Does the Budget Franchise Agreement include a caveat that modifies Article 14 of the Franchise Agreement?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
- Notwithstanding anything to the contrary set forth in the Franchise Agreement, and in particular Article 14 thereof, the Franchise Agreement and the legal relations among the parties to the Franchise Agreement shall be governed by and construed in accordance with the laws of the State of North Dakota.
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- The following caveat is added to Article 14 of the Franchise Agreement:
"The Securities Commissioner has held the following to be unfair, unjust or inequitable to North Dakota franchisees (Section 51-19-09, N.D.C.C.):
Restriction on Forum: Requiring North Dakota franchisees to consent to the jurisdiction of courts outside of North Dakota.
Applicable Laws: Franchise Agreements which specify that they are to be governed by the laws of a state other than North Dakota.
Waiver of Exemplary & Punitive Damages: Requiring North Dakota franchisees to consent to a waiver of exemplary and punitive damages.
Limitation of Claims: Franchise Agreements that require the franchisee to consent to a limitation of claims. The statute of limitations under North Dakota law applies."
- Sections 6.3, 11.4 and 14.10 of the Franchise Agreement are amended by the addition of the following language to the original language that appears therein:
"The site of the arbitration or mediation will be agreeable to all parties and may not be remote from the franchisee's place of business."
- Section 14.10 of the Franchise Agreement is amended by the addition of the following language to the original language that appears therein:
"This section shall not in any way abrogate or reduce any rights of the Franchisee as provided for in the North Dakota Franchise Investment Law, including the right to a trial by jury and the right to submit matters to the jurisdiction of the Courts of North Dakota."
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, Article 14 of the Franchise Agreement is subject to a caveat, particularly for franchisees in North Dakota. This caveat addresses specific concerns raised by the North Dakota Securities Commissioner regarding fairness and equity for franchisees within the state.
Specifically, the caveat added to Article 14 states that certain provisions are considered unfair, unjust, or inequitable to North Dakota franchisees. These provisions relate to restrictions on forum, applicable laws, waiver of exemplary and punitive damages, and limitations of claims. The caveat clarifies that requiring North Dakota franchisees to consent to the jurisdiction of courts outside of North Dakota, specifying that the agreement is governed by laws other than North Dakota's, consenting to a waiver of exemplary and punitive damages, or agreeing to a limitation of claims are all viewed negatively by the North Dakota Securities Commissioner. The statute of limitations under North Dakota law applies.
Furthermore, the FDD states that any amendments to Sections 6.3, 11.4, and 14.10 of the Franchise Agreement include language ensuring that the arbitration or mediation site is agreeable to all parties and not remote from the franchisee's place of business. Section 14.10 is also amended to ensure it does not reduce any rights of the franchisee under the North Dakota Franchise Investment Law, including the right to a jury trial and the right to submit matters to North Dakota courts. This indicates that Budget is willing to modify certain aspects of its standard agreement to comply with North Dakota law and protect the rights of its franchisees in that state.