If Budget withholds consent to a settlement offer received by a Budget licensee, and the actual settlement or judgment amount is greater than the rejected offer, what are the respective indemnification responsibilities of the licensee and Budget?

According to Budget's 2025 Franchise Disclosure Document, if Budget withholds consent to a settlement offer that a licensee desires to accept, and the ultimate settlement or judgment is higher than the rejected offer, the licensee and Budget share the indemnification responsibilities. The licensee is responsible for indemnifying the Budget Indemnified Parties up to the amount of the rejected settlement offer. Budget, on the other hand, is responsible for indemnifying the licensee for the amount exceeding the rejected settlement offer.

In practical terms, this means that a Budget franchisee could be financially responsible for a portion of a settlement or judgment even if Budget made the decision to reject the initial settlement offer. The franchisee's liability is capped at the amount of the rejected offer, while Budget assumes responsibility for the excess. This arrangement could create tension between Budget and its franchisees, as their financial interests may not always align in settlement negotiations.

For a prospective Budget franchisee, it's crucial to understand this indemnification clause and its potential financial implications. Franchisees should carefully consider the risks associated with Budget's right to withhold consent to settlement offers, as this decision could expose them to significant financial liability. It would be prudent to discuss this scenario with existing franchisees and legal counsel to fully grasp the potential risks and rewards.