What section of the Desi District Multi-Unit Development Agreement outlines the conditions for termination by the franchisor with cause?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section in franchise or other agreement | Summary |
|---|---|---|
| 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. |
| 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, Section 4 of the Multi-Unit Development Agreement (MUDA) outlines the conditions under which Desi District may terminate the agreement with cause. The FDD also clarifies that if a franchisee signs a MUDA, the termination of the MUDA by Desi District does not automatically lead to the termination of the franchise agreement itself. However, if the franchise agreement is terminated, Desi District retains the right to terminate the MUDA.
The FDD specifies examples of both curable and non-curable defaults that could lead to termination. Curable defaults, which allow the franchisee a period to remedy the issue, include non-payment (with 10 days to cure), violating the franchise agreement (other than a non-curable default, with 30 days to cure), and operating in a manner dangerous to health or safety (with 48 hours to cure). Non-curable defaults under the MUDA include failure to meet the development schedule and violation of the franchise agreement or any other agreement that gives Desi District the right to terminate it.
It is important for prospective Desi District franchisees to understand these termination conditions, as they define the circumstances under which they could lose their franchise rights. The distinction between curable and non-curable defaults is particularly significant, as it determines whether a franchisee has an opportunity to correct the issue and avoid termination. Franchisees should carefully review Section 4 of the MUDA to fully understand their obligations and the potential consequences of failing to meet them.