Is franchisee consent required for a transfer of the Desi District franchise?
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 proposed assignee will not be required to pay an initial franchise fee);
- (v) all owners of the proposed assignee provide a guaranty in accordance with Section 2.5;
- (vi) Franchisee has paid all monetary obligations to Desi District Franchise Group and its affiliates, and to any lessor, vendor, supplier, or lender to the Business, and
- 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
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, franchisees must obtain consent from Desi District Franchise Group before transferring their franchise. The document specifies that the rights and duties outlined in the franchise agreement are personal to the franchisee, and Desi District entered into the agreement based on the franchisee's skills and abilities.
To transfer a franchise, a franchisee must provide Desi District at least 60 days' prior notice and obtain their consent. Desi District may impose several conditions when granting consent. These conditions include receiving a transfer fee of $10,000 plus any broker fees and out-of-pocket costs incurred by Desi District. The proposed assignee must also complete Desi District's franchise application process, meet the then-applicable standards for new franchisees, and be approved by Desi District.
Additionally, the proposed assignee must not be a competitor and must execute Desi District's current form of franchise agreement, which may contain materially different provisions. All owners of the proposed assignee must provide a guaranty, and the franchisee must have paid all monetary obligations to Desi District and its affiliates, as well as to any lessor, vendor, supplier, or lender to the business. The franchisee must not be in default or breach of the agreement. The proposed assignee and its owners and employees must also undergo any required training, and both the franchisee and the transferee must execute a general release of Desi District. Finally, the business must fully comply with Desi District's most recent System Standards.
There is an exception for transfers for convenience of ownership, such as to a corporation or limited liability company, which requires only 15 days' notice and fulfillment of certain conditions, such as the franchisee owning all voting securities of the new entity. Transfers upon death or incapacity also have specific requirements, including compliance with the standard transfer conditions outlined in Section 15.2.