During the term of the Desi District agreement, can a franchisee lend money to a competitor?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
on is owned by Desi District Franchise Group (except for Confidential Information which Desi District Franchise Group licenses from another person or entity). This Section will survive the termination or expiration of this Agreement indefinitely.
13.2 Covenants Not to Compete.
- (a) Restriction In Term. During the term of this Agreement, neither Franchisee, any Owner, nor any spouse of an Owner (the "Restricted Parties") shall directly or indirectly have any ownership interest in, lend money or provide financial assistance to, provide any services to, or be employed by, any Competitor.
- (b) Restriction Post Term. For two years after this Agreement expires or is terminated for any reason (or, if applicable, for two years after a Transfer), no Restricted Party shall directly or indirectly have any ownership interest in, lend money or provide financial assistance to, provide any services to, or be employed by, any Competitor within five miles of Franchisee's Territory or the territory of any other Desi District business operating on the date of termination or transfer, as applicable. If this Agreement is terminated before the Territory is determined, then the area of noncompetition will the Development Area and the territory of any other Desi District business operating on the date of termination.
- (c) Interpretation. The parties agree that each of the foregoing covenants is independent of any other covenant or provision of this Agreement. If all or any portion of the covenants in this Section is held to be unenforceable or unreasonable by any arbitrator or court, then the parties intend that the arbitrator or court modify such restriction to the extent reasonably necessary to protect the legitimate business interests of Desi District Franchise Group. Franchisee agrees that the existence of any claim it may have against Desi District Franchise Group shall not constitute a defense to the enforcement by Desi District Franchise Group of the covenants of this Section.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, franchisees are restricted from lending money to competitors during the term of the agreement. Specifically, the agreement states that neither the franchisee, any owner, nor any spouse of an owner can directly or indirectly lend money or provide financial assistance to any competitor during the term of the agreement. This restriction is in place to protect Desi District's business interests and prevent franchisees from supporting competing businesses.
This restriction also applies to the guarantor of the franchise agreement. The guarantor is also prohibited from lending money or providing financial assistance to a competitor during the term of the Franchise Agreement.
After the agreement expires or is terminated, the restriction continues for two years. During this post-term period, the franchisee, owner, spouse, or guarantor cannot lend money or provide financial assistance to a competitor within five miles of the franchisee's territory or the territory of any other Desi District business operating on the date of termination or transfer. This extended restriction aims to further safeguard Desi District's market position even after the franchise relationship ends.
These covenants are independent of any other agreement provisions. If any part of these covenants is deemed unenforceable, the intention is for the arbitrator or court to modify the restriction to protect Desi District's business interests reasonably. The existence of any claim against Desi District does not serve as a defense against the enforcement of these covenants.