Does Desi District Franchise Group rely on the franchisee's financial capacity when entering into the agreement?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
ICLE 15. TRANSFERS**
- 15.1 By Desi District Franchise Group. Desi District Franchise Group may transfer or assign this Agreement, or any of its rights or obligations under this Agreement, to any person or entity, and Desi District Franchise Group may undergo a change in ownership and/or control, without the consent of Franchisee.
- 15.2 By Franchisee. Franchisee acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that Desi District Franchise Group entered into this Agreement in reliance on Franchisee's business skill, financial capacity, personal character, experience, and business ability. Accordingly, Franchisee shall not conduct or undergo a Transfer without providing Desi District Franchise Group at least 60 days prior notice of the proposed Transfer, and without obtaining Desi District Franchise Group's consent. In granting any such consent, Desi District Franchise Group may impose conditions, including, without limitation, the following:
- (i) Desi District Franchise Group receives a transfer fee equal to $10,000 plus any broker fees and other out-of-pocket costs incurred by Desi District Franchise Group;
- (ii) the proposed assignee and its owners have completed Desi District Franchise Group's franchise application processes, meet Desi District Franchise Group's then-applicable standards for new franchisees, and have been approved by Desi District Franchise Group as franchisees;
- (iii) the proposed assignee is not a Competitor;
- (iv) the proposed assignee executes Desi District Franchise Group's then-current form of franchise agreement and any related documents, which form may contain materially different provisions than this Agreement (provided, however, that the pr
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 does consider a franchisee's financial capacity when entering into an agreement. Specifically, the document states that Desi District entered into the agreement in reliance on the franchisee's business skill, financial capacity, personal character, experience, and business ability.
This means that Desi District evaluates a prospective franchisee's financial resources as part of the approval process. This is a fairly standard practice in franchising, as the franchisee's financial stability is an indicator of their ability to meet the financial obligations of the franchise, such as the initial franchise fee, ongoing royalty payments, and other operational expenses.
For a prospective Desi District franchisee, this highlights the importance of demonstrating sufficient financial resources during the application process. This may involve providing financial statements, tax returns, or other documentation to verify their financial capacity. It also suggests that Desi District may deny a franchise application if they deem the applicant's financial resources to be inadequate.