How does Budget manage its exposure to changes in the price of fuel?

According to Budget's 2025 Franchise Disclosure Document, Budget manages its risk exposure to fluctuating fuel prices by periodically entering into derivative commodity contracts. These contracts are designated as freestanding derivatives. Any changes in the fair value of these derivatives are recorded in Budget's earnings. These changes are then presented in the same line of the income statement as the item being hedged.

This strategy allows Budget to offset potential losses from rising fuel costs with gains from these derivative contracts, and vice versa. By using these financial instruments, Budget aims to stabilize its earnings and reduce the impact of fuel price volatility on its overall financial performance. This is a common practice among companies with significant fuel expenses, as it provides a mechanism to protect against unpredictable market fluctuations.

For a prospective Budget franchisee, this indicates that Budget is proactive in managing its operational costs and mitigating risks associated with fuel price changes. While the FDD provides this general overview, it does not detail the specific types of derivative contracts Budget uses, the extent of their hedging activities, or the potential impact on franchisees. A prospective franchisee should inquire with Budget about the specifics of their hedging strategies and how these strategies might affect the franchisee's costs and profitability.