Under what conditions related to insolvency or bankruptcy will ABCR automatically terminate the Budget agreement?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
ABCR may automatically terminate this Agreement in the following events:
(i) In the event of the insolvency or dissolution of Licensee, the making by Licensee of an assignment for the benefit of, or entering into any composition or arrangement with, creditors, or the appointment of a receiver or trustee for liquidation of the business of Licensee, or if bankruptcy, reorganization, insolvency or arrangement proceedings or proceedings under any other laws relating to the relief of debtors are commenced by or against Licensee, then this Agreement will automatically terminate together with all rights and interests of Licensee hereunder, without any notice to Licensee.
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, ABCR can automatically terminate the agreement with a Budget licensee under specific insolvency or bankruptcy-related conditions. These conditions include the licensee's insolvency or dissolution, making an assignment for the benefit of creditors, entering into any composition or arrangement with creditors, or the appointment of a receiver or trustee for the liquidation of the licensee's business.
Additionally, if bankruptcy, reorganization, insolvency, or arrangement proceedings are commenced by or against the licensee under any laws relating to the relief of debtors, ABCR can terminate the agreement. In any of these scenarios, the termination is automatic and occurs without any prior notice to the licensee. This means that the licensee's rights and interests under the agreement cease immediately upon the occurrence of any of these events.
This clause is a standard protective measure for franchisors. It allows Budget to sever ties with franchisees who are in severe financial distress, as such distress could negatively impact the Budget brand and network. Prospective franchisees should be aware of these conditions and ensure they have a solid financial plan to avoid such circumstances. It is also important to note that the termination is automatic, meaning there is no opportunity to remedy the situation once one of these events occurs.