What transfer fee does Desi District Franchise Group charge for a franchise transfer?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
ICLE 15. TRANSFERS**
- 15.1 By Desi District Franchise Group. Desi District Franchise Group may transfer or assign this Agreement, or any of its rights or obligations under this Agreement, to any person or entity, and Desi District Franchise Group may undergo a change in ownership and/or control, without the consent of Franchisee.
- 15.2 By Franchisee. Franchisee acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that Desi District Franchise Group entered into this Agreement in reliance on Franchisee's business skill, financial capacity, personal character, experience, and business ability. Accordingly, Franchisee shall not conduct or undergo a Transfer without providing Desi District Franchise Group at least 60 days prior notice of the proposed Transfer, and without obtaining Desi District Franchise Group's consent. In granting any such consent, Desi District Franchise Group may impose conditions, including, without limitation, the following:
- (i) Desi District Franchise Group receives a transfer fee equal to $10,000 plus any broker fees and other out-of-pocket costs incurred by Desi District Franchise Group;
- (ii) the proposed assignee and its owners have completed Desi District Franchise Group's franchise application processes, meet Desi District Franchise Group's then-applicable standards for new franchisees, and have been approved by Desi District Franchise Group as franchisees;
- (iii) the proposed assignee is not a Competitor;
- (iv) the proposed assignee executes Desi District Franchise Group's then-current form of franchise agreement and any related documents, which form may contain materially different provisions than this Agreement (provided, however, that the proposed assignee will not be required to pay an initial franchise fee);
- (v) all owners of the proposed assignee provide a guaranty in accordance with Section 2.5;
- (vi) Franchisee has paid all monetary obligations to Desi District Franchise Group and its affiliates, and to any lessor, vendor, supplier, or lender to the Business, and
- Franchisee is not otherwise in default or breach of this Agreement or of any other obligation owed to Desi District Franchise Group or its affiliates;
- (vii) the proposed assignee and its owners and employees undergo such training as De
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, if a franchisee seeks to transfer their franchise, Desi District Franchise Group may require a transfer fee. This fee is $10,000, in addition to any broker fees and other out-of-pocket costs incurred by Desi District. This means that a franchisee looking to sell their business will need to factor in these costs, which could potentially reduce their profit from the sale.
In addition to the transfer fee, Desi District also stipulates several other conditions that must be met before a transfer is approved. The proposed new franchisee must complete Desi District's franchise application process, meet the then-current standards for new franchisees, and be approved by Desi District. The proposed franchisee cannot be a competitor and must execute Desi District's current form of franchise agreement, which may contain materially different provisions. All owners of the proposed new franchisee must provide a guaranty, and the current franchisee must have paid all monetary obligations to Desi District and not be in default of the agreement.
These conditions ensure that any new franchisee meets Desi District's standards and is financially stable. The outgoing franchisee must also ensure that the business fully complies with Desi District's most recent System Standards. These requirements are typical in franchising to maintain brand consistency and protect the franchise system. Prospective franchisees should carefully consider these transfer conditions and associated costs, as they can significantly impact the ability to sell the franchise in the future.
Furthermore, the transfer process also necessitates that the proposed assignee, along with their owners and employees, undergo training as required by Desi District. Both the franchisee, its owners, and the transferee, including its owners, must execute a general release of Desi District in a form satisfactory to them. These stipulations add further complexity to the transfer process, emphasizing the importance of understanding all requirements before entering into a franchise agreement with Desi District.