Under what conditions is the payment of all initial fees deferred for a Budget franchise?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
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- Notwithstanding anything to the contrary set forth in the Franchise Agreement, and in particular Sections 7.1 and 7.2, payment of all initial fees is deferred until Franchisor has satisfied its pre-opening obligations and Franchisee's Franchised Business opens to the public.
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.
- 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.
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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.
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 is deferred under specific conditions that vary by state. 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 deferral also applies to development and initial fees for specific units within a development schedule, with payment deferred until each unit opens. The Department determined that Budget had not demonstrated adequate capitalization, necessitating the fee deferral.
For franchisees in Washington, all initial fees are deferred until Budget has fulfilled its initial pre-opening obligations and the franchisee's 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.
In Illinois, 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. Furthermore, according to the Franchise Agreement, payment of all initial fees is deferred until Budget has satisfied its pre-opening obligations and the franchisee's franchised business opens to the public.
These deferral conditions provide a financial benefit to new Budget franchisees by allowing them to delay the initial fee payment until certain milestones are achieved. This can reduce the upfront financial burden and align the payment of fees with the commencement of business operations. However, it is important for prospective franchisees to understand the specific conditions and obligations that must be met to trigger the fee payment.