How is the Termination Fee calculated for a Budget licensee who terminates the agreement?
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 licensee can terminate the agreement with 180 days written notice. However, a Termination Fee may apply during that 180-day period. This fee is triggered if the licensee ceases to operate the rental business or if their gross revenue falls below the average monthly gross revenue of the preceding year (or the term of the agreement, if less than one year).
The Termination Fee is calculated as follows: First, take six times the average License Fees payable by the licensee for the immediately preceding year (or the term of the agreement if less than one year). Then, multiply that result by a fraction. The numerator of the fraction is the number of days remaining in the 180-day period after the event that triggered the fee (either ceasing operations or revenue falling below the average). The denominator of the fraction is 180.
For example, if a Budget licensee's average monthly license fees were $1,000 over the past year, and they ceased operations 30 days into the 180-day notice period, the Termination Fee would be calculated as follows: (6 * $1,000) * (150/180) = $5,000. It is important to note that the FDD also states that the enforceability of the Termination Fee might be limited under Minnesota Franchise Law, but Budget and the licensee agree to enforce the terms to the maximum extent the law allows.