What rights does Desi District Franchise Group have if a Desi District franchisee is in default?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee shall reimburse Desi District Franchise Group for its costs and expenses (including the allocation of any internal costs) for such action, plus 10% as an administrative fee.
- 11.4 Right to Discontinue Supplies Upon Default. While Franchisee is in default or breach of this Agreement, Desi District Franchise Group may (i) require that Franchisee pay cash on delivery for products or services supplied by Desi District Franchise Group, (ii) stop selling or providing any products and services to Franchisee, and/or (iii) request any third-party vendors to not sell or provide products or services to Franchisee.
No such action by Desi District Franchise Group shall be a breach or constructive termination of this Agreement, change in competitive circumstances or similarly characterized, and Franchisee shall not be relieved of any obligations under this Agreement because of any such action.
Such rights of Desi District Franchise Group are in addition to any other right or remedy available to Desi District Franchise Group.
11.1 Manual; Modification. The Manual, and any part of the Manual, may be in any form or media determined by Desi District Franchise Group. Desi District Franchise Group may supplement, revise, or modify the Manual, and Desi District Franchise Group may change, add or delete System Standards at any time in its discretion. Desi District Franchise Group may inform Franchisee thereof by any method that Desi District Franchise Group deems appropriate (which need not qualify as "notice" under Section 18.9). In the event of any dispute as to the contents of the Manual, Desi District Franchise Group's master copy will control.
11.2 Inspections. Desi District Franchise Group may enter the premises of the Business from time to time during normal business hours and conduct an inspection. Franchisee shall cooperate with Desi District Franchise Group's inspectors. The inspection may include, but is not limited to, observing operations, conducting a physical inventory, evaluating physical conditions, monitoring sales activity, speaking with employees and customers, and removing samples of products, supplies and materials. Desi District Franchise Group may videotape and/or take photographs of the inspection and the Business. Desi District Franchise Group may set a minimum score requirement for inspections, and Franchisee's failure to meet or exceed the minimum score will be a default under this Agreement. Without limiting Desi District Franchise Group's other rights under this Agreement, Franchisee will, as soon as reasonably practical, correct any deficiencies noted during an inspection. If Desi District Franchise Group conducts an inspection because of a governmental report, customer complaint or other customer feedback, or a default or noncompliance with any System Standard by Franchisee (including following up a previous failed inspection), then Desi District Franchise Group may charge all out-of-pocket expenses plus its then-current inspection fee to Franchisee.
11.3 Desi District Franchise Group's Right to Cure. If Franchisee breaches or defaults under any provision of this Agreement, Desi District Franchise Group may (but has no obligation to) take any action to cure the default on behalf of Franchisee, without any liability to Franchisee.
14.3 Effect of Termination. Upon termination or expiration of this Agreement, all obligations that by their terms or by reasonable implication survive termination, including those pertaining to non-competition, confidentiality, indemnity, and dispute resolution, will remain in effect, and Franchisee must immediately:
(i) pay all amounts owed to Desi District Franchise Group based on the operation of the Business through the effective date of termination or expiration;
(ii) return to Desi District Franchise Group all copies of the Manual, Confidential Information and any and all other materials provided by Desi District Franchise Group to Franchisee or created by a third party for Franchisee relating to the operation of the Business, and all items containing any Marks, copyrights, and other proprietary items; and delete all Confidential Information and proprietary materials from electronic devices;
14.5 Liquidated Damages. If Desi District Franchise Group terminates this Agreement based upon Franchisee's default (or if Franchisee purports to terminate this Agreement except as permitted under Section 14.1), then within 10 days thereafter Franchisee shall pay to Desi District Franchise Group a lump sum (as liquidated damages and not as a penalty) calculated as follows: (x) the average Royalty Fees that Franchisee owed to Desi District Franchise Group under this Agreement for the 52-week period preceding the date on which Franchisee ceased operating the Business; multiplied by (y) the lesser of (1) 104 or (2) the number of weeks remaining in the thencurrent term of this Agreement. If Franchisee had not operated the Business for at least 52 weeks, then (x) will equal the average Royalty Fees that Franchisee owed to Desi District Franchise Group during the period that Franchisee operated the Business. The "average Royalty Fees that Franchisee owed to Desi District Franchise Group" shall not be discounted or adjusted due to any deferred or reduced Royalty Fees set forth in an addendum to this Agreement, unless this Section 14.5 is specifically amended in such addendum. Franchisee acknowledges that a precise calculation of the full extent of Desi District Franchise Group's damages under these circumstances is difficult to determine and the method of calculation of such damages as set forth in this Section is reasonable. Franchisee's payment to Desi District Franchise Group under this Section will be in lieu of any direct monetary damages that Desi District Franchise Group may incur as a result of Desi District Franchise Group's loss of Royalty Fees that would have been owed to Desi District Franchise Group after the date of termination; however, such payment shall be in addition to all damages and other amounts arising under Section 14.3 and Section 14.4, Desi District Franchise Group's right to injunctive relief for enforcement of Article 13, and any attorneys' fees and other costs and expenses to which Desi District Franchise Group is entitled under this Agreement. Except as provided in this Section, Franchisee's pay
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, if a franchisee defaults, Desi District Franchise Group has several rights. Desi District can take action to cure the default on behalf of the franchisee without any liability. The franchisee is responsible for reimbursing Desi District for all costs and expenses associated with the action, including internal costs, plus an additional 10% administrative fee. Desi District also retains the right to modify its manual and system standards at its discretion.
While a franchisee is in default, Desi District Franchise Group can demand cash on delivery for products or services, stop providing products and services, and request that third-party vendors do the same. These actions do not constitute a breach or constructive termination of the agreement, and the franchisee remains obligated under the agreement. These rights are in addition to any other remedies available to Desi District.
Upon termination or expiration of the franchise agreement, obligations related to non-competition, confidentiality, indemnity, and dispute resolution remain in effect. The franchisee must immediately pay all outstanding amounts, return all copies of the Manual, Confidential Information, and other materials, and delete all Confidential Information from electronic devices. If Desi District terminates the agreement due to the franchisee's default, the franchisee must pay liquidated damages, calculated based on past royalty fees and the remaining term of the agreement.
Desi District also has the right to conduct inspections of the franchisee's business premises during normal business hours. These inspections may include observing operations, conducting inventory, evaluating conditions, monitoring sales, speaking with employees and customers, and taking samples. Desi District may videotape or photograph the inspections and set minimum score requirements, with failure to meet the minimum score constituting a default. If an inspection is conducted due to a governmental report, customer complaint, or a previous failed inspection, Desi District may charge the franchisee for all out-of-pocket expenses plus an inspection fee.