What are the potential consequences for a Budget franchisee who fails to meet the standards outlined in Item 8, considering the territory designation process outlined in Item 12?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
ustomers and potential customers of our affiliates' business locations, without compensation to you. Budget is under no obligation to take any action if conflicts arise concerning Budget Franchise owners and our affiliates' business operators.
If you fail to: (i) open and continue operating the required minimum number of locations for your Budget Franchise, including requirements to develop additional rental offices at Budget's request; (ii) achieve and/or maintain average market penetration quotas Budget periodically establishes in the Budget License Agreement for automobile penetration; or (iii) participate in and comply with mandatory programs; then Budget may, in lieu of terminating your Budget License Agreement and in its sole discretion on 30 days' notice to you: (a) terminate the Budget License Agreement with respect to the portion of the licensed territory that Budget determines you have failed to develop; or (b) convert your exclusive rights in the geographic market that Budget determines is underdeveloped, and/or your rights with respect to those products and services that Budget determines are underdeveloped, to become non-exclusive in nature.
You may serve any customer without regard to his or her domicile. You may not operate your Budget Franchise or any part of it from a location outside the licensed territory. You may not pick up customers who reside outside your Budget Franchise's territory unless authorized by Budget in writing. Otherwise, there are no restrictions on your accepting customers who reside outside your licensed territory or on other Network members' accepting customers who reside inside your licensed territory. You must obtain Budget's prior written consent for your initial location, any change in your location, or construction of additional facilities (see Item 11).
You have no options, rights of first refusal or similar rights to acquire additional franchises within your licensed territory or contiguous territories. As described above in this Item, your exclusive right to the licensed territory depends on your meeting market penetration quotas for automobile rental and otherwise complying with your Budget License Agreement. In addition, if you do not meet minimum fleet and royalty requirements set forth in the Budget License Agreement, you may risk termination of your Budget Franchise. Budget may negotiate development terms for the Budget License Agreements it offers to Budget Licensees.
You may not relocate your Budget Franchise without Budget's prior written approval. You may apply for the right to open additional Budget Franchises under separate franchise agreements, but we have
no obligation to allow you to open additional Budget Franchises. Budget does not compensate you for soliciting or accepting orders from persons residing in your licensed territory.
You will not be allowed to relocate your Budget Franchise outside of your licensed territory. We and our affiliates and other franchisees may solicit or accept orders from customers located anywhere, without compensation to you.
ITEM 13 TRADEMARKS
Budget grants you a license to operate a Budget Franchise under Budget's Proprietary Marks.
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, a franchisee's failure to meet certain operational and performance standards can lead to significant consequences regarding their territory. Item 12 outlines the conditions under which Budget may take action if a franchisee does not meet expectations. These standards include opening and maintaining the required minimum number of locations, achieving market penetration quotas for automobile rentals, and participating in mandatory programs. The size of the licensed territory depends on factors like population and the presence of an airport. A territory will not usually include a population of less than 25,000 people.
Specifically, if a Budget franchisee fails to meet these requirements, Budget has the option to take remedial actions. Budget may choose to terminate the Budget License Agreement with respect to the portion of the licensed territory that Budget determines the franchisee has failed to develop. Alternatively, Budget can convert the franchisee's exclusive rights in the underdeveloped geographic market, or for specific underdeveloped products and services, to non-exclusive rights. Budget will provide 30 days' notice before taking either of these actions.
These provisions in the Budget License Agreement highlight the importance of meeting the franchisor's expectations for market penetration and development. For a prospective franchisee, this means carefully evaluating the market potential of the assigned territory and ensuring they have the resources and capabilities to meet Budget's minimum requirements. Failure to do so could result in a reduced territory or the loss of exclusive rights, impacting the franchisee's potential revenue and market position.
Budget also reserves rights not expressly granted to the franchisee, including the right to operate or grant others the right to operate Budget franchises outside the franchisee's licensed territory and, under certain circumstances (for National Accounts or if the franchisee fails to comply with the Budget License Agreement), inside the licensed territory. Budget may also hire salespersons and enter into sales and marketing agreements within the licensed territory. This means that even if a franchisee is meeting their obligations, Budget retains considerable control over market access and competition within the territory.