Can the new franchise agreement required for a Desi District franchise transfer contain materially different provisions?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
n Franchisee's business skill, financial capacity, personal character, experience, and business ability. Accordingly, Franchisee shall not conduct or undergo a Transfer without providing Desi District Franchise Group at least 60 days prior notice of the proposed Transfer, and without obtaining Desi District Franchise Group's consent. In granting any such consent, Desi District Franchise Group may impose conditions, including, without limitation, the following:
- (i) Desi District Franchise Group receives a transfer fee equal to $10,000 plus any broker fees and other out-of-pocket costs incurred by Desi District Franchise Group;
- (ii) the proposed assignee and its owners have completed Desi District Franchise Group's franchise application processes, meet Desi District Franchise Group's then-applicable standards for new franchisees, and have been approved by Desi District Franchise Group as franchisees;
- (iii) the proposed assignee is not a Competitor;
- (iv) the proposed assignee executes Desi District Franchise Group's then-current form of franchise agreement and any related documents, which form may contain materially different provisions than this Agreement (provided, however, that the pr
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, if a franchisee seeks to transfer their franchise to a new owner, the new owner may be required to sign Desi District's then-current franchise agreement. This new agreement can contain provisions that are materially different from the original agreement.
This requirement is one of several conditions Desi District may impose when granting consent for a transfer. Other conditions include the payment of a $10,000 transfer fee (plus broker fees and out-of-pocket costs), the assignee meeting Desi District's standards for new franchisees, and the assignee not being a competitor. The assignee must also provide a guaranty.
This means that a prospective buyer of an existing Desi District franchise should carefully review the current franchise agreement offered by Desi District, as it may differ significantly from the agreement the seller originally signed. This could impact the profitability and operational requirements of the franchise. The prospective buyer will not be required to pay an initial franchise fee.