According to press releases the company has issued this year, the national club has anywhere from 16,000 to 30,000 members. Giglio told us that last year the club’s members used its boats for over 280,000 days.
Visit to a Local FBC Location
Capt. Greg Gaillard is manager of the Connecticut Freedom Boat Club, which has a fleet of five boats in Stamford, CT, the home port of BoatTEST.com. He told us during a recent visit that new FBC members get unlimited training. After spending four hours with Capt. Greg (a USCG-licensed captain) on one of the club’s boats, we can report that we were impressed by his professionalism, understanding of his members’ needs, and his knowledge of what it takes for a successful business.
Only 30% to 40% of the FBC members are first time buyers, according to Capt. Greg. From 60 to 70% of the members are former boat owners who still want to go boating, but are not ready for the economic commitment of boat ownership. This is an important statistic because it means that boat rental clubs can be a new source of eventual new boat buyers.
The Cost of Membership
Capt. Greg told us that to join the club in Connecticut there is a one-time charge of $6,999. Then, there is a monthly fee of $359, 12 months a year, which works out to $4,308 annually, plus the cost of fuel used. That’s it. For that sum, members can use the boats as many times as they like so long as there is availability.
Summer weekends are tightest, he told us, but the club will also make boats available for half-a-day, so if that is all a member needs for a weekend outing, another member might be able to use the boat for the rest of the day.
Membership Has its Privileges
What we found particularly attractive was that Freedom Boat Club members can use the club’s rental boats in other parts of the country. Obviously, Florida and the Gulf Coast will be prime targets for snowbirds in the winter, and because they are on vacation, weekday usage should surge. But the reverse is true as well. Boaters who have dreamed of cruising Maine, the Great Lakes, the Chesapeake Bay or other locations can simply apply for usage there with the club’s national booking office.
The Boats Available
All franchise owners are responsible for buying their own boats, and they can buy most any brand they want. Since they have local knowledge they should know what type of boat is the most compelling for the local market.
In Stamford, the type of boats were center consoles and dual consoles in the 20’ (6.10 m) range, plus a larger Jeanneau with a small pilothouse that was still being used in late October. Virtually all boats in the FBC national fleet are outboard powered. We were told that plans call for doubling the size of the Stamford fleet in 2019 to 10 boats.
Boat Brands. It looks to us as if the models selected by many franchisors are ones that are in the lower range of boat pricing. For example, center consoles tend to be Key West models, some of the least expensive on the market. Deck boats are often Hurricanes, which again are among the lowest-priced boats in class. (Some franchises have more up-scale brands in their fleets, we’re told.)
But since the boats are rental, brand names don’t seem to be so important. Since there is no pride-of-ownership involved, and because the boats are professionally commissioned and maintained, this economic choice by many of the franchisors evidently makes the program work for all concerned.
When we asked Galliard if the rental worked with large cruising boats, he said that others had tried, but it did not work economically with new boats, one or two outfits, notwithstanding. It seems that in the cruising boat size range, chartering boats from owners, or through charter companies is best for both consumers and owners.
Maintenance. Galliard told us that he has a crew that washes each boat each day after usage, and maintenance is on-going. Club rules require that franchisees retire their boats after three years of use, which means all boats are in good shape.
Indeed, Galliard told us the franchisor he works for (who owns Mercury and Honda outboard dealerships) usually sells the rental boats at the end of each season, if possible. Obviously, this makes maintenance even easier and less expensive for the franchisor.
Jeanneau and Europe
In February of this year, the Freedom Boat Club announced an alliance agreement with Jeanneau to cooperatively develop Freedom Boat Club franchises among its European dealer network. According to FBC CEO John Giglio, the FBC franchise model is now being offered to Jeanneau retailers in Europe using Jeanneau outboard-powered boats.
“Our Jeanneau European alliance grew out of a strong relationship with the Groupe Beneteau brands here in the U.S., as a growing number of our franchisees have placed Jeanneau, Four Winns, and Glaston outboard boats in their fleets,” said Giglio.
“The boat clubs are a real trend that our dealers are keen to develop,” confirms Jean-Paul Chapeleau, Jeanneau CEO. “For Jeanneau dealers, it’s a unique opportunity to benefit from an experienced partner while launching this new service to our customers.”
French Riviera Anyone?
We have been told that one French franchisee has plans for putting FBC boats in many of the locations along the French Riviera. There are already boat rental operations working out of most ports on the Riviera, such as Antibes, but by means of the FBC network vacationers will be able to go from one location to another, and possibly even book from the U.S., something that is beyond the scope of small local boat rental operations.
None of this has missed the notice of Entrepreneur Magazine and its annual business rankings. FBC was ranked #1 in the “Misc. Recreational Business Category” and #309 in the overall 2018 Franchise 500® list.
FBC Contact Information & Pricing
Because there are so many diverse locations across the U.S. with different seasons and usage demands, the charges may vary in terms of seasonality and related rates. The local membership executive in each market will be happy to review the specific details with prospective members. FBC Franchise Information: Call 888-781-7363; or email [email protected].
Brunswick Enters the Business
As mentioned above, two months ago the Brunswick Corp. (owner of Mercury Marine, Sea Ray, and Boston Whaler, among a number of other brands) announced the OnBoard Boating Club and Rentals, as part of its newly formed Boating Services Network, a new boating services division of Brunswick. A company press release said that the OnBoard Boating Club and Rentals operation would offer “a state-of-the-art, turnkey business platform empowering marine dealers and marinas to expand their operations and serve the emerging and rapidly growing boat club and rental consumer market segments.”
According to the release, the OnBoard program would offer—
• Access to a diverse fleet of leading boat brands,
• Financing for boat fleet purchases (subject to credit approval),
• Software for boating club and rental operations, and
• A range of tools and best practices to help operators build a successful operation.
The release went on to say that “OnBoard Boating Club and Rentals is seeking partnership with marine dealers and/or marinas to begin preparing for the next boating season in each local market. Those interested in exploring how they can launch an OnBoard Boating Club and Rental location are encouraged to call 1-833-GET-ONBD (1-833-438-6623) or visit www.onboard-boating.com to learn more.