What transfer fee does Desi District Franchise Group charge for a franchisee 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 pr
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, if a franchisee wishes to transfer their franchise to a new owner, Desi District requires a transfer fee. This fee is $10,000, in addition to any broker fees and out-of-pocket costs that Desi District incurs during the transfer process. This means that a franchisee looking to sell their business must be prepared to pay this fee to Desi District before the transfer can be completed.
In addition to the transfer fee, Desi District also stipulates other conditions that must be met before they will approve a transfer. The proposed new franchisee must complete Desi District's franchise application process, meet their current standards for new franchisees, and be approved by Desi District. The new franchisee cannot be a competitor of Desi District. They must also execute Desi District's current franchise agreement, which may have different terms than the original agreement, although they will not be required to pay an initial franchise fee.
Furthermore, all owners of the proposed new franchisee must provide a guaranty, and the current franchisee must have paid all outstanding monetary obligations to Desi District, its affiliates, and any lessors, vendors, suppliers, or lenders associated with the business. The franchisee must also not be in default or breach of the franchise agreement or any other obligations to Desi District or its affiliates. These conditions ensure that Desi District maintains control over who becomes a franchisee and that all financial obligations are met before a transfer is finalized.
These transfer conditions are fairly typical in franchising, as franchisors want to ensure that any new franchisee meets their standards and will uphold the brand's reputation. The transfer fee helps to cover the franchisor's costs associated with reviewing and approving the transfer. Franchisees should carefully consider these requirements and fees when planning to sell their franchise.