Under what condition will the payment of initial fees for a Budget franchise be deferred?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
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- THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED TOGETHER WITH THE DISCLOSURE DOCUMENT.
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- The following is added as the first paragraph of Item 5:
The Department has determined that we, the franchisor, have not demonstrated we are adequately capitalized and/or that we must rely on franchise fees to fund our operations. The Commissioner has imposed a fee deferral condition, which requires that we defer the collection of all initial fees from California franchises until we have completed all of our pre-opening obligations and you are open for business. For California franchisees who sign a development agreement, the payment of the development and initial fees attributed to a specific unit in your development schedule is deferred until that unit is open.
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- Payment of Initial Fees will be deferred until Franchisor has met its initial obligations to franchisee, and franchisee has commenced doing business. This financial assurance requirement was imposed by the Office of the Illinois Attorney General due to Franchisor's financial condition.
WASHINGTON
Notwithstanding anything to the contrary set forth in Item 5, all initial fees shall be deferred until Franchisor has fulfilled its initial pre-opening obligations and until Franchisee's Franchised Business is open to the public.
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- Initial License Purchase Fee. Notwithstanding anything contrary in Section 7.1, the payment of all initial fees is deferred until Budget has satisfied its pre-opening obligations to Franchisees under the License Agreement and Franchisee's Licensed Business opens to the public.
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the payment of initial franchise fees can be deferred under specific conditions, varying by jurisdiction. In California, the collection of all initial fees is deferred until Budget has completed all pre-opening obligations and the franchisee is open for business. This condition is imposed because Budget has not demonstrated adequate capitalization and/or relies on franchise fees to fund operations, as determined by the Department. For California franchisees who sign a development agreement, the payment of development and initial fees attributed to a specific unit in the development schedule is deferred until that specific unit is open.
In Illinois, the payment of initial fees will be deferred until Budget has met its initial obligations to the franchisee, and the franchisee has commenced doing business. This financial assurance requirement was imposed by the Office of the Illinois Attorney General due to Budget's financial condition.
For franchisees in Washington, all initial fees are deferred until Budget has fulfilled its initial pre-opening obligations and until the franchisee's franchised business is open to the public. Similarly, in Minnesota, the payment of all initial fees is deferred until Budget has satisfied its pre-opening obligations to franchisees and the franchisee's licensed business opens to the public. These deferral conditions provide some financial relief to new franchisees by delaying the initial fee payment until certain milestones are achieved.