What happens to a Desi District franchisee's rights if the Intercompany License Agreement is terminated?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
Desi District, LLC, our affiliate, owns the trademarks described in this Item. Under an Intercompany License Agreement between us and Desi District, LLC, we have been granted the exclusive right to sublicense the trademarks to franchisees throughout the United States. The agreement is of perpetual duration. It may be modified only by mutual consent of the parties. It may be canceled by our affiliate only if (1) we materially misuse the trademarks and fail to correct the misuse, or (2) we discontinue commercial use of the trademarks for a continuous period of more than one year. The Intercompany License Agreement specifies that if it is ever terminated, your franchise rights will remain unaffected.
Source: Item 13 — TRADEMARKS (FDD pages 40–42)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, the termination of the Intercompany License Agreement between Desi District, LLC (the affiliate owning the trademarks) and the franchisor will not affect a franchisee's rights. This agreement grants the franchisor the exclusive right to sublicense the trademarks to franchisees throughout the United States. The agreement is of perpetual duration and can only be modified by mutual consent. Desi District, LLC can cancel the agreement if the franchisor materially misuses the trademarks without correcting the misuse, or if the franchisor discontinues commercial use of the trademarks for over a year.
This provision offers a level of security for franchisees. Even if the licensing agreement between the franchisor and its affiliate is terminated, the franchisee's right to use the trademarks remains intact. This is particularly important because the trademarks are central to the franchise's brand identity and the franchisee's ability to operate the business.
In the franchise industry, it is not uncommon for trademark rights to be held by a separate entity and licensed to the franchisor. This arrangement adds a layer of complexity, but Desi District's explicit statement that franchise rights remain unaffected by termination of the Intercompany License Agreement provides reassurance to potential franchisees. This clause protects franchisees from losing their rights to use the brand's trademarks due to issues between the franchisor and its affiliate, ensuring business continuity.