What actions are considered a failure to cooperate with an audit or inspection by Desi District Franchise Group?

According to Desi District's 2024 Franchise Disclosure Document, refusing to cooperate with or permit any audit or inspection by Desi District or its agents or contractors, or otherwise failing to comply with Section 10.5 or Section 11.2 of the franchise agreement, constitutes a failure to cooperate. This means that franchisees are obligated to allow Desi District and its representatives to conduct audits and inspections of their business operations.

Section 10.5 pertains to record audits, granting Desi District the right to examine and audit all books and records related to the business at any reasonable time. These audits can occur at the franchise location or require the franchisee to deliver copies of the necessary documents to a location designated by Desi District. Furthermore, franchisees may be responsible for reimbursing Desi District for all costs and expenses associated with the audit if the audit was prompted by the franchisee's failure to submit required reports or comply with the system, or if the audit reveals that the franchisee understated gross sales by 3% or more for any four-week period.

Section 11.2 outlines Desi District's inspection rights, allowing them to enter the premises during normal business hours to conduct inspections. Franchisees are required to cooperate with these inspections, which may include observing operations, conducting physical inventories, evaluating physical conditions, monitoring sales activity, speaking with employees and customers, and removing samples of products, supplies, and materials. Desi District may also videotape or take photographs during the inspection. Failure to meet or exceed any minimum score requirement set by Desi District for inspections will be considered a default under the Franchise Agreement.

Therefore, a Desi District franchisee must be forthcoming and accommodating during any audit or inspection conducted by the franchisor. Failure to do so can result in a breach of the franchise agreement and potential penalties.