In Minnesota, can the Desi District franchise agreement require the franchisee to consent to liquidated damages?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
Minnesota Statutes, Section 80C.21 and Minnesota Rules 2860.4400(J) prohibit the franchisor from requiring litigation to be conducted outside Minnesota, requiring waiver of a jury trial, or requiring the franchisee to consent to liquidated damages, termination penalties or judgment notes. In addition, nothing in the Franchise Disclosure Document or agreement(s) can abrogate or reduce (1) any of the franchisee's rights as provided for in Minnesota Statutes, Chapter 80C or (2) franchisee's rights to any procedure, forum, or remedies provided for by the laws of the jurisdiction.
Source: Item 23 — RECEIPTS (FDD pages 52–140)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, if you are opening a franchise in Minnesota, the franchise agreement cannot require you to consent to liquidated damages. The Minnesota Addendum to the Disclosure Document explicitly states that Minnesota Statutes, Section 80C.21 and Minnesota Rules 2860.4400(J) prohibit Desi District from requiring franchisees to consent to liquidated damages. This protection is in place to ensure fairness and protect franchisee rights under Minnesota law.
This means that any clause in the standard Desi District franchise agreement that might imply consent to liquidated damages is unenforceable in Minnesota. Liquidated damages are pre-set amounts of money that a franchisee must pay if they breach the franchise agreement. Because Minnesota law prohibits requiring consent to them, a Desi District franchisee in Minnesota would have more legal recourse to challenge such payments than franchisees in other states.
This provision is favorable for prospective Desi District franchisees in Minnesota, as it prevents the franchisor from imposing potentially unreasonable financial penalties. It ensures that any damage claims would need to be substantiated and determined through a fair legal process, rather than being predetermined and automatically enforced based on the franchise agreement. This protection aligns with Minnesota's broader efforts to safeguard franchisee rights and promote equitable franchising practices.