What constitutes the 'Termination Fee' for a Budget Licensee?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
or any other agreement between such parties, which litigation and claims will be
identified in such release. If such conditions are not met within the prescribed time period referred to above prior to the expiration of the current term, such term will expire upon the Expiration Date previously established in accordance with this Paragraph 11.1. Budget agrees to provide Licensee with notice of the approaching expiration of any term and the documentation referenced above sufficiently in advance of such expiration date for Licensee to comply with the renewal provisions of this Paragraph 11.1.
- 11.2 Termination By Licensee. Budget agrees that Licensee may terminate this Agreement, with or without cause, effective one hundred and eighty (180) days after written notice of its election to so terminate is delivered to Budget. However, if, in any calendar month during that one hundred eighty (180) day period: (a) Licensee ceases to operate the Rental Business; or (b) Licensee's Gross Revenue is less than the average monthly Gross Revenue of the Rental Business during the preceding one (1) year period (or during the term of this Agreement if less than one year), then in lieu of the License Fees otherwise payable for the remainder of the one hundred eighty (180) day period, Licensee will pay Budget the Termination Fee. The "Termination Fee" shall equal: (i) six (6) times the amount of the average License Fees, which were payable by Licensee hereunder for the immediately preceding one (1) year period (or during the term of this Agreement if less than one year);
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, a franchisee may be charged a termination fee if they terminate the agreement with 180 days written notice to Budget. The termination fee is calculated based on a formula that considers the average license fees payable over the preceding year (or the term of the agreement, if less than one year) and the remaining portion of the 180-day notice period.
Specifically, the "Termination Fee" is defined as six times the average license fees payable by the franchisee for the immediately preceding year (or the term of the agreement if less than one year). This amount is then multiplied by a fraction. The numerator of this fraction is the number of days between the date the franchisee ceases to operate the rental business or experiences a significant drop in gross revenue, and the end of the 180-day notice period. The denominator of the fraction is 180.
For a prospective Budget franchisee, this means that terminating the agreement early could result in a substantial termination fee. The fee is designed to compensate Budget for the franchisee's decision to exit the agreement before its natural expiration. However, the FDD also notes that the enforceability of the termination fee might be limited under Minnesota Franchise Law, but Budget intends to enforce it to the maximum extent allowed by law. Franchisees should be aware of this potential obligation and factor it into their decision-making process when considering whether to terminate their agreement.