Does Desi District have the right to terminate the franchise agreement without cause?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in franchise or other agreement | Summary |
|---|---|---|
| e. Termination by | Not Applicable | |
| franchisor without cause | ||
| f. Termination by franchisor with cause | FA: § 14.2 MUDA: § 4 | We may terminate your agreement for cause, subject to any applicable notice and cure opportunity. If you sign a Multi-Unit Development Agreement, termination of your MUDA does not give us the right to terminate your franchise agreement. However, if your franchise agreement is terminated, we have the right to terminate your MUDA. |
| g. "Cause" defined curable defaults | FA: § 14.2 MUDA: none | Non-payment by you (10 days to cure); violate franchise agreement other than non-curable default (30 days to cure); operate in a manner dangerous to health or safety (48 hours to cure). |
| h. "Cause" definednon curable defaults | FA: § 14.2 MUDA: § 4 | FA: Misrepresentation when applying to be a franchisee; knowingly submitting false information; bankruptcy; lose possession of your location; violation of law; violation of confidentiality; violation of non-compete; violation of transfer restrictions; slander or libel of us; refusal to cooperate with our business inspection; cease operations for more than 5 consecutive days; three defaults in 12 months; cross-termination; charge or conviction of, or plea to a felony, or commission or accusation of an act that is reasonably likely to materially and unfavorably affect our brand; any other breach of franchise agreement which by its nature cannot be cured. MUDA: failure to meet development schedule; violation of franchise agreement or other agreement which gives us the right to terminate it. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 44–48)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, Desi District does not have the right to terminate the franchise agreement without cause. Item 17 outlines the conditions for termination, and specifically notes that termination by the franchisor without cause is 'Not Applicable'.
Desi District can terminate the franchise agreement with cause, which includes both curable and non-curable defaults. Curable defaults include non-payment (with 10 days to cure), violations of the franchise agreement other than non-curable defaults (with 30 days to cure), and operating in a manner dangerous to health or safety (with 48 hours to cure). Non-curable defaults include misrepresentation during the application process, submitting false information, bankruptcy, losing possession of the location, violating laws, confidentiality, or non-compete agreements, slandering Desi District, refusing business inspections, ceasing operations for more than 5 consecutive days, having three defaults in 12 months, cross-termination, being charged or convicted of a felony, or any breach that cannot be cured. For Multi-Unit Development Agreements (MUDA), non-curable defaults also include failure to meet the development schedule or violating any agreement that gives Desi District the right to terminate it.
This means a Desi District franchisee can only have their agreement terminated if they fail to meet certain obligations or violate the terms of the franchise agreement. The franchisee has the opportunity to correct some violations, while others are considered severe enough to warrant immediate termination. Prospective franchisees should carefully review Section 14.2 of the Franchise Agreement (FA) and Section 4 of the MUDA to fully understand what constitutes cause for termination and what their rights and obligations are in such situations.