Hertz 2010 Annual Report Download - page 37

ITEM 1. BUSINESS (Continued)
Licensees
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 over 140 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 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.
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.
During the year ended December 31, 2010, we added eight locations by acquiring former licensees of
our domestic and international car rental operations. See Note 3 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 Rent-A-Car Company, or ‘‘Enterprise,’’
which also operates the National Car Rental and Alamo brands, and Dollar Thrifty Automotive
Group, Inc., or ‘‘Dollar Thrifty,’’ which operates the Dollar and Thrifty brands. In the United States, the
Hertz brand had the highest market share, by revenues, in 2009 and in the first nine months of 2010 at
approximately 200 of the largest airports where we have company-operated locations
We have a significant presence in the off-airport market. We believe that we maintain the second largest
market share, by revenues, in the off-airport car rental market in the United States. Since January 1,
2008, we increased the number of our off-airport rental locations in the United States by approximately
22% to approximately 1,930 locations. Revenues from our U.S. off-airport operations represented
$1,079.5 million, $953.1 million and $975.9 million of our total car rental revenues in the years ended
December 31, 2010, 2009 and 2008, respectively. Many smaller companies also operate in the airport
and off-airport rental markets.
13