What happens if a levy or execution is made against a Desi District franchisee's business?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
- (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;
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, if a levy or execution is made against a franchisee's business, it can lead to a default under the franchise agreement. Specifically, if a levy or execution occurs, or if an attachment or lien remains on the business for 30 days, unless the franchisee is actively contesting it in good faith, it constitutes grounds for default.
This default provision has significant implications for a Desi District franchisee. A levy or execution typically arises when a creditor obtains a judgment against the franchisee and seeks to seize assets to satisfy the debt. The presence of such actions indicates financial instability, which Desi District views as a risk to the brand and the network of franchisees. The 30-day period to resolve an attachment or lien provides a limited window for the franchisee to address the issue, either by paying the debt or contesting it legally.
If the franchisee fails to resolve the levy, execution, attachment, or lien within the specified timeframe, Desi District has the right to terminate the franchise agreement. Termination would result in the franchisee losing the right to operate under the Desi District brand, and could also trigger additional financial obligations, such as liquidated damages as outlined in the FDD. This clause is a protective measure for Desi District, allowing them to disassociate from franchisees facing severe financial difficulties that could harm the brand's reputation or operational standards.