What actions related to the transfer of the franchise can lead to termination of the Desi District franchise agreement?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee is not otherwise in default or breach of this Agreement or of any other obligation owed to Desi District Franchise Group or its affiliates;
(vii) the proposed assignee and its owners and employees undergo such training as Desi District Franchise Group may require;
(viii) Franchisee, its Owners, and the transferee and its owners execute a general release of Desi District Franchise Group in a form satisfactory to Desi District Franchise Group; and
(ix) the Business fully complies with all of Desi District Franchise Group's most recent System Standards.
15.3 Transfer for Convenience of Ownership. If Franchisee is an individual, Franchisee may Transfer this Agreement to a corporation or limited liability company formed for the convenience of ownership after at least 15 days' notice to Desi District Franchise Group, if, prior to the Transfer: (1) the transferee provides the information required by Section 2.3; (2) Franchisee provides copies of the entity's charter documents, by-laws (or operating agreement) and similar documents, if requested by Desi District Franchise Group, (3) Franchisee owns all voting securities of the corporation or limited liability company, and (4) Franchisee provides a guaranty in accordance with Section 2.5.
15.4 Transfer upon Death or Incapacity. Upon the death or incapacity of Franchisee (or, if Franchisee is an entity, the Owner with the largest ownership interest in Franchisee), the executor, administrator, or personal representative of that person must Transfer the Business to a third party approved by Desi District Franchise Group (or to another person who was an Owner at the time of death or incapacity of the largest Owner) within nine months after death or incapacity.
Such transfer must comply with Section 15.2.
- 15.5 Desi District Franchise Group's Right of First Refusal. Before Franchisee (or any Owner) engages in a Transfer (except under Section 15.3, to a co-Owner, or to a spouse, sibling, or child of an Owner), Desi District Franchise Group will have a right of first refusal, as set forth in this Section.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, a franchisee's ability to transfer their franchise is contingent upon meeting certain conditions. Failure to meet these conditions can be construed as a breach of the franchise agreement, potentially leading to its termination.
Specifically, before a franchisee can engage in a transfer, Desi District has a right of first refusal, except under specific conditions such as a transfer for convenience of ownership, to a co-owner, or to a spouse, sibling, or child of an owner. If the franchisee is not otherwise in default or breach of the agreement or any other obligation owed to Desi District or its affiliates, this could impede the transfer process.
Moreover, the franchisor can impose conditions such as receiving a $10,000 transfer fee, ensuring the proposed assignee meets the standards for new franchisees, and confirming the assignee is not a competitor. The assignee must also execute the current form of the franchise agreement and provide a guaranty. If these conditions are not met, Desi District may withhold consent for the transfer, and proceeding with the transfer without consent would be a breach of the agreement, potentially leading to termination.