FORM 10-K
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal year ended December 31, 2004 |
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from_______________to_______________ |
Commission file number 1-13647
DOLLAR THRIFTY AUTOMOTIVE GROUP, INC.
| Delaware (State or other jurisdiction of incorporation or organization) |
73-1356520 (I.R.S. Employer Identification No.) |
5330 East 31st Street, Tulsa, Oklahoma 74135
(Address of principal executive offices and zip code)
Registrant’s telephone number, including
area code: (918) 660-7700
| Title of each class: Common Stock, $.01 par value |
Name of each exchange on which registered: New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: x
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act): Yes x No o
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, 2004, the last business day of the registrant's most recently completed second fiscal quarter, based on the closing price of the stock on the New York Stock Exchange on such date was $683,855,454.
The number of shares outstanding of the registrant’s Common Stock as of February 28, 2005 was 25,260,838.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 20, 2005, are incorporated by reference in Part III.
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| PART I |
| ITEM | 1. BUSINESS | 4 |
| ITEM | 2. PROPERTIES | 18 |
| ITEM | 3. LEGAL PROCEEDINGS | 18 |
| ITEM | 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS | 18 |
| PART II |
| ITEM | 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED |
| STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 19 |
| ITEM | 6. SELECTED FINANCIAL DATA | 21 |
| ITEM | 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL |
| CONDITION AND RESULTS OF OPERATION | 23 |
| ITEM | 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES |
| ABOUT MARKET RISK | 38 |
| ITEM | 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 39 |
| ITEM | 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS |
| ON ACCOUNTING AND FINANCIAL DISCLOSURE | 70 |
| ITEM | 9A. CONTROLS AND PROCEDURES | 70 |
| ITEM | 9B. OTHER INFORMATION | 72 |
| PART III |
| ITEM | 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT | 72 |
| ITEM | 11. EXECUTIVE COMPENSATION | 73 |
| ITEM | 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS |
| AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 73 |
| ITEM | 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS | 73 |
| ITEM | 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES | 73 |
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| PART IV |
| ITEM | 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | 73 |
| SIGNATURES | 92 |
| INDEX TO EXHIBITS | 93 |
FACTORS AFFECTING FORWARD-LOOKING STATEMENTS
Some of the statements contained herein under “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operation” may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although Dollar Thrifty Automotive Group, Inc. believes such forward-looking statements are based upon reasonable assumptions, such statements are not guarantees of future performance and certain factors could cause results to differ materially from current expectations. These factors include: price and product competition; economic and competitive conditions in markets and countries where our companies’ customers reside and where our companies and their franchisees operate; natural hazards or catastrophes; incidents of terrorism; airline travel patterns; changes in capital availability or cost; costs and other terms related to the acquisition and disposition of automobiles; systems or communications failures; costs of conducting business and changes in structure or operations; and certain regulatory and environmental matters and litigation risks. Should one or more of these risks or uncertainties, among others, materialize, actual results could vary from those estimated, anticipated or projected. Dollar Thrifty Automotive Group, Inc. undertakes no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.
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PART I
|
ITEM 1. |
BUSINESS |
Company Overview
General
Dollar Thrifty Automotive Group, Inc., a Delaware corporation (“DTG”), owns DTG Operations, Inc. (“DTG Operations”), Dollar Rent A Car, Inc. and Thrifty, Inc. Thrifty, Inc. owns Thrifty Rent-A-Car System, Inc. and Thrifty Car Sales, Inc. (“Thrifty Car Sales”), which operates a franchised retail used car sales network. Thrifty Rent-A-Car System, Inc. owns Dollar Thrifty Automotive Group Canada Inc. (“DTG Canada”). On January 1, 2003, DTG began operating under a corporate structure which realigned the prior brand structure to a functional structure, combining the management of operations and administrative functions for both the Dollar and Thrifty brands. DTG Operations operates company-owned stores under the Dollar brand and the Thrifty brand, provides vehicle leasing to franchisees and operates reservation centers for both brands. Thrifty Rent-A-Car System, Inc. and Dollar Rent A Car, Inc. conduct franchising activities and sales and marketing activities for their respective brands. The Company has two additional subsidiaries, Rental Car Finance Corp. and Dollar Thrifty Funding Corp., which are special purpose financing entities and have been appropriately consolidated in the financial statements of the Company. Dollar Rent A Car, Inc., the Dollar brand and DTG Operations operating under the Dollar brand are individually and collectively referred to hereafter as “Dollar”. Thrifty, Inc., Thrifty Rent-A-Car System, Inc., Thrifty Car Sales, the Thrifty brand and DTG Operations operating under the Thrifty brand are individually and collectively referred to hereafter as “Thrifty”. DTG, Dollar and Thrifty and each of their subsidiaries are individually or collectively referred to herein as the “Company”, as the context may require. Dollar and Thrifty and their respective independent franchisees operate the Dollar and Thrifty vehicle rental systems. The Dollar and Thrifty brands represent a value-priced rental vehicle generally appealing to leisure customers, including foreign tourists, and to small businesses, government business and independent business travelers. As of December 31, 2004, Dollar and Thrifty had 859 locations in the United States and Canada of which 352 were company-owned stores and 507 were locations operated by franchisees. While Dollar and Thrifty have franchisees in countries outside the United States and Canada, revenues from these franchisees have not been material to results of operations of the Company.
In the United States, Dollar's main focus is operating company-owned stores located in major airports, and it derives substantial revenues from leisure and tour package rentals. Thrifty focuses on serving both the airport and local markets operating through a network of company-owned stores and franchisees. Dollar derives a majority of its U.S. revenues from providing rental vehicles and services directly to rental customers, while Thrifty has historically derived its revenues primarily from franchising fees and services including vehicle leasing. However, Thrifty has shifted to operating more company-owned stores by acquiring franchisee locations in key markets and now derives a majority of its revenues from corporate operations. Dollar and Thrifty incur the costs of operating company-owned stores and their revenues are directly affected by changes in rental demand and pricing.
The Company is the successor to Pentastar Transportation Group, Inc., which was formed in 1989 to acquire and operate the rental car subsidiaries of Chrysler Corporation, now known as DaimlerChrysler Corporation (such entity and its subsidiaries and members of its affiliated group are hereinafter referred to as “DaimlerChrysler”). DTG Operations, formerly known as Dollar Rent A Car Systems, Inc., was incorporated in 1965. Thrifty Rent-A-Car System, Inc. was incorporated in 1950 and Dollar Rent A Car, Inc. was incorporated in December 2002. Thrifty, Inc. was incorporated in December 1998.
Available Information
The Company makes available free of charge on or through its Internet Web site its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after such material has been electronically filed with, or furnished to, the
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Securities and Exchange Commission (“SEC”). The Company’s Internet address is http://www.dtag.com. The SEC also maintains a Web site that contains all of the Company’s filings at http://www.sec.gov.
The Company has a code of business conduct, which is available on the Company’s Web site under the heading, “About DTG”. The Company’s Board of Directors has adopted a corporate governance policy and Board committee charters, which are updated periodically and can be found on the Company’s Web site under the heading, “Corporate Governance”. A copy of the code of business conduct, the corporate governance policy and the charters are available upon request to the Company’s headquarters as listed on the front of this Form 10-K, attention “Corporate Communications” department.
The annual Chief Executive Officer certification required by the New York Stock Exchange Listed Company Manual was submitted to the New York Stock Exchange on May 24, 2004.
Industry Overview
The U.S. daily vehicle rental industry has two principal markets: the airport market and the local market. Vehicle rental companies that focus on the airport market rent primarily to business and leisure travelers. Vehicle rentals from airport locations account for the largest portion of vehicle rentals in the United States. Companies focusing on the local market rent primarily to persons who need a vehicle periodically for personal or business use or who require a temporary replacement vehicle. Rental companies also sell used vehicles and ancillary products such as refueling services and loss damage waivers to vehicle renters.
Vehicle rental companies typically incur substantial debt to finance their rental fleets. They also typically acquire a majority of their fleets under manufacturer residual value programs that repurchase or guarantee the resale value of Program Vehicles (hereinafter defined) at particular times in the future. This allows a rental company to determine in advance this important component of its cost structure. The Program Vehicles and the related obligations of the manufacturers are used as collateral for fleet financing.
The rental car industry has consolidated ownership of the top eight brands which are now owned by just five companies. Enterprise is privately held, Hertz is a subsidiary of Ford, Budget and Avis are operating subsidiaries of Cendant Corporation, Dollar and Thrifty are operating subsidiaries of the Company, and Alamo and National are operating subsidiaries of Vanguard Car Rental USA, Inc., an affiliate of Cerberus Capital Management, L.P., a private investment group.
Prior to 2001, the car rental industry had experienced steady growth over the previous decade driven by increased leisure and business airline passenger traffic and additional capacity in the hotel industry. During 2001, however, the travel industry suffered from the effects of an economic recession as well as the terrorist attacks of September 11. In the aftermath of September 11, airline passenger traffic dropped significantly and car rental companies reduced their fleet size in response to lower levels of demand. Airline passenger traffic has recovered and in 2004 exceeded the previous peak levels of traffic in 2000. The future growth of the car rental industry will be determined by general economic conditions and the level of leisure and business travel.
Seasonality
The Company’s business is subject to seasonal variations in customer demand, with the summer vacation period representing the peak season for vehicle rentals. This general seasonal variation in demand, along with more localized changes in demand, causes the Company to vary its fleet size over the course of the year. In 2004, the Company’s average monthly fleet size ranged from a low of approximately 93,000 vehicles in the first quarter to a high of approximately 149,000 vehicles in the third quarter.
The Company
The Company has two value rental car brands, Dollar and Thrifty, with a strategy to operate company-owned stores in the top 75 airport markets and in key leisure destinations in the United States. In the United States, the Dollar and Thrifty brands remain separate, but operate under a single
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management structure and share vehicles, back-office employees and facilities, where possible. The Company also operates company-owned stores in the eight largest airports in Canada under DTG Canada. In Canada, the company-owned stores are primarily co-branded.
The Company also offers franchise opportunities in smaller markets in the United States and Canada and in all markets internationally so that franchisees can operate under the Dollar or Thrifty trademarks or dual franchise and operate both brands in one market.
Summary Operating Data of the Company
| Years Ended December 31, | |||||||||||||||||
| 2004 | 2003 | 2002 | |||||||||||||||
| (in thousands) | |||||||||||||||||
Revenues: |
|||||||||||||||||
Revenue from U.S. and Canada company-owned stores |
$ | 1,282,386 | $ | 1,019,476 | $ | 901,790 | |||||||||||
Revenue from U.S. and Canada franchisees |
130,855 | 198,039 | 225,885 | ||||||||||||||
Revenue from international franchisees |
5,128 | 4,515 | 4,192 | ||||||||||||||
Other revenue |
5,611 | 5,856 | 1,327 | ||||||||||||||
Total revenues |
$ | 1,423,980 | $ | 1,227,886 | $ | 1,133,194 | |||||||||||
| As of December 31, | |||||||||||||||||
| 2004 | 2003 | 2002 | |||||||||||||||
Rental locations: |
|||||||||||||||||
U.S. and Canada company- owned stores |
352 | 310 | 224 | ||||||||||||||
U.S. and Canada franchisee locations |
507 | 513 | 579 | ||||||||||||||
Franchisees: |
|||||||||||||||||
U.S. and Canada |
229 | 248 | 243 | ||||||||||||||
International |
112 | 99 | 106 | ||||||||||||||
Dollar and Thrifty Brands
Dollar
Dollar’s main focus is serving the airport vehicle rental market, which is comprised of business and leisure travelers. The majority of its locations are on or near airport facilities. At December 31, 2004, Dollar had 105 company-owned and franchised in-terminal airport locations. Dollar operates primarily through company-owned stores in the United States, and also licenses to independent franchisees which operate as a part of the Dollar brand system in the United States, Canada and abroad. In January 2003, Dollar re-acquired its master franchise rights in Canada and began acquiring the operations of franchisees in the eight largest airport markets of Calgary, Winnipeg, Ottawa, Toronto, Montreal, Halifax, Edmonton and Vancouver. Dollar successfully completed the acquisition of all franchisee operations in these top markets by January 2004, when it purchased the franchise operation in Vancouver.
As of December 31, 2004, Dollar’s vehicle rental system included 349 locations in the United States and Canada, consisting of 185 company-owned stores and 164 franchisee locations. Dollar’s total rental revenue generated by company-owned stores was $877 million for the year ended December 31, 2004.
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Thrifty
Historically, Thrifty’s main focus had been on franchising and franchise support services. However, Thrifty is shifting to operating more company-owned stores by acquiring franchisee locations in key markets. Consistent with 2003, Thrifty made significant progress during 2004 in acquiring franchised operations and converting them to company-owned locations. Thrifty U.S. company-owned locations increased to 115 at December 31, 2004 from 87 at December 31, 2003. Thrifty’s U.S. company-owned stores and its franchisees derive approximately 80% of their combined rental revenues from the airport market and approximately 20% from the local market. Thrifty’s approach of serving both the airport and local markets allows many of its franchisees and company-owned stores to have multiple locations to improve fleet utilization and profit margins by moving vehicles among locations to better address demand between these markets. At December 31, 2004, Thrifty had 98 company-owned and franchised in-terminal airport locations.
As of December 31, 2004, Thrifty’s vehicle rental system included 510 rental locations in the United States and Canada, consisting of 343 franchisee locations and 167 company-owned stores. Thrifty’s total rental revenue generated by company-owned stores was $399 million for the year ended December 31, 2004.
Corporate Operations
United States
Beginning in 2003, the Company implemented a new operating model for U.S. Dollar and Thrifty company-owned stores, which included maintaining separate airport counters, bussing, reservations, marketing and all other customer contact activities, while using a single management team for both brands. In addition, this operating model included sharing vehicles, back-office employees and service facilities, where possible.
As of December 31, 2004, the Company operates the Dollar brand in 55 and the Thrifty brand in 39 of the top 75 airport markets in the United States and operates both brands in 35 of these top 75 airport markets. During 2004, the Company added Thrifty in ten and Dollar in one top 75 airport markets by acquiring franchisee locations or opening greenfield locations.
Canada
The Company operates in Canada through DTG Canada. Thrifty has historically had a strong corporate presence in Canada, and, during 2003, Dollar acquired its master franchise rights in Canada and began re-acquiring its franchisee locations in the eight largest airport markets in Canada. The Company operates corporate stores in all eight of the largest airport markets in Canada, which includes Calgary, Winnipeg, Ottawa, Toronto, Montreal, Halifax, Edmonton and Vancouver. The majority of the markets are operated under the Company’s co-branding strategy in Canada where both the Dollar and Thrifty brands are represented at one shared location. These operations are important to maintaining a national airport presence in Canada, where DTG Canada has significant airport concessions and lease commitments.
Franchise Acquisition Program
The Company acquires assets, operations and locations of franchisees. The Company is pursuing opportunities to acquire both Dollar and Thrifty franchise operations in the top 75 U.S. airport markets and other key leisure markets. Historically, Thrifty had established company-owned stores only upon the financial failure of a franchisee. However, Thrifty is shifting to operating more company-owned stores by acquiring franchisee locations in key markets. In 2004, Thrifty continued its strategy to transition from a franchise operation to a corporate operation in key U.S. markets.
During 2004, the Company acquired the Thrifty franchise operations in 13 U.S. markets in Greensboro, Aspen, Raleigh-Durham, Ft. Myers, Orlando, Tampa, Chicago (O’Hare and Midway), Corpus Christi, Los Angeles, San Diego, Boise, and Orange County and the Dollar franchise operations in two U.S. markets in Aspen and Boise. Dollar and Thrifty generally have the right of first refusal on the sale of a franchise operation. As of December 31, 2004, the Company estimates it has completed approximately 70% of its acquisition program.
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Tour Rentals
Vehicle rentals by customers of foreign and U.S. tour operators generated approximately $192 million or 15% of the Company’s rental revenues for the year ended December 31, 2004. These rentals are usually part of tour packages that can also include air travel and hotel accommodations. No single tour operator account generated in excess of 3% of the Company’s 2004 rental revenues.
Other
Dollar and Thrifty reduce costs through bulk purchasing, applying performance benchmarks and developing and implementing best practice management techniques nationwide. Its company-owned store network also allows Dollar and Thrifty to offer customers one-way rentals in most markets.
As of December 31, 2004, the Company had 113 vehicle rental concessions for company-owned stores at 80 airports in the United States. Its payments for these concessions are usually based upon a specified percentage of airport-generated revenue, subject to a minimum annual fee, and typically include fixed rent for terminal counters or other leased properties and facilities. A growing number of larger airports are building consolidated airport rental car facilities to eliminate congestion at the airport which also facilitates additional growth for the rental car industry.
Supplemental Equipment and Optional Products – Dollar and Thrifty rent ski racks, baby seats and other supplemental equipment, sell pre-paid gasoline and, subject to availability and applicable local law, make available loss damage waivers and insurance products related to the vehicle rental.
Summary of Corporate Operations Data
| Years Ended December 31, | |||||||||||||||||
| 2004 | 2003 | 2002 | |||||||||||||||
| (in thousands) | |||||||||||||||||
Rental revenues: |
|||||||||||||||||
United States - Dollar |
$ | 870,606 | $ | 804,700 | $ | 780,760 | |||||||||||
United States - Thrifty |
339,700 | 157,006 | 76,884 | ||||||||||||||
Total U.S. rental revenues |
1,210,306 | 961,706 | 857,644 | ||||||||||||||
| Canada - Dollar and Thrifty | 65,717 | 52,415 | 39,740 | ||||||||||||||
Total rental revenues |
1,276,023 | 1,014,121 | 897,384 | ||||||||||||||
| Other | 6,363 | 5,355 | 4,406 | ||||||||||||||
Total revenues from U.S. and Canadian Corporate Operations |
$ | 1,282,386 | $ | 1,019,476 | $ | 901,790 | |||||||||||
| As of December 31, | |||||||||||||||||
| 2004 | 2003 | 2002 | |||||||||||||||
Rental locations (U.S. and Canada): |
|||||||||||||||||
Dollar |
185 | 169 | 138 | ||||||||||||||
Thrifty |
167 | 141 | 86 | ||||||||||||||
Total rental locations |
352 | 310 | 224 | ||||||||||||||
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Franchising
Dollar -- United States and Canada
Dollar sells its U.S. franchises on an exclusive basis for specific geographic areas, generally outside the top 75 U.S. airport markets. Most franchisees are located at or near airports that generate a lower volume of vehicle rentals than the airports served by Dollar’s company-owned stores.
In Canada, Dollar operates corporately at the top eight airport markets and sells franchises in markets outside the top eight airport markets.
The Company offers franchisees, in smaller U.S. and Canadian markets, the opportunity to dual franchise. That is, one franchisee can operate both the Dollar and the Thrifty brand, thus allowing them to drive more business in their market while leveraging fixed costs.
Dollar licenses its franchisees to use the Dollar brand service marks in the vehicle rental and leasing and parking businesses. Franchisees pay Dollar an initial franchise fee generally based on the population, number of airline passengers, total airport vehicle rental revenues and the level of any other vehicle rental activity in the franchised territory, as well as other factors.
System Fees – In addition to an initial franchise fee, each U.S. franchisee is generally required to pay Dollar a system fee equal to 8% of airport rental revenue and 6% for suburban operations. All Canadian franchisees whether operating a single-brand or co-brand location pay a monthly fee generally equal to 8% of rental revenue.
Franchisee Services and Products – Dollar makes insurance coverage available to its franchisees and provides them with training and operational assistance, site selection guidance, vehicle leasing programs, vehicle damage recovery and claims management advice, sales assistance and image and standards guidance. Dollar also provides franchisees with fleet planning and customer satisfaction programs and sells them certain Dollar-branded supplies. In addition, Dollar offers its franchisees rental rate management analysis, centralized corporate account and tour billing and travel agent commission payments. Dollar franchisees pay Dollar a fee for each reservation made through Dollar’s worldwide reservation system.
Thrifty -- United States and Canada
Thrifty sells its U.S. franchises on an exclusive basis for specific geographic areas, generally outside the top 75 U.S. airport markets. Historically, Thrifty sold franchises more broadly; however, in 2003, Thrifty implemented a strategy to operate the top 75 U.S. markets as company-owned locations. In Canada, Thrifty sells franchises in markets outside the top eight Canadian airport markets.
The Company offers franchisees in smaller U.S. and Canadian markets the opportunity to dual franchise, operating both the Thrifty and Dollar brand.
Thrifty licenses its franchisees to use the Thrifty brand service marks in the vehicle rental and leasing and parking businesses. Franchisees pay Thrifty an initial franchise fee generally based on the population, number of airline passengers, total airport vehicle rental revenues and the level of any other vehicle rental activity in the franchised territory, as well as other factors. Thrifty offers its franchisees a full line of products and services not easily or cost effectively available from other sources. Thrifty works closely with its franchisees in formulating and implementing marketing and operating strategies.
System Fees and Advertising Fees – In addition to the initial franchise fee, Thrifty’s U.S. franchisees pay Thrifty an administrative fee, which is generally 3% of base rental revenue, excluding ancillary products. U.S. franchisees also pay an advertising fee ranging from 2.5% to 5% of base rental revenue to a separate advertising fund managed jointly by franchisees and Company management. For 2005, the advertising fee has been reduced from a maximum of 5.0% to 4.5%. For 2004, Thrifty's five largest U.S. franchisees generated less than 2% of the Company’s total revenues in the form of system, fleet leasing, reservation and other fees.
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Franchisee Services and Products – Thrifty provides its U.S. and Canadian franchisees with a full range of products and services, including vehicle leasing, insurance programs, reservations, site selection, computer systems, marketing programs and assistance, supplies, image and standards and training.
Canadian Franchisees – A new program has been introduced in Canada allowing Canadian franchisees the opportunity to also acquire the Dollar brand and operate locations on a co-brand basis. All Canadian franchisees whether operating a single-brand or co-brand location pay a monthly fee generally equal to 8% of rental revenue.
Summary of U.S. and Canada Franchise Operations Data
| As of December 31, | |||||||||||||||||
| 2004 | 2003 | 2002 | |||||||||||||||
Franchisee locations: |
|||||||||||||||||
Dollar |
164 | 145 | 129 | ||||||||||||||
Thrifty |
343 | 368 | 450 | ||||||||||||||
Total franchisee locations |
507 | 513 | 579 | ||||||||||||||
Franchisees: |
|||||||||||||||||
Dollar |
75 | 78 | 56 | ||||||||||||||
Thrifty |
154 | 170 | 187 | ||||||||||||||
Total franchisees |
229 | 248 | 243 | ||||||||||||||
International
Dollar and Thrifty offer master franchises outside the United States and Canada, generally on a countrywide basis. Each master franchise is permitted to operate within their franchised territory directly or through subfranchisees. At December 31, 2004, Dollar had franchised locations in 40 countries and Thrifty had franchised locations in 64 countries outside the United States and Canada. These locations are in Latin America, Europe, the Middle East, and the Asia-Pacific regions. In 2003, the Company began offering franchisees the opportunity to license the rights to operate both the Dollar and Thrifty brands in certain markets on a dual franchise or co-brand basis. Revenue generated by the Company from franchised operations outside the United States and Canada totaled $5.1 million in 2004.
Thrifty Car Sales
In December 1998, Thrifty Car Sales was formed to operate a franchise system, “Thrifty Car Sales”. Thrifty Car Sales provides an opportunity for both independent and manufacturer franchised dealers to enhance or expand their used car operations under a well-recognized national brand name. In addition to the use of the brand name, dealers have access to a variety of products and services offered by Thrifty Car Sales. These products and services include operational and marketing support, vehicle supply services, customized retail and wholesale financing programs as well as national accounts and supplies programs. As of December 31, 2004, Thrifty Car Sales had 43 franchise locations in operation.
Reservations
The Internet is an important source of reservations for the Company. For the year ended December 31, 2004, approximately 58% of the Company’s total non-tour reservations came through the Internet, increasing from approximately 53% in 2003. The Company’s Internet Web sites (dollar.com and thrifty.com) provided approximately 31% of total non-tour reservations. During 2004, 27% of non-tour reservations were provided from third party Internet sites with no individual third party site providing in excess of 11% of total non-tour reservations. The remaining non-tour reservations were primarily provided by the reservation call centers and travel agents. The Company has continuously staffed reservation call centers for Dollar and Thrifty at its headquarters in Tulsa, Oklahoma, and at its facility in Tahlequah, Oklahoma. Dollar and Thrifty reservation systems are linked to all major airline reservation systems and through such systems to travel agencies in the United States, Canada and abroad.
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Marketing
Dollar
Dollar positions itself as a value car rental company in the travel industry, providing on airport convenience with low rates on quality vehicles. Customers who rent from Dollar are cost conscious leisure, tour and business travelers who want to save money on car rentals without compromising fundamental car rental services. Dollar implements this strategy through national advertising, strategic marketing partnerships and enhancing distribution channels.
|
Advertising and Promotion |
Dollar has shifted much of its traditional media mix of print and network/cable television to its current emphasis on Internet advertising, where it has made significant investments. In all of its advertising, Dollar promotes dollar.com, its award winning Web site, to encourage travelers to book reservations with Dollar through this low cost channel. Dollar encourages franchisees, as well as local management of company-owned stores, to develop local market relationships and retail sales initiatives that coordinate with Dollar’s national advertising programs.
Dollar has made filings under the intellectual property laws of jurisdictions in which it or its franchisees operate, including the U.S. Patent and Trademark Office, to protect the names, logos and designs identified with Dollar. These marks are important for customer awareness and selection of Dollar for vehicle rental.
|
Strategic Marketing Efforts |
Dollar has made significant investments in dollar.com and has plans to further enhance the Web site to best meet its customers’ needs. In 2004, Dollar designed and implemented an entirely new, and more user-friendly, dollar.com Web site which now has two-click booking capabilities.
Dollar is also one of the leading car rental companies in direct-connect technology, which supports bypassing the global distribution systems thereby greatly reducing reservation costs.
Major travel chains and consortia operate under preferred supplier agreements with Dollar, and are supported by the Dollar sales department. Under its preferred supplier agreements, Dollar provides these travel agency accounts contracted commission levels and overrides/marketing funds in return for promoting Dollar and giving Dollar a priority in their reservation systems. In general, these agreements are not exclusive to Dollar, and many travel agency accounts have similar arrangements with other vehicle rental companies.
Dollar is also considered an industry leader and has strong relationships with many significant overseas tour operators who specialize in inbound tour packages to the United States. Strategic marketing partnerships have also been developed with most U.S. airlines through active participation in their frequent flyer programs.
Thrifty
Thrifty positions itself as an industry leader in delivering value for vehicle rental to value-conscious consumers. In the United States, it implements this strategy primarily through national advertising, strategic marketing partnerships and enhancing distribution channels. In addition, marketing assistance is provided to U.S. franchisees in local advertising, promotion and sales.
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