How is the Budget Termination Fee calculated?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
ng litigation between Licensee and Budget or the Related Entities and the then-existing claims of Licensee against Budget or the Related Entities in the ordinary course of business under this Agreement or any other agreement between such parties, which litigation and claims will be
identified in such release. If such conditions are not met within the prescribed time period referred to above prior to the expiration of the current term, such term will expire upon the Expiration Date previously established in accordance with this Paragraph 11.1. Budget agrees to provide Licensee with notice of the approaching expiration of any term and the documentation referenced above sufficiently in advance of such expiration date for Licensee to comply with the renewal provisions of this Paragraph 11.1.
- 11.2 Termination By Licensee. Budget agrees that Licensee may terminate this Agreement, with or without cause, effective one hundred and eighty (180) days after written notice of its election to so terminate is delivered to Budget. However, if, in any calendar month during that one hundred eighty (180) day period: (a) Licensee ceases to operate the Rental Business; or (b) Licensee's Gross Revenue is less than the average monthly Gross Revenue of the Rental Business during the preceding one (1) year period (or during the term of this Agreement if less than one year), then in lieu of the License Fees otherwise payable for the remainder of the one hundred eighty (180) day period, Licensee will pay Budget the Termination Fee.
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, a franchisee may terminate the agreement with 180 days written notice. However, according to Item 23, if the franchisee ceases to operate the rental business or if the franchisee's gross revenue is less than the average monthly gross revenue during the preceding year (or during the term of the agreement if less than one year) in any calendar month during that 180-day period, the franchisee will have to pay Budget a termination fee.
The termination fee is calculated by multiplying six times the average license fees payable by the franchisee for the immediately preceding year (or during the term of the agreement if less than one year) by a fraction. The fraction's numerator is the number of days between the event that triggered the fee and the end of the 180-day period, and the denominator is 180.
For a prospective Budget franchisee, this means that terminating the agreement early or experiencing a significant drop in revenue during the notice period can result in a substantial termination fee. This fee is in addition to any other amounts owed to Budget. Franchisees should carefully consider these potential costs before deciding to terminate their agreement. It is also important to note that Budget and the franchisee agree to enforce the terms of this paragraph to the maximum extent that the law allows, but the payment of the Termination Fee might not be enforceable under the Minnesota Franchises Law.