What are the consequences for a Desi District franchisee who violates the restrictions on suppliers (Item 8), considering their general obligations outlined in Item 9?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
d parties, shall be honest and fair. Franchisee shall comply with any code of ethics or statement of values from Desi District Franchise Group. Franchisee shall not take any action which may injure the goodwill associated with the Marks.
ARTICLE 8. SUPPLIERS AND VENDORS
- 8.1 Generally. Franchisee shall acquire all Inputs required by Desi District Franchise Group from time to time in accordance with System Standards. Desi District Franchise Group may require Franchisee to purchase or lease any Inputs from Desi District Franchise Group, Desi District Franchise Group's designee, Required Vendors, Approved Vendors, and/or under Desi District Franchise Group's specifications. Desi District Franchise Group may change any such requirement or change the status of any vendor. To make such requirement or change effective, Desi District Franchise Group shall issue the appropriate System Standards.
- 8.2 Alternate Vendor Approval. If Desi District Franchise Group requires Franchisee to purchase a particular Input only from an Approved Vendor or Required Vendor, and Franchisee desires to purchase the Input from another vendor, then Franchisee must submit a written request for approval and any information, specifications and/or samples requested by Desi District Franchise Group. Desi District Franchise Group may condition its approval on such criteria as Desi District Franchise Group deems appropriate, which may include evaluations of the vendor's capacity, quality, financial stability, reputation, and reliability; inspections; product testing, and performance reviews. Desi District Franchise Group will provide Franchisee with written notification of the approval or disapproval of any proposed new vendor within 30 days after receipt of Franchisee's request.
- 8.3 Alternate Input Approval. If Desi District Franchise Group requires Franchisee to purchase a particular Input, and Franchisee desires to purchase an alternate to the Input, then Franchisee must submit a written request for approval and any information, specifications and/or samples requested by Desi District Franchise Group. Desi District Franchise Group will provide Franchisee with written notification of the approval or disapproval of any proposed alternate Input within 30 days after receipt of Franchisee's request.
- 8.4 Purchasing. Desi District Franchise Group may negotiate prices and terms with vendors on behalf of the System. Desi District Franchise Group may receive rebates, payments or other consideration from vendors in connection with purchases by franchisees.
What This Means (2024 FDD)
Based on the 2024 Desi District Franchise Disclosure Document, franchisees are obligated to acquire all required inputs in accordance with the System Standards, potentially from Desi District, their designee, or approved vendors. If a franchisee wishes to use an alternate vendor or input, they must seek written approval from Desi District, which may impose conditions based on factors like the vendor's capacity, quality, and financial stability.
While the FDD excerpts detail the obligations regarding suppliers and vendors, they do not explicitly state the consequences for violating these restrictions. However, the document does outline general default and termination conditions. A franchisee's failure to comply with mandatory obligations in the Manual or System Standards, as stated in Article 7.1, could potentially lead to a notice of default. If a franchisee receives two or more notices of default within a 12-month period and commits another breach of the agreement, Desi District has grounds for termination, as per section 14.2 (xi).
Therefore, while not directly stated, a violation of supplier restrictions could be considered a breach of the Franchise Agreement, potentially leading to default notices and, if repeated, possible termination of the agreement. A prospective franchisee should seek clarification from Desi District regarding the specific consequences of violating supplier restrictions and how these violations would be handled under the default and termination clauses of the Franchise Agreement.