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Another Puzzle Piece: Inside The (Potentially) Profitable Business Of Gear Rentals

The way the game works in both the MI and concert touring worlds...

By Peter Janis September 5, 2019

In the world of sound and production rental companies, there are two distinct categories: A) basic equipment (dry) rentals such as renting a guitar amp, microphone and PA system for the weekend, and B) full production rentals for a full set of gear, and this also includes delivery, setup, and crew. If you’re a manufacturer or distributor, getting your product into a rental company’s inventory is a great way to build trust and confidence in your brand.

When I think of basic equipment rentals, one company is foremost in my mind: Long & McQuade Music in Canada. L&M not only provides rentals, it also has a financing program that enables a musician to put some cash down and pay the balance over an extended period. Competitors have always griped that “If you have a heartbeat, L&M will give you credit! How do you compete with that?”

Jack Long, then a trumpet player, started the company back in the 1950s with a shop in Toronto where he sold instruments and taught lessons. The rental program began when he decided to start charging friends for all the instruments they were “borrowing.” The financing program began when a customer asked if he could purchase a drum set but not pay for it all at once.

L&M began expanding in 1968, and currently there’s at least 82 stores across Canada as well as an online presence. Do the math: 82 stores in Canada is equivalent to 820 stores in the United States! The company is – without a doubt – a major powerhouse.

The Extended View

L&M also manufactures the Yorkville PA and Trainer guitar brands, it imports various accessories under its own brand, and it also distributes a number of brands across Canada, such as Gibson and Line 6. I still have a copy of the 1970 L&M rental manual that describes how to run a rental department and the company has hosted many seminars for dealers for years.

During a recent conversation, Jeff Long told me that Yorkville products are designed from the bottom up to work in a rental environment. He also stated that running a rental department requires a serious long-term commitment.

Let’s look at some numbers in the form of an L&M rental fee on a very popular product:

Shure SM58 Microphone
Daily rental: $4.00 CDN (approximately $3.00 USD)
Saturday: $6.00 CDN ($4.50 USD)
Weekly rate: $8.00 CDN ($6.00 USD)
Monthly rate: $16.00 CDN ($12.00 USD)

At these rates, how does one make money? It probably costs more to write up a rental agreement than the rental’s profit when you consider a $3 or $4 daily rental. And given the fact that most retailers pay their staff a commission on each sale, figuring a workable commission with rentals is complex, if impossible. The easy route is to sell a mic and be done with it. So, for many retailers, running a rental department is a non-starter.

However, there’s a lot more to consider. For instance, rentals lead directly to sales. Let’s say someone is looking to buy an expensive mic, L&M will rent it to them for a couple of days and credit back 100 percent of the rental towards the purchase. This is known as the “puppy-dog” sale – take the puppy home and you’re stuck with the dog for ever! With long-term rentals, L&M will credit back as much as 60 percent towards the purchase, which gives the customer confidence.


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About Peter

Peter Janis
Peter Janis

Retired President, Radial Engineering
 
Peter Janis is the former CEO of Radial Engineering, Primacoustic, Hafler and Tonebone. He now runs exit-plan.ca where he assists business owners with their strategic planning, growth and eventual retirement.
http://www.exit-plan.ca

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