Can a Desi District franchisee offset or deduct from payments owed to Desi District Franchise Group?

According to Desi District's 2024 Franchise Disclosure Document, a franchisee's obligation to pay fees or amounts owed to Desi District Franchise Group is independent of Desi District's performance. This means that franchisees are required to make all payments without any offset or deduction. In other words, a franchisee cannot withhold payments due to any perceived failure on the part of Desi District to fulfill its obligations.

This requirement protects Desi District's revenue stream, ensuring that they receive the royalties and fees necessary to support the franchise system. However, this places a significant financial responsibility on the franchisee, who must continue to make payments even if they believe Desi District is not meeting its contractual obligations.

While franchisees cannot offset payments, the FDD does state that if Desi District exercises its purchase option upon termination, it may deduct from the purchase price all amounts due from the franchisee, the franchisee's share of appraisal costs, and amounts paid to cure defaults under the franchisee's lease or amounts owed to third parties. Desi District may also pay a portion of the purchase price directly to lienholders to pay off any liens on the assets and may withhold 25% of the purchase price for 90 days to ensure all of the franchisee's taxes and other liabilities are paid. This is a specific instance where deductions are permitted, but it is tied to the termination and repurchase of the franchise, not ongoing operational payments.