Who is responsible for legal costs in a legal proceeding related to the Desi District franchise agreement?

According to Desi District's 2024 Franchise Disclosure Document, the responsibility for legal costs in any legal proceeding, including arbitration, related to the franchise agreement or any guaranty, falls upon the non-prevailing party. This means that the party who does not win the central issues in the legal dispute and does not obtain substantial relief will be required to pay the legal costs of the party that does prevail. These costs include attorney fees, court costs, and other expenses associated with the legal proceeding.

For a prospective Desi District franchisee, this clause has significant implications. If a franchisee initiates a legal action against Desi District and loses, the franchisee will be responsible for covering Desi District's legal expenses, which could be substantial. Conversely, if Desi District loses a legal action brought by the franchisee, Desi District would be responsible for the franchisee's legal costs. This creates a financial risk for franchisees who consider taking legal action against the franchisor.

This type of clause is relatively common in franchise agreements. It is designed to discourage frivolous lawsuits and ensure that parties carefully consider the merits of their claims before initiating legal proceedings. Franchisees should be aware of this provision and factor it into their decision-making process when considering whether to pursue legal action related to the franchise agreement. It is advisable to seek legal counsel to assess the potential costs and benefits before engaging in any legal proceeding.