Must a proposed assignee of a Desi District franchise meet the then-applicable standards for new franchisees?
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. 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
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, if a franchisee wishes to transfer their franchise to another party, the proposed assignee must meet certain conditions. One of these conditions is that the proposed assignee and their owners must complete Desi District's franchise application processes, meet Desi District's then-applicable standards for new franchisees, and be approved by Desi District as franchisees. This requirement ensures that any new operator of a Desi District franchise meets the brand's current standards for franchisees.
This stipulation is common in franchising, as franchisors want to maintain consistent brand standards and operational quality across all locations. By requiring the assignee to meet the then-current standards, Desi District aims to ensure that the new franchisee has the necessary skills, experience, and financial resources to successfully operate the franchise. This protects the brand's reputation and the interests of other franchisees in the system.
In addition to meeting the standards for new franchisees, the proposed assignee must also execute Desi District's then-current form of franchise agreement and related documents, which may contain materially different provisions than the original agreement. However, the proposed assignee will not be required to pay an initial franchise fee. The franchisee must also pay a transfer fee of $10,000 plus any broker fees and other out-of-pocket costs incurred by Desi District. These conditions collectively ensure that the transfer is in the best interest of the Desi District franchise system.