Does the Desi District Multi-Unit Development Agreement define 'cause' for termination?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
oyalty Fees | $102,704.02 | |
| 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. |
| g. "Cause" defined curable defaults | FA: § 14.2 MUDA: none | Non-payment by you (10 days to cure); violate franchise agreement other than non-curable default (30 days to cure); operate in a manner dangerous to health or safety (48 hours to cure). |
| h. "Cause" definednon curable defaults | FA: § 14.2 MUDA: § 4 | FA: Misrepresentation when applying to be a franchisee; knowingly submitting false information; bankruptcy; lose possession of your location; violation of law; violation of confidentiality; violation of non-compete; violation of transfer restrictions; slander or libel of us; refusal to cooperate with our business inspection; cease operations for more than 5 consecutive days; three defaults in 12 months; cross-termination; charge or conviction of, or plea to a felony, or commission or accusation of an act that is reasonably likely to materially and unfavorably affect our brand; any other breach of franchise agreement which by its nature cannot be cured. MUDA: failure to meet development schedule; violation of franchise agreement or other agreement which gives us the right to terminate it. |
| i. Franchisee's obligations on termination/non renewal | FA: §§ 14.3 – 14.6 MUDA: none | Pay all amounts due; |
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 Multi-Unit Development Agreement (MUDA) does define 'cause' for termination. The FDD outlines specific curable and non-curable defaults that constitute 'cause' for termination of the MUDA.
Curable defaults, which provide an opportunity for the franchisee to remedy the situation, include non-payment (with 10 days to cure), violations of the franchise agreement other than non-curable defaults (with 30 days to cure), and operating in a manner dangerous to health or safety (with 48 hours to cure). Non-curable defaults, which do not offer an opportunity to cure, include failure to meet the development schedule and violation of the franchise agreement or any other agreement that gives Desi District the right to terminate it.
For a prospective Desi District multi-unit franchisee, understanding these termination clauses is crucial. Failure to meet the development schedule outlined in the MUDA can lead to termination without an opportunity to correct the issue. Franchisees should carefully review the MUDA to fully understand their obligations and the potential consequences of failing to meet them. It is also important to note that while termination of the MUDA does not automatically terminate the franchise agreement, termination of the franchise agreement does give Desi District the right to terminate the MUDA.