Under what conditions can Budget terminate the agreement without prior notice to the licensee?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
ice of default or similar notice issued by Budget in any judicial proceeding in which the validity of the termination of this Agreement is at issue. Any notice of default by Budget will specify the time period (if any) within which such failure or failures must be cured by Licensee, which Licensee agrees will be fifteen (15) days from the date of delivery of notice to Licensee in the case of all failures by Licensee to pay any sums owed to Budget and thirty (30) days from delivery in the case of failure of Licensee to adhere to any other provision of this Agreement or the Standards (except as otherwise set forth in Paragraph 11.4). If Licensee fails to cure any such failure within the prescribed time period, this Agreement will terminate without further notice or action by Budget and upon expiration of the prescribed time period.
11.4 Termination By Budget Without Prior Notice. Budget will also, to the maximum extent permitted by law, effective upon written notice to Licensee, have the right at any time to terminate this Agreement immediately and without other cause, or prior action or notice by Budget to Licensee, if:
- (a) Licensee makes an assignment for the benefit of creditors;
(b) Licensee makes a written admission of its inability to pay its debts or obligations as they become due;
(c) Licensee files, or has filed against it (which filing is not dismissed within sixty (60) days after its entry), any petition in bankruptcy or other petition or pleading seeking any reorganization, liquidation, dissolution or other similar relief;
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, Budget can terminate the franchise agreement immediately without prior notice under specific conditions. These conditions primarily involve financial instability or legal actions initiated by or against the franchisee.
Specifically, Budget can terminate the agreement if the franchisee makes an assignment for the benefit of creditors, admits in writing their inability to pay debts, files for bankruptcy (or has such a petition filed against them which is not dismissed within 60 days), or seeks or consents to the appointment of a trustee, receiver, or liquidator. These circumstances indicate severe financial distress or an inability to manage the business, posing a significant risk to the Budget brand and network.
It is important to note that Minnesota law provides additional protections for franchisees. For franchises governed by Minnesota law, Budget must provide a 90-day notice of termination (with 60 days to cure) and a 180-day notice for non-renewal, except in certain specified cases. This highlights the importance of understanding both the franchise agreement and the specific state laws that govern the franchise relationship.