Avis 2010 Annual Report Download - page 13

Table of Contents
ability to transfer its license agreement and capital stock. Licensees are generally required to adhere to our system standards for each brand as
updated and supplemented by our policy bulletins, brand manuals and service programs.
We maintain the right to monitor the operations of licensees and, when applicable, can declare a licensee to be in default under its license
agreement. We can terminate license agreements for certain defaults, including failure to pay royalties and failure to adhere to our operational
standards. Under agreements that predate our ownership of Avis or Budget, a limited number of licensees in the United States are also separately
licensed to sell used cars under the Avis or Budget brand in certain territories. Our current domestic license agreements provide for a 20-year
term and renewal terms, for no additional fee, so long as the licensee is not in default and provided that certain conditions are met. Some of our
older domestic license agreements do not contain a fixed term, or provide for renewal terms for no additional fee so long as the licensee is not in
default. Upon renewal, the terms and conditions of the license agreement may generally be amended from those contained in the expiring license
agreements, while language in certain older license agreements may limit our ability to do so. The car rental royalty fee payable to us under
license agreements is generally 5% to 8% of gross rental revenue but certain licensees of each brand, both internationally and domestically, have
license agreements with different royalty fee structures, including Avis Europe, which operates for the most part under royalty-free license
agreements.
Pursuant to their license agreements, some licensees must meet certain minimal requirements relating to the number of rental locations in their
licensed territory, the number of vehicles available for rental and the amount of their advertising and promotional expenditures. In general, each
license agreement provides that the licensee must not engage in any other vehicle rental business within the licensed territory during the term of
such agreement and, in the Budget license agreement, for 12 months thereafter. Upon termination of a license, the licensee is also prohibited
from using the Avis or Budget name and related marks in any business. In the United States, these license relationships constitute “franchises”
under most federal and state laws regulating the offer and sale of franchises and the relationship of the parties to a franchise agreement.
Other Revenue
In addition to revenue from vehicle rentals and licensee royalties, we generate revenue from Avis and Budget customers through the sale and/or
rental of optional products and services. Our employees offer products to customers that will better suit their rental experience, including loss
damage waivers, insurance products such as additional/supplemental liability insurance or personal accident/effects insurance, products for
driving convenience such as where2 GPS navigation units, optional emergency roadside assistance, fuel service options and electronic toll
collection, and other ancillary products and services as described above, such as rentals of satellite radio units and child safety seats. In 2010,
approximately 4% of our domestic vehicle rental operations revenue was generated by the sale of loss damage waivers, under which we agree to
relieve a customer from financial responsibility arising from vehicle damage incurred during the rental period if the customer has not breached
the rental agreement. In addition, we receive reimbursement from our customers for certain operating expenses we incur, including gasoline and
vehicle licensing fees, as well as airport concession fees, which we pay in exchange for the right to operate at airports and other locations.
Websites
Avis and Budget have strong brand presence on the Internet through their websites, avis.com and budget.com, as well as third-party websites.
Both Avis and Budget have agreements to promote their car rental services with major online travel agencies such as Expedia, Travelocity and
Orbitz, and have a strong advertising presence on various search engines. Bookings over the Internet accounted for 36% of Avis’ 2010 domestic
rentals, with 28% derived from bookings on avis.com, and for 54% of Budget’s 2010 domestic rentals, with 31% derived from bookings on
budget.com.
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