Must a proposed assignee meet Desi District's 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 G
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 a new owner, the proposed assignee must meet Desi District's standards for new franchisees. Specifically, the proposed assignee and their owners must complete Desi District's franchise application processes and be approved by Desi District as franchisees. This requirement ensures that any new owner meets the brand's criteria for business skill, financial capacity, personal character, experience, and business ability.
This condition is part of a broader set of requirements for transferring a Desi District franchise. Other conditions include paying a transfer fee of $10,000 plus any broker fees and out-of-pocket costs incurred by Desi District, executing the then-current form of franchise agreement (which may contain materially different provisions), providing a guaranty, paying all outstanding obligations, and ensuring the business complies with the most recent System Standards.
These transfer conditions are typical in franchising, as franchisors want to maintain brand consistency and protect their investment by ensuring new operators are qualified. For a prospective Desi District franchisee, this means that if they ever decide to sell their franchise, the pool of potential buyers may be limited to those who meet Desi District's standards and are willing to undergo the application and approval process. This could potentially affect the resale value and ease of selling the franchise.