If a Desi District franchisee violates the franchise agreement, is this considered a curable default?
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. |
| g. "Cause" defined curable defaults | FA: § 14.2 MUDA: none | Non-payment by you (10 days to cure); violate franchise agreement other than non-curable default (30 days to cure); operate in a manner dangerous to health or safety (48 hours to cure). |
| h. "Cause" definednon curable defaults | FA: § 14.2 MUDA: § 4 | FA: Misrepresentation when applying to be a franchisee; knowingly submitting false information; bankruptcy; lose possession of your location; violation of law; violation of confidentiality; violation of non-compete; violation of transfer restrictions; slander or libel of us; refusal to cooperate with our business inspection; cease operations for more than 5 consecutive days; three defaults in 12 months; cross-termination; |
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, certain violations of the franchise agreement are considered curable defaults, while others are not. Specifically, if a franchisee violates the franchise agreement in a way that is not defined as a non-curable default, they typically have 30 days to cure the violation. Additionally, if a franchisee operates in a manner dangerous to health or safety, they have 48 hours to cure the issue. Failure to make payments provides a 10-day cure period.
However, the FDD also lists several non-curable defaults that would lead to immediate termination. These include misrepresentation during the application process, knowingly submitting false information, bankruptcy, losing possession of the location, violating laws, breaching confidentiality or non-compete agreements, violating transfer restrictions, slandering or libeling Desi District, refusing to cooperate with business inspections, ceasing operations for more than 5 consecutive days, having three defaults within a 12-month period, cross-termination, being charged with or convicted of a felony, or any breach that cannot be cured by its nature.
For a prospective Desi District franchisee, it's crucial to understand the distinction between curable and non-curable defaults. The cure periods offer a chance to rectify certain issues, but non-curable defaults can lead to immediate termination of the franchise agreement. This highlights the importance of adhering to the franchise agreement and maintaining open communication with Desi District to address any potential issues promptly. Franchisees should also be aware that if they sign a Multi-Unit Development Agreement (MUDA), termination of the MUDA does not automatically terminate the franchise agreement, but termination of the franchise agreement does allow Desi District to terminate the MUDA.