Following the termination or expiration of the Budget agreement, what is the geographic scope of the Licensee's non-competition obligation?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
- Non-Competition. The third and fourth sentences of Paragraph 11.9 of the License Agreement are deleted in their entirety and the following sentences are substituted in their place:
"Licensee further acknowledges the impossibility of accurately determining the tangible and intangible damages which Budget will suffer if Licensee fails or refuses to adhere to this provision or the provisions of Paragraph 1.6 or 2.4 hereof and accordingly agrees that Budget may seek entry, without prior notice, to the extent that applicable notice requirements may be waived, of temporary and permanent injunctions against Licensee's breach of such provisions. Licensee further agrees that Budget may seek an amount equal to the aggregate of Budget's costs of obtaining any such temporary and permanent injunctive relief, including all costs of investigation and proof of facts, court costs and attorney's fees."
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
Based on the 2025 Budget Franchise Disclosure Document, the specific geographic scope of the non-competition obligation following the termination or expiration of the License Agreement is not explicitly detailed in the provided excerpts. However, Item 23 does reference Paragraph 11.9 of the License Agreement, which addresses non-competition. It indicates that the third and fourth sentences of Paragraph 11.9 are replaced with new sentences concerning Budget's ability to seek injunctive relief and recover costs if a licensee breaches the non-competition provisions or the provisions of Paragraphs 1.6 or 2.4.
While the excerpts discuss the enforcement of non-competition obligations through injunctive relief and cost recovery, they do not specify the geographic area to which these obligations apply. The excerpts mention actions a licensee must take upon termination, such as ceasing to identify as a Budget licensee, returning materials, and transferring phone numbers and reservations. These actions suggest that the non-competition obligations are tied to the territory in which the licensee operated the Budget rental business.
A prospective Budget franchisee should carefully review the full License Agreement, specifically Paragraph 11.9 and related sections, to understand the precise geographic scope and terms of the non-competition clause. It would be prudent to discuss this with the franchisor to gain clarity on how the non-competition agreement would affect their ability to operate a similar business after leaving the Budget system, and to seek legal counsel to fully understand the implications.