If a Budget franchisee is proposing to transfer a partial interest and the transferee is not a current owner or family member, what rights does Budget Rent A Car System, Inc. have?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
"Transfer" is defined as any transfer, sale, assignment, management agreement or other agreement of any kind, at any time during the term of the Transferring Licensee's License Agreement, and in accord with the provisions thereof, which directly or indirectly results in a change in the beneficial ownership or control of the Licensee, the Rental Business, the Budget franchise, or the identity of the parties dealing with Budget on either an ownership or operational level.
Sale, assignment or transfer of Licensee, the Rental Business, or the beneficial ownership of Licensee requiring the consent of Budget will include: (i) a sale, assignment or transfer, or cumulative sales, assignments or transfers, lifetime and testamentary, at any time during the term of this Agreement, of twenty-five percent (25%) or more of the equity ownership, or a lesser percentage if such transfer would change the voting control of Licensee or the Rental Business, whether in the form of common or preferred stock or any security convertible thereto or partnership or proprietorship interest; provided that, notwithstanding anything in this Agreement to the contrary, dispositions by a beneficial owner by will or intestacy or by gifts, sales or otherwise to the spouse or children of such beneficial owner or to other then-current beneficial owners of Licensee or their respective spouses or children (a "Permitted Transferee") will not be deemed
a sale, assignment or transfer giving rise to Budget's need to consent thereto so long as Licensee gives prior written notice of any such disposition to Budget.
If Licensee or its beneficial owners propose to sell, assign or transfer this Agreement, the beneficial ownership of Licensee or the Rental Business (or any material assets relating to the Rental Business) as hereinbefore set forth in Paragraph 12.2(b) (other than to a Permitted Transferee), a copy of the agreement to sell, assign or transfer will be in writing and executed by all parties and submitted to Budget along with all information in Licensee's or the transferee's possession concerning the proposed buyer.
Licensee acknowledges and understands that Budget may not consent to Licensee's private offering if Budget determines, in its sole discretion, that such an offering is not in the best interest of Budget or its franchise system.
If Budget allows a private offering, Licensee will need to pay a higher transfer fee, as reasonably determined by Budget, and meet the other Transfer Requirements contained in Exhibit F.
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, Budget Rent A Car System, Inc. has specific requirements and rights regarding the transfer of ownership or control of a Budget franchise. A transfer is defined as any agreement that results in a change in the beneficial ownership or control of the Licensee, the Rental Business, or the Budget franchise.
Budget's approval is required for any transfer of twenty-five percent (25%) or more of the equity ownership, or a lesser percentage if such transfer would change the voting control. The franchisee must provide prior written notice to Budget of any proposed sales, assignments, or transfers constituting a change in equity ownership or control. The franchisee must also maintain stop-transfer instructions against the transfer of any equity securities and include a specific legend on all certificates evidencing ownership, indicating that transfer is restricted by the Budget Rent A Car System License Agreement.
Budget also has a right of first refusal if a franchisee proposes to sell, assign, or transfer the agreement, beneficial ownership, or the Rental Business to someone other than a Permitted Transferee (spouse, children, or current beneficial owners). In such cases, the franchisee must submit a copy of the executed agreement to Budget along with all relevant information about the proposed buyer. Budget will assess the transferee's financial strength, credit history, managerial ability, experience, and commitment to operating the Rental Business according to Budget's standards. Budget also considers the number and type of prospective shareholders or partners of the transferee and their potential impact on the Rental Business. Budget may not consent to a Licensee's private offering if Budget determines, in its sole discretion, that such an offering is not in the best interest of Budget or its franchise system. If Budget allows a private offering, Licensee will need to pay a higher transfer fee, as reasonably determined by Budget, and meet the other Transfer Requirements contained in Exhibit F.