Must all owners of the proposed assignee provide a guaranty for a Desi District franchise transfer?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
ICLE 15. TRANSFERS**
- 15.1 By Desi District Franchise Group. Desi District Franchise Group may transfer or assign this Agreement, or any of its rights or obligations under this Agreement, to any person or entity, and Desi District Franchise Group may undergo a change in ownership and/or control, without the consent of Franchisee.
- 15.2 By Franchisee. Franchisee acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that Desi District Franchise Group entered into this Agreement in reliance on Franchisee's business skill, financial capacity, personal character, experience, and business ability.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, if a franchisee plans to transfer their franchise to another party, all owners of the proposed assignee must provide a guaranty. This requirement is one of several conditions that Desi District may impose when granting consent for a transfer.
Specifically, the FDD states that Desi District may require that "all owners of the proposed assignee provide a guaranty in accordance with Section 2.5." Section 2.5 discusses the personal guaranty that each owner must sign if the franchisee is an entity. Attachment 3 to the franchise agreement is the form of guaranty and non-compete agreement that each owner must sign.
This means that any individual or entity acquiring a Desi District franchise through a transfer will need to have all its owners agree to personally guarantee the obligations of the franchise. This is a standard practice in franchising, as it ensures that the franchisor has recourse to the personal assets of the owners should the franchisee default on its obligations. Prospective franchisees should carefully review the guaranty agreement to understand the full extent of their personal liability.