Under the Budget Guarantee, what does it mean for the Guarantors to undertake a separate and additional obligation to indemnify Budget?

According to Budget's 2025 Franchise Disclosure Document, the Guarantors undertake a separate and additional obligation to indemnify Budget. This means the Guarantors are providing a guarantee against any loss Budget incurs if the Licensee fails to perform their obligations as outlined in Paragraph 1 of the agreement. This obligation is separate from, and in addition to, the primary guarantee of the Licensee's obligations.

In practical terms, if the Budget franchisee (Licensee) fails to meet their financial or contractual responsibilities, the Guarantors are not only responsible for covering the original debt or obligation, but they must also protect Budget against any additional losses, costs, or expenses that Budget incurs as a result of the Licensee's failure. This could include legal fees, collection costs, or other damages resulting from the breach of contract.

This indemnification clause provides Budget with an extra layer of financial security, ensuring they can recover any losses stemming from a franchisee's default. For potential Guarantors, this represents a significant financial risk, as they could be liable for amounts beyond the original obligations of the Licensee. They should carefully assess the financial stability and business acumen of the Licensee before agreeing to act as a Guarantor.

It is important for potential Guarantors to seek legal counsel to fully understand the scope of their obligations and potential liabilities under the Guarantee and indemnification agreement. They should also conduct thorough due diligence on the Licensee's business plan and financial projections to evaluate the likelihood of the Licensee fulfilling their obligations to Budget.