Considering the litigation disclosed in Item 3, what impact might this have on a Budget franchisee's ability to comply with the restrictions on sources of products and services (Item 8)?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
Except for the litigation disclosed in Item 3, with regard to Budget, its predecessor or predecessors, and the persons identified in Item 2 or an affiliate offering franchise under Budget's principal trademark:
- A. There is no pending administrative, criminal or civil action pending alleging: a felony; a violation of a franchise, antitrust or securities law; fraud, embezzlement, fraudulent conversion, or misappropriation of property; unfair or deceptive practices; or comparable civil or misdemeanor allegations.
- B. No such party has been convicted of a felony or pleaded nolo contendere to a felony charge or, within the 10-year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or been held liable in a civil action alleging: violation of a franchise, antitrust or securities law; fraud, embezzlement, fraudulent conversion, or misappropriation of property; or unfair or deceptive practices; or comparable allegations.
- C. No such party is subject to a currently effective injunctive or restrictive order or decree relating to the franchise, or under any federal, state or Canadian franchise, securities, antitrust, trade regulation or trade practice law, as a result of a concluded or pending action or proceeding brought by a public agency; or is subject to any currently effective order of any national securities association or national securities exchange as defined in the Securities and Exchange Act of 1934, suspending or expelling such person from membership in such association or exchange; or is subject to a currently effective injunctive or restrictive order relating to any other business activity as a result of an action brought by a public agency or department, including, without limitation, actions affecting a license as a real estate broker or sales agent.
What This Means (2025 FDD)
The 2025 FDD for Budget does not specify how the litigation disclosed in Item 3 might impact a franchisee's ability to comply with restrictions on sources of products and services as outlined in Item 8. Item 8 generally discusses Budget's ability to designate approved suppliers for goods, services, supplies, fixtures, equipment, inventory, computer hardware/software, and real estate. It also states that Budget can change the standards and specifications for purchases or leases during the operation of the franchise.
Item 23 does state, "Except for the litigation disclosed in Item 3, with regard to Budget, its predecessor or predecessors, and the persons identified in Item 2 or an affiliate offering franchise under Budget's principal trademark..." followed by a list of conditions. These conditions include that there are no pending actions alleging violations of franchise, antitrust, or securities laws, fraud, or unfair practices; no convictions for felonies or misdemeanors related to such violations; and no effective injunctive or restrictive orders related to franchise, securities, antitrust, or trade regulation laws.
Without further information about the specifics of the litigation disclosed in Item 3, it is impossible to determine the potential impact on a franchisee's ability to comply with Item 8. A prospective franchisee should carefully review Item 3 of the FDD and seek clarification from Budget regarding the nature of the litigation and its potential effects on the franchise operation, particularly concerning sourcing restrictions and supplier relationships.