What constitutes an assignment or transfer of the Budget Licensee, Rental Business, or beneficial ownership of Licensee that requires Budget's consent?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
Sale, assignment or transfer of Licensee, the Rental Business, or the beneficial ownership of Licensee requiring the consent of Budget will include: (i) a sale, assignment or transfer, or cumulative sales, assignments or transfers, lifetime and testamentary, at any time during the term of this Agreement, of twenty-five percent (25%) or more of the equity ownership, or a lesser percentage if such transfer would change the voting control of Licensee or the Rental Business, whether in the form of common or preferred stock or any security convertible thereto or partnership or proprietorship interest; provided that, notwithstanding anything in this Agreement to the contrary, dispositions by a beneficial owner by will or intestacy or by gifts, sales or otherwise to the spouse or children of such beneficial owner or to other then-current beneficial owners of Licensee or their respective spouses or children (a "Permitted Transferee") will not be deemed
a sale, assignment or transfer giving rise to Budget's need to consent thereto so long as Licensee gives prior written notice of any such disposition to Budget.
(c) Notice of Any Sale, Assignment, or Transfer. Notwithstanding the foregoing, Licensee will provide to Budget prior written notice of any proposed sales, assignments or transfers constituting any change in the equity ownership or control of Licensee or the Rental Business. Furthermore, Licensee will maintain stop-transfer instructions against the transfer on its records of any equity securities of Licensee; and all certificates evidencing ownership of equity securities will have the following legend printed legibly and conspicuously on their face:
"Transfer of these shares is restricted by an Budget Rent A Car System License Agreement with Budget Rent A Car System, Inc."
- (d) No Public Offering.
Licensee covenants not to be or become, a public company directly or indirectly including, by way of an initial public offering or transfer to or merger with an existing public company.
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, a transfer requiring Budget's consent includes the sale, assignment, or transfer of the Licensee, the Rental Business, or the beneficial ownership of the Licensee. Specifically, this includes a sale, assignment, or transfer (or cumulative such actions) of 25% or more of the equity ownership at any time during the agreement's term. A transfer of less than 25% may also require consent if it changes the voting control of the Licensee or the Rental Business. These restrictions apply to equity ownership in the form of common or preferred stock, or any security convertible thereto, or partnership or proprietorship interest.
However, there are exceptions. Dispositions by a beneficial owner to their spouse or children, or to other current beneficial owners of the Licensee or their spouses or children (referred to as "Permitted Transferees"), do not require Budget's consent, provided that Budget receives prior written notice of such dispositions. Despite this allowance, Licensees must still notify Budget in writing of any proposed sales, assignments, or transfers that could alter the equity ownership or control of the Licensee or the Rental Business.
Budget also mandates that Licensees maintain stop-transfer instructions on their records for any equity securities. Furthermore, all certificates of ownership must bear a legend stating that transfer of the shares is restricted by the Budget Rent A Car System License Agreement. Licensees are prohibited from becoming a public company, either directly or indirectly, through an initial public offering or a merger with an existing public company. This ensures that Budget maintains control over who is operating under their brand and that the financial stability of its franchisees remains consistent with Budget's standards.
Prospective franchisees should be aware of these transfer restrictions as they can impact the future sale or transfer of their franchise. It is important to understand the conditions under which Budget's consent is required and the procedures for obtaining that consent. Additionally, franchisees should be aware of Budget's right of first refusal, which allows Budget to purchase the franchise on the same terms as a proposed buyer.