What is the 'Holdover Notice' in the context of a Desi District franchise?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
- 18.10 Holdover. If Franchisee continues operating the Business after the expiration of the term without a renewal agreement or successor franchise agreement executed by the parties in accordance with Section 3.2, then at any time (regardless of any course of dealing by the parties), Desi District Franchise Group may by giving written notice to Franchisee (the "Holdover Notice") either (i) require Franchisee to cease operating the Business and comply with all post-closing obligations effective immediately upon giving notice or effective on such other date as Desi
District Franchise Group specifies, or (ii) bind Franchisee to a renewal term of 5 years, and deem Franchisee and its Owners to have made the general release of liability described in Section 3.2(vi).
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Desi District Franchise Disclosure Document, the 'Holdover Notice' comes into play if a franchisee continues to operate the business after the franchise term expires, without a renewal or successor agreement in place. In this situation, Desi District Franchise Group can issue a written 'Holdover Notice' to the franchisee.
The 'Holdover Notice' gives Desi District two options. First, Desi District can demand that the franchisee immediately cease operating the business and comply with all post-termination obligations. Alternatively, Desi District can bind the franchisee to a renewal term of 5 years.
If Desi District chooses to bind the franchisee to a renewal term, the franchisee and its owners are considered to have made a general release of liability, as described in another section of the franchise agreement. This means the franchisee gives up certain rights to sue Desi District. This clause highlights the importance of carefully considering all options and potential liabilities when a franchise term is nearing its end.