Under what condition might a Budget licensee be charged a termination fee?
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. The "Termination Fee" shall equal: (i)
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, a licensee may be charged a termination fee if they terminate the agreement with Budget, with or without cause, by providing 180 days written notice. However, this fee is only applicable under specific conditions during that 180-day period.
Specifically, Budget will charge a termination fee if, during any calendar month within that 180-day period, the licensee either ceases to operate the rental business or if their gross revenue is less than the average monthly gross revenue of the rental business during the preceding year (or the term of the agreement, if less than a year). The termination fee is calculated as six times the average license fees payable for the preceding year, multiplied by a fraction. The numerator of this fraction is the number of days between the event (ceasing operations or revenue shortfall) and the end of the 180-day period, and the denominator is 180.
It's important to note that Budget and the licensee acknowledge that the enforceability of this termination fee might be subject to Minnesota Franchise Law, but they agree to enforce the terms to the maximum extent allowed by law. This means that while the agreement stipulates a termination fee under certain conditions, its actual application could be influenced by legal considerations.