If Budget elects to stop participating in a multiemployer plan, what might Budget be required to do?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
lassified investments of $2 million and $11 million, respectively, as Level 3.
We estimate that future benefit payments from plan assets will be $33 million, $34 million, $35 million, $36 million, $37 million and $197 million for 2025, 2026, 2027, 2028, 2029 and 2030 to 2034, respectively.
Multiemployer Plans
We contribute to a number of multiemployer plans under the terms of collective-bargaining agreements that cover a portion of our employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects: (i) assets contributed to the multiemployer plan by one employer may be used to provide benefits to employees of other participating employers; (ii) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; (iii) if we elect to stop participating in a multiemployer plan, we may be required to con
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, if Budget chooses to stop participating in a multiemployer plan, it may be required to contribute an amount to the plan. This amount would be based on the underfunded status of the plan at the time Budget exits. Multiemployer plans involve collective bargaining agreements that cover some of Budget's employees.
This is because multiemployer plans pool assets from various employers to provide benefits to all participating employees. If one employer, like Budget, leaves the plan, the remaining employers might have to cover the unfunded obligations. This condition protects the remaining participants in the multiemployer plan from potential shortfalls if an employer withdraws.
For a prospective Budget franchisee, this means that Budget's financial obligations related to multiemployer plans could change. In the years 2022, 2023, and 2024, Budget contributed $8 million, $10 million, and $10 million respectively, to multiemployer plans. If Budget decides to withdraw from a plan in the future, it could face a significant one-time payment to cover its share of any underfunding. Franchisees should consider this potential liability when assessing Budget's financial health and stability.
It's also important to note that Budget has no direct involvement in how the multiemployer plans' investments are managed. This lack of control, combined with the potential for withdrawal liabilities, adds an element of financial risk that franchisees should be aware of. Understanding these factors is crucial for making an informed investment decision.