Risk Score
Pending analysis
Investment Range
$879,300 - $15,874,000
Franchise Fee
$25,000
Total US Locations
3,485
Business Summary
Hertz System, Inc. operates car rental businesses that rent cars for periods of 365 days or less under the "Hertz" brand. These businesses follow a standardized system for operations, accounting, customer acquisition, advertising, and vehicle appearance, which may be updated by Hertz System, Inc. to maintain brand standards and competitiveness.
Corporate History
Hertz System, Inc. was formed on January 19, 1925, as a Delaware corporation, operating car rental businesses under the "Hertz" name. Its parent company, The Hertz Corporation, was incorporated in 1967. Over its long history, Hertz System, Inc. initially offered licenses for car and truck rentals, later focusing on car-only rentals. The larger Hertz family of brands includes Firefly, Hertz Car Sales Business, and Hertz Rent2Buy. Affiliates like DTG Operations, Inc. previously managed Dollar and Thrifty licenses, which are now largely overseen by The Hertz Corporation, particularly for Canadian franchises since 2015-2017. In May 2020, Hertz System, Inc. and its parent entities filed for Chapter 11 bankruptcy reorganization, successfully emerging in June 2021. The system is continuously evolving, with potential combinations of Hertz, Dollar, and Thrifty systems.
Financial Overview
Investment Range
$879,300 - $15,874,000
Franchise Fee (Low)
$25,000
Franchise Fee (High)
$500,000
Royalty %
6%
Equipment Costs (Low)
$16,500
Equipment Costs (High)
$275,000
Working Capital
$35,000
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Unqualified opinion
Financial Health Notes
Hertz System, Inc.'s parent company, The Hertz Corporation, has accrued approximately $320 million as of December 31, 2024, for ongoing litigation regarding make-whole premiums and post-petition interest related to its Chapter 11 bankruptcy. While the ultimate outcome of this litigation is uncertain, the payment of such a judgment could significantly impact Hertz's financial condition, results of operations, or cash flows. The FDD also notes that during the third quarter of 2024, there was a reduction in cash flow projections for the Americas RAC and International RAC segments, leading to an impairment charge of $1.0 billion on long-lived assets, primarily due to accelerating fleet rotation and delayed operating cost improvements. Further changes in market conditions or asset performance could result in additional impairment charges.
Financing Details
Hertz System, Inc. does not offer any direct or indirect financing to its franchisees. This means Hertz System, Inc. will not provide loans, lease agreements, or guarantee any financial obligations for its franchisees.
Performance Metrics
Total US Locations
3,485
Franchised Units
400
Corporate Units
3,085
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
Yes
Litigation Count
24
Litigation Summary
Hertz System, Inc. itself has no pending or prior litigation to disclose. However, its Parent, The Hertz Corporation, and other affiliates have been involved in several legal matters. There are 4 pending lawsuits against Hertz's parent entities, including a case regarding a franchise agreement termination in Brazil and another alleging breach of contract for a terminated license agreement in Canada. There is also ongoing litigation with Wells Fargo Bank regarding redemption premiums and post-petition interest related to Hertz's Chapter 11 bankruptcy, which resulted in a Third Circuit decision in September 2024 and an accrual of approximately $320 million for this litigation as of December 31, 2024. Another pending arbitration involves a terminated Dollar franchise in Puerto Rico. The parent has also initiated 5 lawsuits against former subfranchisees for trademark misuse in Brazil and South Africa, some of which are ongoing or in the process of recovering legal costs. Additionally, there were 13 prior lawsuits involving the parent entities, including consumer fraud class actions, tortious interference claims, and a class action related to pre-paid fuel charges, many of which were settled. A notable prior action was a settlement in December 2022 for approximately $168 million related to claims of alleged false arrests. There are also two injunctive orders, one from the Federal Trade Commission in 1991 regarding disclosure of mandatory charges and one in 2019 with the State of Washington concerning "No Poaching Provisions" in franchise agreements.
Bankruptcy History
On May 22, 2020, Hertz System, Inc., its Parent, The Hertz Corporation, and certain U.S. and Canadian affiliates, filed for Chapter 11 bankruptcy reorganization in the U.S. Bankruptcy Court for the District of Delaware. This included entities like Dollar Thrifty Automotive Group, Inc. and Thrifty Rent-A-Car System, LLC. The primary place of business for most of these entities is Estero, Florida, with Dollar Thrifty Automotive Group Canada, Inc. located in Etobicoke, Ontario, Canada. Hertz and its affiliates successfully completed their restructuring process and emerged from bankruptcy on June 30, 2021.
Agreement Terms
Initial Term
5 years
Renewal Term
5 years
Renewal Conditions
To renew their franchise agreement, Hertz System, Inc. franchisees must provide written notice of their intent to renew between 9 and 12 months before the current term ends. They must have paid all outstanding amounts owed to Hertz System, Inc. and its affiliates on time and have consistently complied with all terms of the franchise agreement and other agreements. Franchisees and their owners are required to meet current qualification and training requirements, pay Hertz System, Inc.'s costs for processing the renewal application, and sign a general release of claims against Hertz System, Inc. and its affiliates. Additionally, franchisees must refurbish, repair, or replace equipment, computer systems, signs, and other decor items to meet Hertz System, Inc.'s then-current brand standards and image. They must also have met the performance requirements outlined in Attachment B of the Franchise Agreement, and Hertz System, Inc. must still be offering new franchises for the system.
Training & Support Program
Franchisor Assistance
Hertz System, Inc. provides pre-opening assistance by offering franchisees a copy of the Operations Guide and support with site selection. Ongoing assistance includes consulting on advertising, sales, and promotion, as well as providing general guidance on managing and operating the business. Hertz System, Inc. maintains a reservation system and a directory of locations on its website, where it also includes information on rates and vehicle rental conditions. Franchisees can access materials, forms, supplies, and signs bearing the Hertz marks, and Hertz System, Inc. assists in locating stolen or converted vehicles. Additionally, Hertz System, Inc. may make purchasing programs available for vehicles and various automotive products.
Initial Training Hours
73
Training Location
Franchisor headquarters, online, or at your designated location
Ongoing Support
Hertz System, Inc. provides ongoing support through consultation upon the franchisee's reasonable request, offering guidance and recommendations on establishing, managing, and operating the business, as well as on advertising, sales, publicity, and promotion. Hertz System, Inc. maintains a reservation system, publishes a location directory on its website, and may offer periodic supplemental training programs at its discretion. They also assist in locating stolen vehicles and may make various purchase programs available to franchisees.
Franchise Requirements
Ideal Candidate Profile
Hertz System, Inc. seeks franchisees who possess sufficient financial resources and the ability to effectively manage and operate their car rental business. Franchisees must commit a significant amount of personal time and effort to developing and running the business. If the franchisee does not serve as the full-time manager, they must employ a manager who has disclosed their identity to Hertz System, Inc., completed the required training, has sufficient vehicle rental business experience, and is dedicated full-time to the management and operation of the franchised location.
Industry Experience Required
Yes
Management Experience Required
Yes
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
Retail
Owner Participation
Hands-On
Territory Type
Non-Exclusive
Territory Size Requirements
Hertz grants franchisees a non-exclusive, geographic Franchised Territory where they will operate their Hertz Business. The specific territory varies for each franchisee and is defined by, at a minimum, the name of a city or other political subdivision(s). If the territory is described as a municipal or state political subdivision, such as a city or county, its boundaries are those existing on the effective date of the agreement. If the territory is described using streets, routes, or highways, the boundary runs to the center line of those as they exist on the effective date. Hertz retains all rights not expressly granted to the franchisee and may operate, or grant franchises to others to operate, other Hertz-branded or affiliate-branded businesses (like Dollar or Thrifty) within or outside the franchisee's territory. Hertz may also use alternative distribution methods, including the Internet, within the territory. The franchisee will not receive compensation for reservations solicited or accepted from within their territory by Hertz or others. Additionally, franchisees do not have rights of first refusal for additional franchises in their territory or contiguous areas. If a franchisee fails to open required additional locations within their territory by specified dates, Hertz may reclaim that portion of the territory (except for a three-mile radius around existing operating locations) and can operate or franchise others to operate there.
Staffing Notes
Hertz System, Inc. requires that each franchised location be supervised by a full-time manager who has completed their training program and possesses sufficient vehicle rental business experience. This manager's identity must be disclosed to Hertz System, Inc. The franchisee itself may serve as this full-time manager. Additionally, franchisees are responsible for implementing a training program for all their employees to ensure compliance with Hertz System, Inc.'s operational standards and procedures. If a franchisee operates multiple brands (Hertz, Dollar, Thrifty), they must have brand-specific dedicated employees in all customer contact areas, with each brand independently staffed by its own uniformed employees.