If a receiver is appointed for the Desi District business, can Desi District Franchise Group terminate the agreement?
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, Desi District Franchise Group can terminate the franchise agreement without an opportunity to cure if a receiver or trustee is appointed by any court for the business or substantially all of the franchisee's property. This also applies if the franchisee makes a general assignment for the benefit of their creditors, is unable to pay debts as they become due, or faces a levy or execution against the business.
Additionally, termination without a cure period is permitted if an attachment or lien remains on the business for 30 days, unless the franchisee is actively contesting it in good faith. The same applies if the franchisee files a petition in bankruptcy, or if such a petition is filed against them and not dismissed within 45 days, or if the franchisee is adjudicated bankrupt.
This clause protects Desi District from financial instability or legal issues affecting the franchisee's business operations. For a prospective franchisee, this means that any significant financial or legal distress that leads to the appointment of a receiver or trustee could result in the immediate termination of their franchise agreement with Desi District.