After pulling RED Driving School back from the brink, Ian McIntosh isn’t afraid his efforts will be for nought with the rise of driverless vehicles. Instead, he’s estimating a glorious future for the franchise’s roughly 1,500 franchisees
RED Driving School needed to change with the times. When Ian McIntosh took over as CEO and bought 11% of the franchise in 2012 he had a huge undertaking at hand. Not only did he face the challenge of turning the failing business around but also had to hot it up to fit a rapidly transforming market where self-driving technology threatens to make his whole industry obsolete. However, his bullishness is almost palpable six years after the takeover. “We’ll be training people to drive cars for decades and decades,” he says. “I’m absolutely 100% confident about that.” And he has reason to be optimistic. Meeting Elite Franchise at 100 Wardour St, the swanky Soho bar, McIntosh claims RED Driving School, despite what the name may suggest, has been thoroughly in the black for more than two years. “It’s great, isn’t it?” he says. “When your mission has been to stop the cash flowing out and you reach the month where you’ve got a positive cashflow that’s a major turning point.”
While he’s adamant the growth has been thanks to both the hard work of the franchisor and its franchisees, a lot of this success can be attributed to McIntosh’s love for a good challenge. “Life’s short,” he says. “Find something exciting to do that stretches you and makes you want to get up in the morning and go to work. I guess it’s always been a little bit like that with me.” Indeed, as a young boy he became the only representative of East Yorkshire’s scouts at the 1971 World Jamboree. Never mind that he was only 14 at the time or that the event was held in Japan, McIntosh put his mind to raising the money and off he went. Despite the planned two weeks of camping being cancelled due to a typhoon he still enjoyed the experience, not to mention overcoming the hurdle of going there. “So there is a pattern there I suppose,” McIntosh shrugs.
Similarly, after acquiring a master’s degree in management at University of Bradford in 1987, he found an apprenticeship at Mars Incorporated, the sweets and pet food manufacturer. “They would literally throw you in at the deep end and see how you’d get on,” McIntosh reveals. Unsurprisingly, given how he thrives when being challenged, McIntosh quickly proved his chops and was hired permanently. No doubt the experience had a huge impact on his future career. “In the years I worked there I did all sorts of amazing stuff job-wise that gave me a lot of skills but also a lot of confidence – some might argue over-confidence,” he laughs.
In the following two decades he continuously challenged himself with a series of top executive roles. But by 2010 he felt that being the president of the west division of AAK, the vegetable oil company, wasn’t enough. “I was running North and South America and most of Western Europe and living on an airplane,” he says. “It was a great job and good money and so on but it wasn’t my business.” Indeed, this feeling of not being in it for himself kept growing. But rather than launching a startup from scratch, he began searching for a company to buy equity in. So over the next year he attended lots of meetings with private equity firms, looking for the perfect opportunity. As luck would have it, he was presented with three struggling companies searching for a new CEO. “I chose RED simply because it sounded like the most challenging opportunity as the business was really, really struggling,” he says.
So what had gone wrong with RED? “It was simply mismanaged and ran out of cash,” states McIntosh. Although, it’s a little bit more complicated than that. Lansdowne Venture Group (LVG), which also owned Airport Driving School, launched the brand in 2004. While the company had been off to a reasonably good start, things went sour around the time of the 2008 recession. For one thing, the financial downturn slammed the brakes on the demand for driving lessons, including the ones to become driving instructors, which was RED’s primary revenue source at the time. Moreover, up until 2009 Barclays had provided point-of-sale loans for training organisations like RED Driving School. However, the bank stopped the praxis around the recession. Additionally, McIntosh is critical towards the business’ old leadership. “It had been basically wasting money on things that weren’t necessary,” he says. “Spending far too much money on frivolous things and paying the directors money they hadn’t earned.”
As a result, LVG went into administration in February 2010 and was subsequently bought by Kelso Place Asset Management, the private equity firm. “It bought it out of administration for next to nothing,” explains McIntosh. “They then spent another couple of years trying to fix the business.” By 2012 it was clear that the changes Kelso Place was looking to make weren’t happening fast enough and the firm began to look for a new CEO to spearhead the turnaround. “And that was when they parachuted me in,” he says.
Having accepted the offer, one of the first things McIntosh did was overseeing a strategic change in the model – from only training instructors to becoming a driving school for everyone. And it’s hardly a secret why the business suddenly changed lanes. “Teaching people to drive is a massive market,” he says. “So there’s a lot of customers to go at.” That being said, the company is still training instructors even though it’s not its main source of income, providing an additional revenue stream as well as a stable pipeline of potential franchisees that could join the network. “We teach our trainees to be driving instructors and we then invite them to join us as a franchisee,” he says. “They aren’t obliged to but you hope to win their hearts and minds that this is a good thing to do.”
But to make the new direction work he had to convince the network’s franchisees to back it. “So from very early on I started travelling the UK and meeting the franchisees,” McIntosh says. However, those get-togethers were rarely fun and mostly consisted of instructors telling the new CEO about how they weren’t getting enough clients, that their cars were breaking down and offering long lists of other complaints. “The first couple of years were full of those sort of meetings,” he says.
Unsurprisingly, with the unsatisfactory results provided by the previous franchisor, about a third of the old franchisees elected to exit the network. “There was a period where things got worse before they got better,” he says. Given the drain of franchisees and that RED Driving School was still haemorrhaging money, McIntosh isn’t afraid to confess to facing every day with a sense of having bitten off more than he could chew. “You know it’s going to be the same with any turnaround situation when you’ve got involved in a business that’s struggling,” he says. “The medicine is bound to be painful to take.”
On the other hand, being in this desperate situation did have the benefit of easier decision-making – it was either do or die. “When it’s backs to the wall and cash is flowing out the door you need to stop it quickly, so decisions are made a lot more intuitively and with a lot less data and research,” he says. Two decisions would have a particularly huge impact on the business: raising the price and offering a quality of service that justified the cost hike. “What we want you as an instructor to do is to give great lessons.” he says. “You don’t sit at the road talking to save fuel. You turn up on time. If it’s a two-hour lesson you give two hours. You don’t drop students off early.”
Still, some franchisees occasionally struggled to maintain the higher price, especially when clients asked if they could do a deal. While McIntosh is adamant every instructor is still free to negotiate their own prices with customers, he’s equally clear that it’s not ideal. “Before you know it your price has spiralled down to a point where you can’t make any money and this does happen,” he says. To avoid this situation from occurring RED Driving School is constantly teaching instructors how to respond when customers ask them for a special deal and to highlight what they’d get for the money. “It’s not cheap but it’s a fair price because we’re selling on value,” McIntosh reasons.
Another change to the model was how the franchisor allocated students to instructors in an area. Essentially, whichever franchisee is at the top of the list gets the next client. Back in the day this service was free of charge, which was something McIntosh quickly changed. “If you get things for free, you value it less,” he says. The consequence of it being free was that some instructors felt they could skip lessons as there would always be a new client coming through the pipeline, an attitude that caused customer satisfaction to plummet. Instead, the franchisor opted to make the client allocation system something franchisees had to pay for. “If the franchisee paid the fee and then messed it up and gave a poor service, they didn’t get the fee back so it was going to cost them money if they didn’t do a good job,” McIntosh explains. Not only did this reduce the number of complaints but also helped grow the number of referrals each instructor got from their own clients, meaning many opted out of the service as they could fill in their own schedules.
To boost the franchise’s reach even further, McIntosh also devoted some marketing budget at finding ways to connect with potential clients. Recognising regular ads would be pointless for the industry, the franchise first focused on spreading word of mouth by providing a great service and secondly by finding ways to boost the franchise’s ranking on Google. “So we came up with the idea of teaching celebrities that will post and talk about us,” McIntosh says. And that was how Maisie Williams, the actress most famous for playing Arya Stark on HBO’s Game of Thrones, ended up taking driving lessons at RED Driving School in 2014. “And it worked really well,” he says. Since then the company has reached out to multiple celebrities and influencers and offerred them a similar deal.
And slowly all these efforts paid off. “I think it was around Christmas 2014, when the turning point came where I could say that ‘we’re on the right path, we’re going to be okay,’” McIntosh recalls. However, they weren’t out of the woods yet. As January 2015 came along it became clear that RED Driving School wouldn’t be able to pay its VAT bill. Fortunately, the franchisor was able to negotiate a deal with the HMRC to pay it in instalments over the next few months, which meant in the spring of that year, the company had its first month with a positive cashflow in years. “We’ve never had a negative cashflow month again,” he says.
In fact, he’s so bullish about the potential of RED Driving School that he’s not even worried about the rising threat of self-driving cars. Even though companies like Lyft, Uber and Waymo are all accelerating their efforts in putting autonomous vehicles on the roads, McIntosh believes people will still need driving licences for decades. “The technology is amazing but it’s a long way from being ready,” he says. Not only is he unsure about the tech being ready for complex road structures but he’s also sceptical about whether people would be forgiving to machines causing traffic accidents. “We intrinsically forgive human error because we all make mistakes but how forgiving will you be when a robot kills somebody?” he asks.
The company is actually so confident about this that it put up an April Fools’ Day joke a few years ago saying RED Driving School would begin to offer driving lessons for self-driving cars. Although, not everyone got the joke. “You would be amazed about how many journalists call us to ask us about that,” McIntosh laughs. In fact, the copy was so convincing that even the PR agency the franchise worked with was fooled. “They’d had a change of staff and the new staff that weren’t around when we wrote the joke called and said, ‘what is this about the driverless lessons?’” he smiles.
But despite not offering any lessons for autonomous vehicles, RED Driving School has still made waves. For instance, earlier this year it was named National Driving School of the Year at the FirstCar Awards 2018. “It’s always nice to be recognised in that way,” McIntosh says.
As the business shifted into another gear and the support system grew, more budding franchisees began looking to join the network. And no matter who they are, RED Driving School is happy to consider them. “It can be absolutely anyone,” McIntosh says. “We get ex-forces, ex-police and older people who are looking to semi-retire.” That being said, it’s not enough that prospective instructors pass the government exams, they also have to demonstrate that they’re buying into the culture and values of the franchise. “Of course, occasionally someone isn’t just suitable and, whilst I’d rather not, we do terminate franchisees or there are trainees that we elect not to take on for various reasons,” he explains. “But it’s reasonably rare.”
Not only has this attitude seen the network make up for the people who left the franchise but has also grown the number of franchisees to roughly 1,500 across the UK. And the CEO is expecting this number to increase in the years to come. “But I don’t want to grow in a crazy burst,” he says. “It’s got to be steady.”
That doesn’t mean McIntosh is taking his foot off the accelerator. Instead, he’s revving up his engines to search for new opportunities to expand the company’s services. “We will continue to be a driving school but we’ve also started in the fleet driving market,” he says. “We’re now doing safety assessments for people who are driving in business.” Not only does this mean employers can be certain their fleet is in good hands but it also means they can offer it as a perk to employees. “We’ve just started this and so far so good,” he says. “We’ve won some accounts already but I think that in the next five years this will be a big, big growth area for us.”
Moreover, he’s not ruling out taking the brand beyond Britain’s borders. “I’m going to the states in October to sniff around the American market,” McIntosh reveals. And that’s not the only one. “We’ve thought about Spain, Saudi Arabia and India but ultimately the focus is the UK,” he says.
Having turned the business around and actively eyeing a road trip further afield, we can’t blame McIntosh for pressing the pedal to the metal to accelerate RED’s opportunities.