Hertz 2012 Annual Report Download - page 39

ITEM 1. BUSINESS (Continued)
sophisticated car diagnostic and repair equipment, are accepted by automobile manufacturers as
eligible to perform and receive reimbursement for warranty work. Collision damage and major repairs
are generally performed by independent contractors.
We dispose of non-program cars, as well as program cars that become ineligible for manufacturer
repurchase or guaranteed depreciation programs, through a variety of disposition channels, including
auctions, brokered sales, sales to wholesalers and dealers and, to a lesser extent and primarily in the
United States, sales at retail through a network of 26 company-operated car sales locations dedicated
exclusively to the sale of used cars from our rental fleet.
During 2009, we launched Rent2Buy, an innovative program designed to sell used rental cars. The
program was licensed to operate in 32 states as of December 31, 2012. Customers have an opportunity
for a three-day test rental of a competitively priced car from our rental fleet. If the customer purchases the
car, he or she is credited with up to three days of rental charges, and the purchase transaction is
completed through the internet and by mail in those states where permitted.
During the year ended December 31, 2012, of the cars that were not repurchased by manufacturers, we
sold approximately 33% at auction, 47% through dealer direct, 13% through our Rent2Buy program or at
retail locations and approximately 7% through other channels.
Licensees Under Our Hertz Brand
We believe that our extensive worldwide ownership of car rental operations contributes to the
consistency of our high-quality service, cost control, fleet utilization, yield management, competitive
pricing and our ability to offer one-way rentals. However, in certain U.S. and international markets, we
have found it more efficient to utilize independent licensees, which rent cars that they own. Our licensees
operate locations in approximately 145 countries, including most of the countries where we have
company-operated locations. See ‘‘Item 1A—Risk Factors’’ in this Annual Report.
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, 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. Licensees in the U.S. 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 Gold Plus Rewards 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.
U.S. 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.
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