Is a guaranty required from the Desi District franchisee when transferring the agreement for convenience of ownership?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, if a franchisee who is an individual wants to transfer the franchise agreement to a corporation or limited liability company for convenience of ownership, they must provide a guaranty. This transfer can occur after giving Desi District at least 15 days' notice, provided that several conditions are met before the transfer takes place.
Specifically, the transferee must provide the information required by Section 2.3 of the agreement. The franchisee must also provide copies of the entity's charter documents, by-laws (or operating agreement), and similar documents if Desi District requests them. Additionally, the franchisee must own all voting securities of the corporation or limited liability company to which the franchise agreement is being transferred.
Finally, the franchisee must provide a guaranty in accordance with Section 2.5 of the franchise agreement. This ensures that even after the transfer, the original franchisee remains responsible for the obligations under the agreement, providing Desi District with continued assurance of compliance and performance.