Is the non-compliance fee charged by Desi District considered a penalty or an estimate of all damages arising from a franchisee's breach?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
after opening, Desi District Franchise Group may charge its then-current training fee. As of the date of this Agreement, the training fee is $350 per day.
- 4.5 Non-Compliance Fee. Desi District Franchise Group may charge Franchisee $500 for any instance of non-compliance with the System Standards or this Agreement (other than Franchisee's non-payment of a fee owed to Desi District Franchise Group) which Franchisee fails to cure after 30 days' notice. Thereafter, Desi District Franchise Group may charge Franchisee $250 per week until Franchisee ceases such non-compliance. This fee is a reasonable estimate of Desi District Franchise Group's internal cost of personnel time attributable to addressing the non-compliance, and it is not a penalty or estimate of all damages arising from Franchisee's breach. Th
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, the non-compliance fee is not considered a penalty or an estimate of all damages arising from a franchisee's breach. Desi District may charge a franchisee $500 for any instance of non-compliance with the System Standards or the Franchise Agreement, provided the franchisee fails to correct the issue after 30 days' notice.
Thereafter, Desi District may charge the franchisee $250 per week until the non-compliance ceases. The FDD states explicitly that this fee is a reasonable estimate of Desi District's internal cost of personnel time spent addressing the non-compliance.
The non-compliance fee is in addition to all of Desi District's other rights and remedies, including default and termination under Section 14.2 of the agreement. This means that Desi District retains the right to pursue other legal or contractual remedies for the franchisee's breach, separate from collecting the non-compliance fee.