Does Desi District Franchise Group have an obligation to cure a franchisee's default under the agreement?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
and Key Employees.** If requested by Desi District Franchise Group, Franchisee will cause its general manager and other key employees to sign Desi District Franchise Group's then-current form of confidentiality and non-compete agreement (unless prohibited by applicable law).
ARTICLE 14. DEFAULT AND TERMINATION
14.1 Termination by Franchisee. Franchisee may terminate this Agreement only if Desi District Franchise Group violates a material provision of this Agreement and fails to cure or to make substantial progress toward curing the violation within 30 days after receiving written notice from Franchisee detailing the alleged default. Termination by Franchisee is effective 10 days after Desi District Franchise Group receives written notice of termination.
14.2 Termination by Desi District Franchise Group.
(a) Subject to 10-Day Cure Period. Desi District Franchise Group may terminate this Agreement if Franchisee does not make any payment to Desi District Franchise Group when due, or if Franchisee does not have sufficient funds in its account when Desi District Franchise Group attempts an electronic funds withdrawal, and Franchisee fails to cure such non-payment within 10 days after Desi District Franchise Group gives notice to Franchisee of such breach.
- (b) Subject to 30-Day Cure Period. If Franchisee breaches this Agreement in any manner not described in subsection (a) or (c), and Franchisee fails to cure such breach to Desi District Franchise Group's satisfaction within 30 days after Desi District Franchise Group gives notice to Franchisee of such breach, then Desi District Franchise Group may terminate this Agreement.
- (c) Without Cure Period.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, Desi District Franchise Group is obligated to allow a franchisee to cure a breach of the franchise agreement in certain circumstances. Specifically, if a franchisee violates a material provision of the agreement, the franchisee can terminate the agreement only if Desi District fails to cure the violation or make substantial progress toward curing it within 30 days after receiving written notice from the franchisee. The termination is effective 10 days after Desi District receives the termination notice. This indicates that Desi District has an obligation to address the franchisee's concerns and attempt to rectify the situation.
However, the FDD also outlines situations where Desi District does not need to provide an opportunity to cure. If the franchisee fails to make payments when due or lacks sufficient funds for electronic withdrawals, Desi District must provide a 10-day notice to cure. For breaches not described in the non-payment clause or the 'without cure period' clause, Desi District must provide a 30-day notice to cure. Desi District can terminate the agreement without a cure period if the franchisee misrepresented facts during the application, knowingly submits false reports, or breaches any representation in the agreement.
These stipulations regarding termination and cure periods are important for prospective franchisees to understand. While Desi District provides franchisees with opportunities to correct certain breaches, other violations can lead to immediate termination. Franchisees should be aware of the specific conditions that trigger these different cure periods to avoid potential termination of their franchise agreement. Understanding these conditions is crucial for maintaining a successful and compliant Desi District franchise.