Risk Score
Pending analysis
Investment Range
$625,500 - $1,608,400
Franchise Fee
$45,000
Total US Locations
109
Business Summary
Payless Car Rental System, Inc. franchises the right to own and operate a business focused on renting automobiles without drivers to the general public for periods of 180 days or less, using the Payless trademarks. Payless Car Rental businesses also offer various related services and products, such as optional insurance services, loss damage waivers, refueling services, child seats, and navigational devices.
Corporate History
Payless Car Rental System, Inc. began its franchising operations under its current entity in 2001, when it took over all Payless Car Rental franchise agreements from its parent company, Payless Car Rental, Inc. (PCR). PCR, originally established in Delaware in 1971, had been offering Payless vehicle rental franchises since then. PCR also briefly ventured into hotel franchising in the early 90s and lodging services in the early 2000s, but no longer offers franchises in any business. In 2013, the larger Avis Budget Group, Inc., which also owns the Avis and Budget car rental brands, acquired Payless Car Rental System, Inc. and its parent.
Financial Overview
Investment Range
$625,500 - $1,608,400
Franchise Fee (Low)
$45,000
Franchise Fee (High)
$50,000
Royalty %
7.5%
Equipment Costs (Low)
$40,000
Equipment Costs (High)
$123,000
Working Capital
$63,700
Audited Financials
Yes
Offers Financing
No
Audit Opinion
Unqualified opinion
Financial Health Notes
The financial statements for Payless Car Rental System, Inc. (via its guarantor, Avis Budget Group, Inc.) show significant financial challenges. A special risk disclosure notes that the franchisor's financial condition "calls into question the Franchisor's financial ability to provide services and support" to franchisees. Avis Budget Group, Inc. reported a substantial net loss of $1.821 billion for the year ended December 31, 2024, a significant decline from net incomes in previous years. This loss includes a $2.3 billion non-cash impairment charge on long-lived assets (vehicles) and an additional $180 million charge for vehicles held for sale, primarily in its Americas segment. These impairments resulted from a change in fleet strategy to accelerate rotations and shorten vehicle useful lives. The company is self-insured for public liability and property damage claims, and the estimation of these reserves involves significant actuarial judgment due to uncertain exposures. While the overall financial statements received an unqualified audit opinion from Deloitte & Touche LLP, the explicit risk disclosure and the reported net loss highlight potential concerns for franchisees regarding the franchisor's ability to maintain support. However, Avis Budget Group, Inc. does provide a guarantee of performance for Payless Car Rental System, Inc.'s obligations.
Financing Details
Payless Car Rental System, Inc. does not offer any direct or indirect financing to its franchisees. This means Payless does not provide loans for the franchise fee, equipment, or working capital, nor does it guarantee any loans that franchisees might secure from third parties. Franchisees are responsible for arranging their own financing. However, Payless Car Rental System, Inc. is listed on the SBA Franchise Directory, suggesting that Small Business Administration (SBA) loans may be an option for prospective franchisees, and if an SBA loan is obtained, an SBA Addendum to the Franchise Agreement must be signed.
Performance Metrics
Total US Locations
109
Franchised Units
12
Corporate Units
97
Franchising Since
1978
Legal & Compliance Analysis
Recent Litigation
Yes
Bankruptcy
No
Litigation Count
17
Litigation Summary
Payless Car Rental System, Inc. and its parent company, Avis Budget Group, Inc., have a notable legal history with several pending and concluded cases. There are five ongoing pending actions as of December 2024. These include two class-action lawsuits in the U.S. District Court for the District of New Jersey: one alleging fraudulent counter sales (add-ons, fuel charges) by Payless since 2016, and another since 2014 concerning New Jersey Consumer Fraud Act violations related to speeding tickets and administrative fees, which is currently on appeal. Additionally, there is a shareholder derivative action filed in April 2024 and two separate complaints filed in September 2024 by Travelers United, Inc. against Avis and Budget, alleging systematic cheating of consumers by refusing to rent vehicles for advertised prices. Payless is also subject to a currently effective Federal Trade Commission consent order from 2008, obligating Budget (an affiliate) to comply with disclosure requirements regarding fuel charges until January 2028. In terms of concluded litigation within the past 10 years, Payless itself settled a Florida Attorney General investigation in 2012 for alleged deceptive trade practices, paying $150,000 in costs and creating a $100,000 customer reimbursement fund. A patent infringement lawsuit against Payless from 2012 was administratively closed in 2019. Avis Budget Group and its affiliates have resolved several significant class-action lawsuits within the last 10 years. These include a 2011 class action regarding undisclosed E-Toll activations and fees, settled for $6.7 million in legal fees and $2.7 million in settlement costs in 2022. A 2013 class action concerning unauthorized supplemental liability insurance sales was dismissed with prejudice in 2023, resulting in $8.525 million in fees and $400,000 in costs for class counsel. A 2012 class action about undisclosed surcharges for frequent flyer miles was settled in 2016 for $3.05 million in attorneys' fees. A 2013 lawsuit by agency operators misclassified as independent contractors was settled in 2018 for a total of $1.758 million. A 2020 class action alleging fraudulent charges was settled for $20,000 in 2022. Another case regarding intentionally false statements about a closing Budget location was settled for $400,000 in 2015. An older FTC consent order against Budget from 1996 regarding "loss of turnback" values terminated in 2016. The FDD also highlights "Out-of-State Dispute Resolution" as a special risk, noting that disputes with the franchisor must be resolved in New Jersey, which may force less favorable settlements or increase costs for franchisees.
Bankruptcy History
Payless Car Rental System, Inc. reports no bankruptcy history for itself or any of its parent companies, predecessors, or principal officers.
Agreement Terms
Initial Term
10 years
Renewal Term
5 years
Renewal Conditions
Payless Car Rental System, Inc. requires franchisees to meet several conditions to renew their franchise agreement. These conditions must be satisfied at least 30 days before the current term expires. Franchisees must not be in default of any part of their agreement, and they or their permitted transferees must be the original beneficial owners. They are also required to sign Payless Car Rental System, Inc.'s then-current form of License Agreement, which might have significantly different terms and conditions. Additionally, franchisees must pay the current renewal fee and, along with all other owners of the licensee, sign a general release of claims.
Training & Support Program
Franchisor Assistance
Payless Car Rental System, Inc. provides comprehensive assistance to its franchisees both before and during the operation of their Payless Car Rental business. Before opening, Payless helps with designating the territory, calculating initial fees, and establishing minimum annual license fees and car rental office requirements. Payless assists in approving the franchisee's chosen location and initial automobile requirements. Franchisees receive a copy of the confidential Manual, which outlines standards, specifications, and operating procedures, and get information on necessary equipment, signs, fixtures, and supplies. Payless also lends a representative copy of the Manual and other franchisee manuals. During operation, Payless offers ongoing training and assistance through web-based seminars, field visits, and other programs, including advice on administrative, bookkeeping, and accounting procedures. Payless may suggest rental rates and requires franchisees to honor rates established under the Corporate Rate Program for National Accounts. Payless, in conjunction with Avis Budget Car Rental, provides rental reservations through the Payless Reservation System, manages customer complaints (with certain adjustments requiring franchisee approval), prepares reservation system profit and loss statements, and centralizes travel agency commission payments.
Initial Training Hours
27
Training Location
Online/virtual
Ongoing Support
Payless Car Rental System, Inc. provides ongoing support to its franchisees through various channels. It furnishes representatives and additional resources via web-based training seminars, field visits, or other programs, to train and assist the General Manager and employees as deemed necessary. This includes operating training, advice, and guidance for administrative, bookkeeping, accounting, and general operating procedures, as well as fleet and equipment acquisition, disposition, and financing. Payless evaluates and approves proposed websites and handles transfer requests. In collaboration with Avis Budget Car Rental, Payless makes rental reservations available, resolves customer complaints, prepares reservation system profit and loss statements, and manages centralized travel agency commission payments. Franchisees and their managers are also required to attend periodic conventions or seminars held for the Network, covering sales, marketing, performance, and advertising. Payless also reserves the right to periodically add new and refresher web-based training programs.
Franchise Requirements
Industry Experience Required
No
Management Experience Required
No
Sales Experience Required
No
Technical Skills Required
No
Operational Details
Location Type
Retail
Owner Participation
Absentee Allowed
Territory Type
Non-Exclusive
Territory Size Requirements
Payless Car Rental System, Inc. defines its franchise territories based on various factors, including population, the presence or absence of an airport, and the franchisee's operational abilities and experience. While a minimum area cannot be specified, territories are typically described by political boundaries like part of a city or county, or sometimes as a circle centered on the location. Payless uses accepted industry parameters, census tracts, population densities, zip code boundaries, buying patterns, traffic counts, and projected commercial and residential growth to determine the boundaries. However, a territory will generally not have a population of less than 25,000 people.
Staffing Notes
Payless Car Rental System, Inc. requires each franchisee to employ at least one full-time General Manager throughout the term of the franchise agreement. This General Manager must complete Payless Car Rental System, Inc.'s instruction to its satisfaction and dedicate their entire normal business hours to managing, operating, and developing the Payless Car Rental business according to the established Standards and Manual. Additionally, an on-premises supervisor is required to successfully complete Payless Car Rental System, Inc.'s training program.