What actions can Desi District take if a franchisee continues operating after the term expires?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
- 18.10 Holdover. If Franchisee continues operating the Business after the expiration of the term without a renewal agreement or successor franchise agreement executed by the parties in accordance with Section 3.2, then at any time (regardless of any course of dealing by the parties), Desi District Franchise Group may by giving written notice to Franchisee (the "Holdover Notice") either (i) require Franchisee to cease operating the Business and comply with all post-closing obligations effective immediately upon giving notice or effective on such other date as Desi
District Franchise Group specifies, or (ii) bind Franchisee to a renewal term of 5 years, and deem Franchisee and its Owners to have made the general release of liability described in Section 3.2(vi).
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, if a franchisee continues to operate the business after the franchise term expires without a renewal or successor agreement, Desi District has specific options. Desi District can provide written notice to the franchisee, called a "Holdover Notice."
Under this Holdover Notice, Desi District can either demand that the franchisee immediately cease operating the business and comply with all post-closing obligations, effective immediately or on a date specified by Desi District. Alternatively, Desi District can bind the franchisee to a renewal term of 5 years.
If Desi District chooses to bind the franchisee to a renewal term, the franchisee and its owners are deemed to have made a general release of liability as described in Section 3.2(vi) of the franchise agreement. This means the franchisee gives up certain rights to sue Desi District, which is a significant consideration for any franchisee continuing operations without a formal agreement.