If a Desi District franchisee's franchise agreement is terminated, what happens to 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, the termination of a franchisee's franchise agreement can impact their Multi-Unit Development Agreement (MUDA). Specifically, if the franchise agreement is terminated, Desi District has the right to terminate the MUDA. This means that the franchisee would lose the rights to develop additional Desi District locations as per the development schedule outlined in the MUDA.
This provision is significant for potential multi-unit developers because it links the fate of their development agreement to the performance and adherence to the terms of their existing franchise agreement. A franchisee must remain in good standing with their initial Desi District location to maintain their development rights.
Conversely, the FDD states that if Desi District terminates the MUDA, it does not automatically give them the right to terminate the franchise agreement for the existing location. This offers some protection to the franchisee, ensuring that the initial franchise can continue operating even if development plans change or are not fulfilled. However, the franchisee should be aware that any violation of the franchise agreement could still lead to its termination, which would then trigger the termination of the MUDA.