What happens if a Desi District franchisee is unable to pay its debts as they become due?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
ty to cure, if any of the following occur:
- (i) Franchisee misrepresented or omitted material facts when applying to be a franchisee, or breaches any representation in this Agreement;
- (ii) Franchisee knowingly submits any false report or knowingly provides any other false information to Desi District Franchise Group;
- (iii) a receiver or trustee for the Business or all or substantially all of Franchisee's property is appointed by any court, or Franchisee makes a general assignment for the benefit of Franchisee's creditors, or Franchisee is unable to pay its debts as they become due, or a levy or execution is made against the Business, or an attachment or lien remains on the Business for 30 days unless the attachment or lien is being duly contested in good faith by Franchisee, or a petition in bankruptcy is filed by Franchisee, or such a petition is filed against or consented to by Franchisee and the petition is not dismissed within 45 days, or Franchisee is adjudicated as bankrupt;
- (iv) Franchisee fails to open for business by the date specified on the Summary Page;
- (v) Franchisee loses possession of the Location;
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, if a franchisee is unable to pay their debts as they become due, it constitutes grounds for termination of the franchise agreement by Desi District. Specifically, the agreement can be terminated without an opportunity for the franchisee to cure the default.
This inability to pay debts is treated as a serious breach of the franchise agreement, placing the franchisee in immediate risk of losing their franchise. This clause protects Desi District from potential financial instability or mismanagement on the part of the franchisee, which could negatively impact the brand's reputation and financial health.
Beyond immediate termination, if Desi District terminates the agreement due to the franchisee's default, the franchisee is obligated to pay liquidated damages. These damages are calculated based on the average Royalty Fees owed to Desi District over a specific period, multiplied by the number of weeks remaining in the franchise term, up to a maximum of 104 weeks. This payment is in addition to other potential damages and amounts owed under other sections of the agreement, including attorney's fees and injunctive relief.