Under what conditions is a transfer of equity ownership in a Budget franchise NOT considered a sale, assignment, or transfer requiring Budget's consent?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
Sale, assignment or transfer of Licensee, the Rental Business, or the beneficial ownership of Licensee requiring the consent of Budget will include: (i) a sale, assignment or transfer, or cumulative sales, assignments or transfers, lifetime and testamentary, at any time during the term of this Agreement, of twenty-five percent (25%) or more of the equity ownership, or a lesser percentage if such transfer would change the voting control of Licensee or the Rental Business, whether in the form of common or preferred stock or any security convertible thereto or partnership or proprietorship interest; provided that, notwithstanding anything in this Agreement to the contrary, dispositions by a beneficial owner by will or intestacy or by gifts, sales or otherwise to the spouse or children of such beneficial owner or to other then-current beneficial owners of Licensee or their respective spouses or children (a "Permitted Transferee") will not be deemed
a sale, assignment or transfer giving rise to Budget's need to consent thereto so long as Licensee gives prior written notice of any such disposition to Budget.
Source: Item 23 — RECEIPTS (FDD pages 80–426)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, certain dispositions of equity ownership are exempt from requiring Budget's consent. Specifically, transfers by a beneficial owner through a will, intestacy, gifts, sales, or other means to their spouse or children, or to other current beneficial owners of the Licensee or their respective spouses or children, are considered "Permitted Transferees." These transfers do not require Budget's consent, provided that Budget receives prior written notice of the disposition. This provision allows for family succession and internal ownership adjustments without needing franchisor approval.
However, even in these cases, the Licensee must still provide Budget with prior written notice of any proposed sales, assignments, or transfers that result in a change in equity ownership or control. Additionally, the Licensee is required to maintain stop-transfer instructions on its records for any equity securities and ensure that all certificates of ownership display a legend indicating transfer restrictions due to the Budget Rent A Car System License Agreement. This ensures that Budget is informed of ownership changes and that potential transferees are aware of the franchise agreement's restrictions.
This policy balances the franchisee's need for flexibility in estate planning and ownership changes with Budget's interest in maintaining control over who operates its franchises. By requiring notice, Budget can still track ownership and ensure compliance with brand standards, even when formal consent is not required. Prospective franchisees should carefully consider these transfer provisions and discuss any specific ownership transfer plans with Budget to ensure compliance with the franchise agreement.