What happens if a Budget licensee makes an assignment for the benefit of creditors?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
- 11.4 Termination By Budget Without Prior Notice.
Budget will also, to the maximum extent permitted by law, effective upon written notice to Licensee, have the right at any time to terminate this Agreement immediately and without other cause, or prior action or notice by Budget to Licensee, if:
- (a) Licensee makes an assignment for the benefit of creditors;
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, if a licensee makes an assignment for the benefit of creditors, Budget has the right to terminate the License Agreement immediately by providing written notice. This action can be taken without any prior notice or action required from Budget. This provision is in place to protect Budget's interests in situations where a licensee's financial stability is severely compromised.
This immediate termination clause is a significant point for prospective Budget franchisees. It means that if a franchisee faces financial difficulties to the point of assigning assets to creditors, Budget can swiftly end the agreement. This is stricter than the standard default cure period, which typically allows a franchisee time to rectify breaches of the agreement. The franchisee loses the opportunity to resolve the financial issues and maintain their franchise.
Budget's right to terminate the agreement immediately upon assignment for the benefit of creditors underscores the importance of maintaining sound financial management. Franchisees should carefully consider their financial capabilities and risk tolerance before entering into an agreement with Budget. Understanding the conditions that can lead to immediate termination is crucial for any potential franchisee to avoid unexpected loss of their franchise.