What is the impact of the Indiana Deceptive Franchise Practices Act on the Desi District franchise agreement?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
- **2.
Certain Provisions Modified.** Any provision of the Agreement which would have any of the following effects is hereby modified to the extent required for the Agreement to be in compliance with the Indiana Acts:
- (1) Requiring goods, supplies, inventories, or services to be purchased exclusively from the franchisor or sources designated by the franchisor where such goods, supplies, inventories, or services of comparable quality are available from sources other than those designated by the franchisor.
However, the publication by the franchisor of a list of approved suppliers of goods, supplies, inventories, or services or the requirement that such goods, supplies, inventories, or services comply with specifications and standards prescribed by the franchisor does not constitute designation of a source nor does a reasonable right of the franchisor to disapprove a supplier constitute a designation.
This subdivision does not apply to the principal goods, supplies, inventories, or services manufactured or trademarked by the franchisor.
(2) Allowing the franchisor to establish a franchisor-owned outlet engaged in a substantially identical business to that of the franchisee within the exclusive territory granted the franchisee by the franchise agreement; or, if no exclusive territory is designated, permitting the franchisor to compete unfairly with the franchisee within a reasonable area.
(3) Allowing substantial modification of the franchise agreement by the franchisor without the consent in writing of the franchisee.
(4) Allowing the franchisor to obtain money, goods, services, or any other benefit from any other person with whom the franchisee does business, on account of, or in relation to, the transaction between the franchisee and the other person, other than for compensation for services rendered by the franchisor, unless the benefit is promptly accounted for, and transmitted to the franchisee.
(5) Requiring the franchisee to prospectively assent to a release, assignment, novation, waiver, or estoppel which purports to relieve any person from liability to be imposed by the Indiana Deceptive Franchise Practices Act or requiring any controversy between the franchisee and the franchisor to be referred to any person, if referral would be binding on the franchisee.
This subsection (5) does not apply to arbitration before an independent arbitrator.
Source: Item 23 — RECEIPTS (FDD pages 52–140)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, the Indiana Deceptive Franchise Practices Act modifies certain provisions of the franchise agreement to ensure compliance with Indiana law. This modification affects several key areas to protect the franchisee.
First, Desi District cannot mandate that franchisees purchase goods, supplies, inventories, or services exclusively from the franchisor or its designated sources if comparable quality items are available elsewhere. This provision does not apply to principal goods, supplies, inventories, or services manufactured or trademarked by Desi District. Also, the franchisor can publish a list of approved suppliers and require compliance with specifications and standards.
Second, the Indiana Act prevents Desi District from unfairly competing with a franchisee by establishing a company-owned outlet engaged in a substantially identical business within the franchisee's exclusive territory or within a reasonable area if no exclusive territory exists. Third, Desi District cannot substantially modify the franchise agreement without the franchisee's written consent. Fourth, the Act prohibits Desi District from receiving undisclosed benefits from the franchisee's business dealings with other parties, unless such benefits are promptly accounted for and transmitted to the franchisee. Finally, the Indiana Deceptive Franchise Practices Act ensures that franchisees are not forced to waive rights or relieve anyone from liabilities imposed by the Act and that franchisees are not bound by mandatory referrals that would be binding on the franchisee. This does not apply to arbitration before an independent arbitrator.
These modifications collectively aim to create a fairer balance of power between Desi District and its franchisees in Indiana, safeguarding the franchisees' interests against potentially overbearing or deceptive practices. Franchisees in Indiana should carefully review these modifications to understand their rights and protections under the Indiana Deceptive Franchise Practices Act.