Under what circumstances is a Budget licensee required to defend Budget and other Budget Indemnified Parties against claims, demands, and causes of action?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
Licensee will indemnify and hold harmless Budget and the Related Entities and their respective officers, directors, employees, affiliates, agents, successors and assigns (collectively, "Budget Indemnified Parties") against any and all liabilities, claims, demands, causes of action, damages, costs, expenses and amounts of any type whatsoever, including environmental claims, whether expended in settlement, in attorneys' fees, or however expended or disbursed, which arise directly or indirectly from, as a result of, or in connection with Licensee's
operation of the Rental Business, or in Licensee's dealings with third parties concerning said Rental Business, this Agreement, the System, or the Marks. In addition, Licensee will, at Budget's request, defend, at Licensee's expense, Budget and the other Budget Indemnified Parties against such claims, demands and causes of action; provided, however, that Licensee will relinquish such defense to Budget immediately upon Budget's request, although Licensee will remain obligated to pay Budget's and the other Budget Indemnified Parties' defense costs (but Licensee shall not be liable for the expenses of more than one law firm representing such Budget Indemnified Parties unless there is a conflict of interest.) and any settlements entered into by Budget and the other Budget Indemnified Parties at their discretion. In no event may Licensee enter into any settlement of any such claim on behalf of an Budget Indemnified Party without Budget's prior written approval.
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, a licensee is required to defend Budget and other Budget Indemnified Parties against claims, demands, and causes of action that arise directly or indirectly from the licensee's operation of the Rental Business. This obligation extends to the licensee's dealings with third parties concerning the Rental Business, the Franchise Agreement, the System, or the Marks. The licensee must undertake this defense at their own expense, upon Budget's request. However, the licensee can relinquish the defense to Budget if Budget requests it.
Even if the licensee relinquishes the defense, they remain obligated to cover Budget's and the other Budget Indemnified Parties' defense costs. However, the licensee is not liable for the expenses of more than one law firm representing the Budget Indemnified Parties unless there is a conflict of interest. The licensee is also responsible for any settlements entered into by Budget and the other Budget Indemnified Parties at their discretion. The licensee cannot enter into any settlement on behalf of a Budget Indemnified Party without Budget's prior written approval.
This indemnification clause means that a Budget franchisee could face significant legal expenses if a claim arises from their business operations. Even if Budget takes over the legal defense, the franchisee is still responsible for covering the legal costs and any settlements. This arrangement protects Budget from liabilities related to the franchisee's actions but places a considerable financial risk on the franchisee. Prospective franchisees should carefully consider this obligation and potentially seek legal counsel to fully understand the scope of their indemnification responsibilities.