How does the Initial License Purchase Fee for a Budget franchise (Item 5) relate to the franchisee's obligations outlined in Item 9?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
| OBLIGATION | SECTION IN AGREEMENT |
|---|---|
| f. Fees | Art. V and VII, and Summary Pages of the Budget License Agreement Art. III, Schedules B, C and D of the Rental System Agreement VI and Addendum A of the Intercity Rules and Regulations I.F(4) and I G of Exhibit G to the Budget License Agreement (Transfer Requirements) |
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the Initial License Purchase Fee, detailed in Item 5, is related to the franchisee's obligations as outlined in Item 9, specifically concerning fees. Item 9 outlines various obligations of the franchisee, referencing specific articles and sections within the Budget License Agreement and other related agreements. Among these obligations is the payment of fees, which is directly linked to Articles V and VII of the Budget License Agreement, as well as related schedules and addenda in other agreements. These sections likely detail the specifics of when and how the Initial License Purchase Fee, along with other ongoing fees, must be paid.
Item 5 specifies that the Initial License Purchase Fee is determined by the population of the territory covered by the franchise agreement, with a base fee of $45,000 for a territory with a population of 50,000 or less, and an additional $5,000 for each 5,000 population increment over 50,000. This fee is not uniform and can be adjusted by Budget based on factors such as the presence of an airport or other commercial rental location, conversion of an existing business, or the level of competition in the territory. The franchisee's obligation to pay this fee is triggered upon signing the Budget License Agreement.
However, Item 23 clarifies that in certain states like Illinois and North Dakota, the payment of all initial fees, including the Initial License Purchase Fee, is deferred until Budget has met its pre-opening obligations to the franchisee and the franchisee's business opens to the public. This deferral is a financial assurance requirement imposed by the Office of the Illinois Attorney General due to Budget's financial condition. This deferral impacts the franchisee's obligations by delaying the point at which they are required to remit the initial fees, providing a degree of financial flexibility during the initial setup phase.
In summary, while Item 5 defines how the Initial License Purchase Fee is calculated and when it is typically due, Item 9 and Item 23 contextualize this fee within the broader scope of the franchisee's obligations and provide for potential deferral of payment under specific circumstances. Prospective franchisees should carefully review all referenced articles and sections within the Budget License Agreement to fully understand their obligations regarding fees and any conditions that may affect the timing of payments.