What happens if a provision of the Budget franchise agreement is deemed unenforceable?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
- 14.12 Severability of Provisions. All provisions of this Agreement and the Standards will be severable. The invalidity, unenforceability or illegality of any provision of this Agreement will not affect any other provision, unless and then only to the extent that such invalidity alters the meaning of such other provision. If any covenant herein which restricts competitive activity is deemed unenforceable by virtue of its scope in terms of area, business activity prohibited and/or length of time, but would be enforceable by reducing any part or all thereof, Licensee and Budget agree that same will be enforced to the fullest extent permissible under the laws and public policies applied in the jurisdiction in which enforcement is sought.
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the franchise agreement contains a severability clause. This means that if a specific part of the agreement is found to be invalid, unenforceable, or illegal, it will not automatically invalidate the entire agreement. Instead, the remaining provisions of the agreement will still be in effect, unless the invalidity of one provision fundamentally alters the meaning of the other provisions.
Specifically regarding covenants restricting competitive activity, such as non-compete clauses, Budget states that if any such covenant is deemed unenforceable due to its scope (area, prohibited business activity, or length of time), Budget and the franchisee agree that it will be enforced to the fullest extent permissible under the laws and public policies of the relevant jurisdiction. This suggests that a court may modify the scope of the covenant to make it enforceable, rather than striking it down completely.
This severability clause offers a degree of protection for both Budget and the franchisee. It prevents the entire agreement from being nullified due to a single problematic clause. However, franchisees should be aware that the enforceability of specific provisions, especially those related to competition, can vary significantly depending on state laws and judicial interpretation. It is advisable for prospective franchisees to seek legal counsel to understand the implications of these clauses in their specific jurisdiction.