What happens if a Desi District franchisee does not meet the development schedule outlined in the MUDA?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
- 4. Default and Termination. Desi District Franchise Group may terminate this MUDA by giving notice to Franchisee, without opportunity to cure, if any of the following occur:
- (i) Franchisee fails to satisfy the development schedule; or
- (ii) Desi District Franchise Group has the right to terminate any franchise agreement between Desi District Franchise Group and Franchisee (or any affiliate thereof) due to Franchisee's default thereunder (whether or not Desi District Franchise Group actually terminates such franchise agreement).
- 5. Limitation of Liability. Franchisee's commitment to develop Desi District businesses is in the nature of an option only. If Desi District Franchise Group terminates this MUDA for Franchisee's default, Franchisee shall not be liable to Desi District Franchise Group for lost future revenues or profits from the unopened Desi District businesses. Franchisee may terminate this MUDA at any time.
- 6. Conditions. Franchisee's right to develop each Desi District franchise after the Store #1 is subject to the following:
- (i) Franchisee must possess sufficient financial and organizational capacity to develop, open, operate, and manage each additional Desi District business, in the reasonable judgment of Desi District Franchise Group, and
- (ii) Franchisee must be in full compliance with all brand requirements at its open Desi District businesses, and not in default under any Franchise Agreement or any other agreement with Desi District Franchise Group.
Source: Item 12 — TERRITORY (FDD pages 38–40)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, failure to meet the development schedule outlined in the Multi-Unit Development Agreement (MUDA) can lead to specific consequences. Desi District Franchise Group has the right to terminate the MUDA if the franchisee fails to adhere to the agreed-upon development schedule. This termination can occur without providing the franchisee an opportunity to rectify the situation.
Despite the potential for termination, the document clarifies that the franchisee's commitment to developing multiple Desi District businesses is considered an option rather than a strict obligation. If Desi District terminates the MUDA due to the franchisee's failure to meet the development schedule, the franchisee will not be held liable for any lost future revenues or profits that Desi District might have expected from the unopened locations. This provision offers some protection to the franchisee, limiting their financial exposure in the event of a default on the development schedule.
The franchisee also has the option to terminate the MUDA at any time, providing additional flexibility. However, the right to develop each Desi District franchise after the initial store is contingent upon the franchisee maintaining sufficient financial and organizational capacity to manage additional locations, as determined by Desi District. Furthermore, the franchisee must remain in full compliance with all brand requirements at their existing Desi District businesses and must not be in default under any other agreements with Desi District Franchise Group.