How is the termination fee calculated for a Budget franchise, as detailed in Paragraphs 7.6 and 11.2?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
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 Paragraph 11.2, a termination fee may be imposed if the franchisee ceases to operate the rental business or if the gross revenue is less than the average monthly gross revenue during the preceding year during that 180-day period.
The termination fee is calculated as six times the average license fees payable by the franchisee for the preceding year, multiplied by a fraction. The numerator of the fraction is the number of days between the event (ceasing operation or revenue shortfall) and the end of the 180-day period, and the denominator is 180.
Budget acknowledges that the enforceability of the termination fee may be limited by Minnesota franchise law but states that they will enforce the terms to the maximum extent allowed by law. This means that while Budget intends to collect this fee, a franchisee's obligation to pay it might be subject to legal challenges or limitations depending on the specific circumstances and jurisdiction.