Does Budget use commodity contracts as derivative instruments?

According to Budget's 2025 Franchise Disclosure Document, Budget uses commodity contracts as derivative instruments. Specifically, Budget periodically enters into derivative commodity contracts to manage their exposure to changes in the price of fuel. These instruments are designated as freestanding derivatives, and the changes in fair value are recorded in earnings and presented in the same line of the income statement expected for the hedged item.

In simpler terms, Budget uses these contracts to protect itself from fluctuations in fuel prices, which is a significant expense for a car rental company. By using these financial instruments, Budget aims to stabilize its costs and reduce the impact of unpredictable fuel price changes on its profitability. This practice is not uncommon for businesses with high fuel consumption, as it allows them to better manage their financial risks.

For a prospective franchisee, this indicates that Budget actively manages its financial risks related to fuel costs. While franchisees may not directly engage in these derivative transactions, the financial stability and risk management practices of the parent company can indirectly benefit franchisees by helping to maintain consistent pricing and profitability. It's important for potential franchisees to understand how Budget manages its financial risks, as this can impact the overall health and stability of the franchise system.