If Desi District stops selling to a franchisee in default, is the franchisee relieved of their obligations?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
- 11.4 Right to Discontinue Supplies Upon Default. While Franchisee is in default or breach of this Agreement, Desi District Franchise Group may (i) require that Franchisee pay cash on delivery for products or services supplied by Desi District Franchise Group, (ii) stop selling or providing any products and services to Franchisee, and/or (iii) request any third-party vendors to not sell or provide products or services to Franchisee.
No such action by Desi District Franchise Group shall be a breach or constructive termination of this Agreement, change in competitive circumstances or similarly characterized, and Franchisee shall not be relieved of any obligations under this Agreement because of any such action.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, if a franchisee is in default or breach of the Franchise Agreement, Desi District has the right to take certain actions, including stopping the sale or provision of products and services to the franchisee.
Importantly, the FDD states that if Desi District exercises its right to discontinue supplies due to a franchisee's default, this action does not relieve the franchisee of their obligations under the Franchise Agreement. This means that even if Desi District stops providing products or services, the franchisee is still responsible for fulfilling all other requirements and responsibilities outlined in the agreement.
This provision protects Desi District by ensuring that franchisees cannot escape their contractual duties simply because the franchisor has stopped supplying them due to a breach. For a prospective franchisee, this highlights the importance of adhering to the Franchise Agreement to avoid default and the potential consequences of continued obligations even without ongoing support or supplies from Desi District.