How do the insurance obligations for a Budget franchisee in Item 9 relate to the restrictions on sources of services in Item 8?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
| Type of Insurance | Minimum Amount |
|---|---|
| Fleet Insurance | $100,000 / $300,000 bodily injury and$50,000 per occurrence for property damage, or such other amounts as are required by local law. |
| Lessor’s / Owner’s Excess Liability Insurance | $1,000,000 combined single limit per occurrence |
| General Liability Insurance | $1,000,000 combined single limits |
| OBLIGATION | SECTION IN AGREEMENT |
| n. Insurance | 9.4 of the Budget License Agreement II, XVII, and XVIII of the Intercity Rules and Regulations |
Currently, except as described above, there are no other goods, services, supplies, fixtures, equipment, inventory, computer hardware or software, or real estate relating to the establishment or operation of your Budget Franchise that you must purchase or lease from Budget, a Budget affiliate, or suppliers that Budget designates or approves. Except as described above in this Item, neither Budget nor its affiliates are approved suppliers for any items or services for your Budget Franchise. However, during the license term Budget may require you to purchase additional items only from suppliers it designates or approves (which might include or be limited to Budget or its affiliates). Upon Budget's request, or if you want to use any item that Budget has not yet evaluated or buy from a supplier that Budget has not yet approved (for those items that require supplier approval), you first must submit sufficient information, specifications, and samples for Budget to determine whether the item complies with the Standards or the supplier meets Budget's criteria.
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, Item 9 outlines the franchisee's obligations, including insurance requirements, while Item 8 details restrictions on approved suppliers. Specifically, Item 9n references section 9.4 of the Budget License Agreement and Intercity Rules and Regulations II, XVII, and XVIII regarding insurance obligations. Item 8 discusses that Budget may require franchisees to purchase certain items from designated or approved suppliers, which could potentially extend to insurance providers.
This means a Budget franchisee may be obligated to obtain insurance coverage that meets specific minimum amounts, such as $100,000 / $300,000 for bodily injury and $50,000 for property damage under Fleet Insurance, $1,000,000 for Lessor’s / Owner’s Excess Liability Insurance, and $1,000,000 for General Liability Insurance. Furthermore, Budget retains the right to mandate that franchisees acquire this insurance from specific, pre-approved sources.
The interplay between these two items highlights Budget's control over various aspects of the franchise operation. While franchisees are responsible for securing the required insurance coverage, Budget can influence where they obtain this coverage. This could impact the franchisee's costs and potentially limit their ability to shop around for the best rates. Prospective franchisees should clarify whether Budget mandates specific insurance providers and understand the criteria for approving alternative suppliers to ensure they can meet their insurance obligations effectively.