After the Budget franchise is terminated or expires, for how long is the non-competition covenant in effect, and what are the geographic limitations?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section of the Budget License Agreement | Summary | |
|---|---|---|---|
| q. | Non-competition during the term of the franchise | 1.6 and Nondisclosure and Noncompetition Agreement | No involvement in other vehicle rental business or system in the United States. |
| r. | Non-competition covenants after the franchise is terminated or expires | 11.9, 12.6, and Nondisclosure and Noncompetition Agreement | No competing business for one year in licensed territory or within five miles of licensed territory. |
| s. | Modification of the agreement | 14.2(c) | Must be reduced to writing and signed by you and Budget. However, the Manual and Standards are subject to change. |
| t. | Integration/merger clause | 14.2(a) | Only terms of license agreement, its exhibits, its schedules, the Standards and Transfer Requirements are enforceable. Any representations or promises outside of the disclosure document and license agreement may not be enforceable. Notwithstanding the foregoing, nothing in this or any related agreement is intended to disclaim the express representations made in the Franchise Disclosure Document, its exhibits and amendments. |
| u. | Dispute resolution by |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 66–70)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the non-competition covenant after the franchise is terminated or expires lasts for one year. This restriction applies within the franchisee's licensed territory or within five miles of that licensed territory. This information is found in Section 11.9, 12.6, and the Nondisclosure and Noncompetition Agreement.
This means that after a Budget franchise agreement ends, whether through termination or expiration, the franchisee is restricted from operating a competing business for one year. The geographic scope of this restriction is limited to the franchisee's original licensed territory and an area extending five miles beyond its borders. This prevents former franchisees from immediately opening a competing rental car business nearby and leveraging the knowledge and experience gained while operating a Budget franchise.
Non-compete clauses are common in franchising to protect the brand and business model. The specific terms, including the duration and geographic scope, can vary significantly between franchise systems. A one-year restriction within the licensed territory and a small buffer zone is fairly standard, but prospective Budget franchisees should carefully consider the implications of this restriction, especially if they plan to remain in the same geographic area after leaving the Budget system. It is important to fully understand these limitations before entering into a franchise agreement.