What is the formula for calculating the Termination Fee for a Budget licensee?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
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); multiplied by (ii) a fraction, the numerator of which is the number of days between the occurrence of the event (a) above and the end of the one hundred eighty (180) day period, and the denominator of which is one hundred eighty (180).
Licensee's obligation to pay the foregoing amount will not in any way affect any other rights or remedies of Budget arising under this Agreement or otherwise.
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the Termination Fee calculation is based on a multiple of the average license fees. If a Budget licensee terminates the agreement with 180 days' notice, but ceases operation or has reduced gross revenue during that period, a Termination Fee applies.
The Termination Fee is calculated as six times the average license fees payable over the preceding year (or the term of the agreement if less than a year). This amount is then multiplied by a fraction. The fraction's numerator is the number of days remaining in the 180-day notice period after the cessation of operations, and the denominator is 180.
For a prospective Budget licensee, this means that early termination can result in a significant fee, especially if the business ceases to operate shortly after giving notice. The fee is designed to compensate Budget for the lost revenue during the notice period. However, the FDD also notes that the enforceability of the Termination Fee might be limited under Minnesota law, but Budget intends to enforce it to the maximum extent allowed.