Avis 2013 Annual Report Download - page 24

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and Extra Space Storage. We also have an exclusive agreement to advertise Budget Truck rental services in the
Mover’s Guide, an official U.S. Postal Service change of address product.
Our Zipcar brand also partners with other active lifestyle brands that appeal to our Zipcar members and organize,
sponsor or participate in charitable and community events with organizations important to us and our Zipcar
members. Zipcar maintains relationships with universities to market to the “next generation consumer” that, upon
graduation, may migrate to the major metropolitan areas that we serve, continue their relationship with us and
advocate for broad sponsorship of Zipcar membership at their places of work. Through our Zipcar for Business
program, we also offer reduced membership fees and weekday driving rates to employees of companies, federal
agencies and local governments that sponsor the use of Zipcars.
LICENSING
We have licensees in more than 160 countries throughout the world. Revenue derived from our vehicle rental
licensees in 2013 totaled $136 million, with approximately $116 million in our International segment and $20
million in our North America segment. Licensed locations are independently operated by our licensees and range
from large operations at major airport locations and territories encompassing entire countries to relatively small
operations in suburban locations. Our licensees generally maintain separate independently owned and operated
fleets. Royalties generated from licensing provide us with a source of high-margin revenue because there are
relatively limited additional fixed costs associated with fees paid by licensees to us. Locations operated by
licensees represented approximately 52% of our Avis and Budget car rental locations worldwide and
approximately 30% of total revenue generated by the Avis and Budget Systems in 2013. We facilitate one-way car
rentals between Company-operated and licensed locations, which enables us to offer an integrated network of
locations to our customers.
We generally enjoy good relationships with our licensees and meet regularly with them at regional, national and
international meetings. Our relationships with our licensees are governed by license agreements that grant the
licensee the right to operate independently operated Avis, Budget or Payless car and/or truck rental businesses in
certain territories. Our license agreements generally provide our licensees with the exclusive right to operate in
their assigned territory. These agreements impose obligations on the licensee regarding its operations and most
agreements restrict the licensee’s 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 program.
Our license agreements typically have terms ranging from five to 20 years. The car rental royalty fee payable to
us under our license agreements is generally 5% to 8% of gross rental revenue, but certain licensees, both in
North America and internationally, have license agreements with different royalty fee structures. 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 perform audits as part of our program to assure licensee compliance with brand quality
standards and contract provisions. Generally, we can terminate license agreements for certain defaults, including
failure to pay royalties and failure to adhere to our operational standards. Upon termination of a license
agreement, the licensee is prohibited from using our brand names 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 our vehicle rentals and licensee royalties, we generate revenue from our customers
through the sale and/or rental of optional ancillary products and services. Our employees offer products to
customers that will enhance their rental experience, including collision and loss damage waivers, insurance
products such as additional/supplemental liability insurance or personal accident/effects insurance, products for
driving convenience such as portable GPS navigation units, optional roadside assistance services, fuel service
options, electronic toll collection and other ancillary products and services, such as access to satellite radio and
child safety seats. In addition, we also supplement our daily truck rental revenue by offering customers
automobile towing equipment and other moving accessories such as hand trucks, furniture pads and moving
supplies.