If a Desi District franchise agreement is terminated, does Desi District have the right to terminate the Multi-Unit Development Agreement (MUDA)?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in franchise or other agreement | Summary |
|---|---|---|
| e. Termination by | Not Applicable | |
| franchisor without cause | ||
| f. Termination by franchisor with cause | FA: § 14.2 MUDA: § 4 | We may terminate your agreement for cause, subject to any applicable notice and cure opportunity. If you sign a Multi-Unit Development Agreement, termination of your MUDA does not give us the right to terminate your franchise agreement. However, if your franchise agreement is terminated, we have the right to terminate your MUDA. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 44–48)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, if a franchisee's individual franchise agreement is terminated, Desi District has the right to terminate the Multi-Unit Development Agreement (MUDA). However, the reverse is not true; if Desi District terminates the MUDA, it does not automatically have the right to terminate the franchise agreement. This is an important distinction for franchisees considering a multi-unit development strategy.
This provision in the franchise agreement means that franchisees must maintain compliance with their individual franchise agreements to protect their broader development rights under the MUDA. A failure to adhere to the terms of the franchise agreement for a single location could jeopardize the franchisee's entire development plan with Desi District.
For prospective multi-unit franchisees, this clause highlights the importance of carefully managing each franchise location and ensuring consistent compliance across all units. It also underscores the need to fully understand the grounds for termination outlined in both the Franchise Agreement and the MUDA, as a breach of either agreement could have significant repercussions.