According to the Budget franchise agreement, what constitutes a 'person'?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
- 12.4 Death or Incapacity of Licensee. Upon the death or permanent incapacity of a natural person who is the Licensee, or a natural person who is a principal beneficial owner of a legal person that is the Licensee, the executor, administrator, conservator or other personal representative of such natural person will transfer his or her interest to a third party approved by Budget within three (3) months thereof. Such transfers, including transfers by devise or inheritance, will be subject to the same conditions as any lifetime transfer. Failure to so dispose of such interest within said period of time will constitute a breach of this Agreement. If, after the death or permanent incapacity of such natural person, the Rental Business are not being managed by a competent and trained manager (as determined by Budget in its sole discretion), Budget is authorized to immediately appoint a manager pursuant to the terms of Paragraph 11.10, to maintain the operation of the Rental Business until an approved assignee will be able to assume the management and operation of the Rental Business.
- 12.5 Beneficial Owners of Licensee. Licensee represents and Budget enters into this Agreement in reliance upon the representation that the individuals identified in the Summary Pages (Section 6) and Exhibit G are the sole beneficial owners (in the stated proportions) of Licensee.
- 12.6 Nondisclosure and Noncompetition Agreement. All persons who are the beneficial owners and principal officers of Licensee will execute Budget's then-current Standard Nondisclosure and Noncompetition Agreement. The current form of Nondisclosure and Noncompetition Agreement is set forth in Exhibit C attached hereto.
- 12.7 Personal Guarantee. All persons who are the beneficial owners of Licensee will execute Budget's then-current standard Personal Guarantee. The current form of Personal Guarantee is set forth in Exhibit A attached hereto.
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
Based on the 2025 Budget Franchise Disclosure Document, the franchise agreement considers a 'person' to be either a natural person or a legal entity. This distinction is important because different requirements apply depending on whether the franchisee is an individual or a company.
For instance, if the Licensee is a natural person and dies or becomes incapacitated, their interest must be transferred to a Budget-approved third party within three months. If this doesn't happen, or if a competent manager isn't running the Rental Business, Budget can appoint one. This ensures continuity of the business. The FDD also states that all persons who are the beneficial owners and principal officers of Licensee will execute Budget's then-current Standard Nondisclosure and Noncompetition Agreement and all persons who are the beneficial owners of Licensee will execute Budget's then-current standard Personal Guarantee.
If the Licensee is a legal entity, Budget relies on the representation that the individuals identified in the Summary Pages (Section 6) and Exhibit G are the sole beneficial owners of Licensee. This means Budget needs to know who really owns and controls the company. This is important for Budget because they want to be sure that the people running the franchise are trustworthy and capable. These individuals may also need to sign non-disclosure agreements and personal guarantees.
Understanding how Budget defines a 'person' is crucial for prospective franchisees, as it dictates the specific obligations and procedures they must follow, especially concerning ownership, management, and transfer of the franchise.