Budget Beats Sixt In German Legal Battle
<B> Budget Beats Sixt In German Legal Battle</B>
By Lynn Woods
It was the franchisee from hell. Although Germany-based Sixt GMBH & Co. had a 20-year history with its franchisor, Budget Rent a Car Corp., in 1996 the relationship began to crumble when Sixt expanded into Switzerland and Austria and, in a clear violation of its agreement with Budget, started referring customers to its own locations rather than those operated by Budget. Elsewhere in Europe, it transferred outbound reservations to a Budget competitor, EuroDollar Car Rental. As a final slap in the face, Sixt enlarged its own logo and shrunk Budget's in its co-branded signage.
Budget attempted to terminate its license agreement with Sixt in the spring of 1997, but Sixt challenged the move and it wasn't until last October that Budget was able to cut off incoming reservations to the German company, routing them instead to National Car Rental, with whom Budget had formed an agreement. Meanwhile, it filed suit against Sixt for breach of contract. Justice finally won out this past April, when the Munich Regional Court of Appeal ruled that Budget had validly terminated its license agreement with Sixt. Although Sixt has appealed, the decision has enabled Budget to move ahead on its plans to reestablish a presence at major locations in Germany, which are expected to be up and running by year-end.
The court has ruled that Sixt must pay Budget's legal fees as well as lost-profit damages resulting from its failure to transmit reservations to Budget locations. As part of its ambitious expansion plans, last year Sixt set up a reservations center in Washington, D.C., which has since closed.
The experience has left Budget with a bad feeling about co-branding: Only in Italy does Budget continue to co-brand with its franchisee, Maggiore, and the new German locations all will be exclusively branded Budget.
Meanwhile, Dollar Rent A Car has formed a partnership with Sixt. The agreement will go into effect after Dollar phases out its agreement with Europcar, its current European partner, at the end of the year.