Hertz 2008 Annual Report Download - page 37

ITEM 1. BUSINESS (Continued)
We believe that our licensee arrangements are important to our business because they enable us to offer
expanded national and international service and a broader one-way rental program. Licenses are issued
principally by our wholly-owned subsidiaries, Hertz System, Inc., or ‘‘System,’’ in the United States, and
Hertz International, Ltd., or ‘‘HIL,’’ in countries outside of the United States under franchise
arrangements to independent licensees and affiliates who are engaged in the car rental business in the
United States and in many other countries.
Licensees generally pay fees based on a percentage of their revenues or the number of cars they
operate. The operations of all licensees, including the purchase and ownership of vehicles, are financed
independently by the licensees, and we do not have any investment interest in the licensees or their
fleets. System licensees share in the cost of our U.S. advertising program, reservations system, sales
force and certain other services. Our European and other international licensees also share in the cost of
our reservations system, sales force and certain other services. In return, licensees are provided the use
of the Hertz brand name, management and administrative assistance and training, reservations through
our reservations channels, the Hertz #1 Club and #1 Club Gold programs, our ‘‘Rent-it-Here/
Leave-it-There’’ one-way rental program and other services. In addition to car rental, certain licensees
outside the United States engage in car leasing, chauffeur-driven rentals and renting camper vans under
the Hertz name.
System licensees ordinarily are limited as to transferability without our consent and are terminable by us
only for cause or after a fixed term. Licensees in the United States may generally terminate for any reason
on 90 days’ notice. In Europe and certain other international jurisdictions, licensees typically do not have
early termination rights. Initial license fees or the price for the sale to a licensee of a company-owned
location may be payable over a term of several years. We continue to issue new licenses and, from time
to time, purchase licensee businesses.
During the year ended December 31, 2008, we added 72 locations by acquiring former licensees of our
domestic and international car rental operations. These acquisitions give us greater control over our
growth both in the United States and internationally and an expanded array of services across the Hertz
network. See Note 2 to the Notes to our consolidated financial statements included in this Annual Report
under the caption ‘‘Item 8—Financial Statements and Supplementary Data.’’
Competition
In the United States, our principal car rental industry competitors are Avis Budget Group, Inc., or ‘‘ABG,’’
which currently operates the Avis and Budget brands, Enterprise, which operates the National Car
Rental, Alamo and Enterprise brands, and Dollar Thrifty Automotive Group, Inc., or ‘‘DTG,’’ which
operates the Dollar and Thrifty brands.
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