What are the obligations of a Desi District franchisee related to purchasing goods and services (Item 8) and how do these obligations relate to the franchisee's general obligations listed in Item 9?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
ties, shall be honest and fair. Franchisee shall comply with any code of ethics or statement of values from Desi District Franchise Group. Franchisee shall not take any action which may injure the goodwill associated with the Marks.
ARTICLE 8. SUPPLIERS AND VENDORS
- 8.1 Generally. Franchisee shall acquire all Inputs required by Desi District Franchise Group from time to time in accordance with System Standards. Desi District Franchise Group may require Franchisee to purchase or lease any Inputs from Desi District Franchise Group, Desi District Franchise Group's designee, Required Vendors, Approved Vendors, and/or under Desi District Franchise Group's specifications. Desi District Franchise Group may change any such requirement or change the status of any vendor. To make such requirement or change effective, Desi District Franchise Group shall issue the appropriate System Standards.
- 8.2 Alternate Vendor Approval. If Desi District Franchise Group requires Franchisee to purchase a particular Input only from an Approved Vendor or Required Vendor, and Franchisee desires to purchase the Input from another vendor, then Franchisee must submit a written request for approval and any information, specifications and/or samples requested by Desi District Franchise Group. Desi District Franchise Group may condition its approval on such criteria as Desi District Franchise Group deems appropriate, which may include evaluations of the vendor's capacity, quality, financial stability, reputation, and reliability; inspections; product testing, and performance reviews. Desi District Franchise Group will provide Franchisee with written notification of the approval or disapproval of any proposed new vendor within 30 days after receipt of Franchisee's request.
- 8.3 Alternate Input Approval. If Desi District Franchise Group requires Franchisee to purchase a particular Input, and Franchisee desires to purchase an alternate to the Input, then Franchisee must submit a written request for approval and any information, specifications and/or samples requested by Desi District Franchise Group. Desi District Franchise Group will provide Franchisee with written notification of the approval or disapproval of any proposed alternate Input within 30 days after receipt of Franchisee's request.
- 8.4 Purchasing. Desi District Franchise Group may negotiate prices and terms with vendors on behalf of the System. Desi District Franchise Group may receive rebates, payments or other consideration from vendors in connection with purchases by franchisees. Desi District Franchise Group has the right (but not the obligation) to collect payments from Franchisee on behalf of a vendor and remit the payments to the vendor and to impose a reasonable markup or charge for administering the payment program. Desi District Franchise Group may implement a centralized purchasing system. Desi District Franchise Group may establish a purchasing cooperative and require Franchisee to join and participate in the purchasing cooperative on such terms and conditions as Desi District Franchise Group may determine.
- 8.5 No Liability of Franchisor. Desi District Franchise Group shall not have any liability to Franchisee for any claim or loss related to any product provided or service performed by any Approved Vendor or Required Vendor, including without limitation defects, delays, or unavailability of products or services.
- 8.6 Product Recalls. If Desi District Franchise Group or any vendor, supplier, or manufacturer of an item used or sold in Franchisee's Business issues a recall of such item or otherwise notifies Franchisee that such item is defective or dangerous, Franchisee shall immediately cease using or selling such item, and Franchisee shall at its own expense comply with all instructions from Desi District Franchise Group or the vendor, supplier, or manufacturer of such item with respect to such item, including without limitation the recall, repair, and/or replacement of such item.
ARTICLE 9. MARKETING
- 9.1 Approval and Implementation. Franchisee shall not conduct any marketing, advertising, or public relations activities (including in-store marketing materials, websites, online advertising, social media marketing or presence, and sponsorships) that have not been approved by Desi District Franchise Group. Desi District Franchise Group may (but is not obligated to) operate all "social media" accounts on behalf of the System, or it may permit franchisees to operate one or more accounts. Franchisee must comply with any System Standards regarding marketing, advertising, and public relations, include any social media policy that Desi District Franchise Group may prescribe. Franchisee shall implement any marketing plans or campaigns determined by Desi District Franchise Group.
- 9.2 Use by Desi District Franchise Group. Desi District Franchise Group may use any marketing materials or campaigns developed by or on behalf of Franchisee, and Franchisee hereby grants an unlimited, perpetual, royalty-free license to Desi District Franchise Group for such purpose.
- 9.3 Market Cooperatives. Desi District Franchise Group may establish market advertising and promotional cooperative funds ("Market Cooperative") in any geographical areas. If a Market Cooperative for the geographic area encompassing the Location has been established at the time Franchisee commences operations hereunder, Franchisee shall immediately become a member of such Market Cooperative. If a Market Cooperative for the geographic area encompassing the Location is established during the term of this Agreement, Franchisee shall become a member of such Market Cooperative within 30 days. Desi District Franchise Group shall not require
Franchisee to be a member of more than one Market Cooperative. If Desi District Franchise Group establishes a Market Cooperative:
- (a) Governance. Each Market Cooperative will be organized and governed in a form and manner, and shall commence operations on a date, determined by Desi District Franchise Group. Desi District Franchise Group may require the Market Cooperative to adopt bylaws or regulations prepared by Desi District Franchise Group. Unless otherwise specified by Desi District Franchise Group, the activities carried on by each Market Cooperative shall be decided by a majority vote of its members. Desi District Franchise Group will be entitled to attend and participate in any meeting of a Market Cooperative. Any Desi District business owned by Desi District Franchise Group in the Market Cooperative shall have the same voting rights as those owned by its franchisees. Each Business owner will be entitled to cast one vote for each Business owned, provided, however, that a franchisee shall not be entitled to vote if it is in default under its franchise agreement. If the members of a Market Cooperative are unable or fail to determine the manner in which Market Cooperative monies will be spent, Desi District Franchise Group may assume this decision-making authority after 10 days' notice to the members of the Market Cooperative.
- (b) Purpose. Each Market Cooperative shall be devoted exclusively to administering regional advertising and marketing programs and developing (subject to Desi District Franchise Group's approval) standardized promotional materials for use by the members in local advertising and promotion.
- (c) Approval. No advertising or promotional plans or materials may be used by a Market Cooperative or furnished to its members without the prior approval of Desi District Franchise Group pursuant to Section 9.1. Desi District Franchise Group may designate the national or regional advertising agencies used by the Market Cooperative.
- (d) Funding. The majority vote of the Market Cooperative will determine the dues to be paid by members of the Market Cooperative, including Franchisee, but not less than 1% and not more than 5% of Gross Sales.
- (e) Enforcement. Only Desi District Franchise Group will have the right to enforce the obligations of franchisees who are members of a Market Cooperative to contribute to the Market Cooperative.
- (f) Termination. Desi District Franchise Group may terminate any Market Cooperative.
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, franchisees are obligated to acquire all required inputs in accordance with the System Standards, as detailed in Article 8 concerning suppliers and vendors. Desi District may mandate that franchisees purchase or lease inputs from specific sources, including Desi District itself, its designees, required vendors, or approved vendors, and may alter these requirements or vendor statuses by issuing updated System Standards. If a franchisee wishes to use an alternate vendor when purchasing a particular input, they must submit a written request for approval, along with any necessary information or samples. Desi District will then provide written notification of approval or disapproval within 30 days of receiving the request. Similarly, if a franchisee wants to use an alternate input, they must also seek approval from Desi District, who will respond within 30 days. Desi District may negotiate prices and terms with vendors on behalf of the entire system and may receive rebates or other consideration from these vendors based on franchisee purchases. Desi District retains the right to collect payments from franchisees on behalf of vendors, remit these payments, and impose a reasonable charge for administering this payment program, and may also implement a centralized purchasing system or establish a purchasing cooperative that franchisees are required to join. However, Desi District assumes no liability for any claims or losses related to products or services provided by approved or required vendors, including issues like defects, delays, or unavailability. In the event of a product recall, franchisees must immediately cease using or selling the item and comply with all instructions from Desi District or the vendor regarding the recall, repair, or replacement of the item at the franchisee's expense.
These purchasing obligations are closely tied to the franchisee's general obligations outlined in Article 7, which covers operations. Franchisees must comply with all mandatory obligations in the Manual and System Standards at their own expense. This includes offering only the products and services prescribed by Desi District, maintaining high-quality standards, and adhering to specific pricing requirements set by Desi District during promotional periods. Franchisees are also responsible for keeping their business premises in good condition, performing necessary maintenance and repairs, and undertaking remodels as required by Desi District.
Furthermore, franchisees must acquire and use all software and related systems required by Desi District, protect the confidentiality and security of these systems, and grant Desi District unlimited access to their point of sale and other software systems. They must also accept various forms of payment designated by Desi District and comply with payment card industry data security standards (PCI-DSS). Franchisees are expected to promptly resolve customer complaints, participate in customer evaluation and compliance programs, and meet minimum score requirements set by Desi District for these programs. These obligations collectively ensure that franchisees maintain consistent standards and operational practices across the Desi District system, while also allowing Desi District to manage and optimize the supply chain and customer experience.