Under what circumstances can Desi District Franchise Group terminate the agreement without providing an opportunity for the franchisee to cure the breach?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
ches this Agreement in any manner not described in subsection (a) or (c), and Franchisee fails to cure such breach to Desi District Franchise Group's satisfaction within 30 days after Desi District Franchise Group gives notice to Franchisee of such breach, then Desi District Franchise Group may terminate this Agreement.
- (c) Without Cure Period. Desi District Franchise Group may terminate this Agreement by giving notice to Franchisee, without opportunity to cure, if any of the following occur:
- (i) Franchisee misrepresented or omitted material facts when applying to be a franchisee, or breaches any representation in this Agreement;
- (ii) Franchisee knowingly submits any false report or knowingly provides any other false information to Desi District Franchise Group;
- (iii) a receiver or trustee for the Business or all or substantially all of Franchisee's property is appointed by any court, or Franchisee makes a general assignment for the benefit of Franchisee's creditors, or Franchisee is unable to pay its debts as they become due, or a levy or execution is made against the Business, or an attachment or lien remains on the Business for 30 days unless the attachment or lien is being duly contested in good faith by Franchisee, or a petition in bankruptcy is filed by Franchisee, or such a petition is filed against or consented to by Franchisee and the petition is not dismissed within 45 days, or Franchisee is adjudicated as bankrupt;
- (iv) Franchisee fails to open for business by the date specified on the Summary Page;
- (v) Franchisee loses possession of the Location;
- (vi) Franchisee or any Owner commits a material violation of Section 7.2 (compliance with laws) or Section 13.1 (confidentiality), violates Section 13.2 (non-compete) or Article 15 (transfer), or commits any other violation of this Agreement which by its nature cannot be cured;
- (vii) Franchisee abandons or ceases operation of the Business for more than five consecutive days;
- (viii) Franchisee or any Owner slanders or libels Desi District Franchise Group or any of its employees, directors, or officers;
- (ix) Franchisee refuses to cooperate with or permit any audit or inspection by Desi District Franchise Group or its agents or contractors, or otherwise fails to comply with Section 10.5 or Section 11.2;
- (x) the Business is operated in a manner which, in Desi District Franchise Group's reasonable judgment, constitutes a significant danger to the health or safety of any person, and Franchisee fails to cure such danger within 48 hours after becoming aware of the danger (due to notice from Desi District Franchise Group or otherwise);
- (xi) Franchisee has received two or more notices of default and Franchisee commits another breach of this Agreement, all in the same 12-month period;
- (xii) Desi District Franchise Group (or any affiliate) terminates any other agreement with Franchisee (or any affiliate) due to the breach of such other agreement by Franchisee (or its affiliate) (provided that termination of a Multi-Unit Development Agreement with Franchisee or its affiliate shall not give Desi District Franchise Group the right to terminate this Agreement);
- (xiii) Franchisee or any Owner is charged with, pleads guilty or no-contest to, or is convicted of a felony;
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Desi District's 2024 Franchise Disclosure Document, there are several specific instances in which Desi District Franchise Group can terminate the franchise agreement immediately, without offering the franchisee a chance to correct the issue. These circumstances involve serious breaches of the agreement or actions that could significantly harm the Desi District brand.
Desi District can terminate the agreement without a cure period if the franchisee misrepresents or omits material facts during the application process or breaches any representation made in the agreement. Similarly, knowingly submitting false reports or providing false information to Desi District is grounds for immediate termination. Other causes include situations where a receiver or trustee is appointed for the business, the franchisee makes an assignment for the benefit of creditors, is unable to pay debts, or has a significant lien against the business. Bankruptcy filings, failure to open the business by the specified date, or losing possession of the location also allow for immediate termination.
Further, Desi District can terminate the agreement without a cure period if the franchisee violates laws, confidentiality, or non-compete agreements, or transfers the franchise without approval. Abandoning the business for more than five consecutive days, slandering or libeling Desi District, refusing audits or inspections, or operating the business in a way that endangers health or safety (and failing to correct it within 48 hours of awareness) are also grounds for immediate termination. Committing another breach of the agreement after receiving two or more notices of default within a 12-month period, termination of any other agreement with the franchisee due to a breach, a felony charge or conviction of the franchisee or any owner, or any act that could materially and unfavorably affect the Desi District brand can also result in termination without opportunity to cure.
These termination conditions are stricter than those found in many franchise agreements, where a cure period is often granted for a wider range of violations. The breadth of these conditions highlights the importance of franchisees understanding and adhering to all aspects of the franchise agreement to avoid potential immediate termination and its associated consequences.