Under what circumstances can Desi District Franchise Group terminate the franchise agreement without providing an opportunity to cure?
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 circumstances under which Desi District Franchise Group can terminate the franchise agreement without offering the franchisee an opportunity to cure the breach. These include misrepresentation or omission of material facts during the application process, or breaching any representation made in the agreement.
Desi District can also terminate the agreement without a cure period if the franchisee knowingly submits false reports or provides false information to Desi District. Further reasons for immediate termination involve financial instability, such as the appointment of a receiver or trustee for the business, making a general assignment for the benefit of creditors, being unable to pay debts, or facing bankruptcy petitions. Failure to open the business by the specified date, losing possession of the location, or committing certain violations related to legal compliance, confidentiality, non-competition, or transfer of the franchise also constitute grounds for termination without a cure period.
Additional causes for termination without cure include abandoning the business for more than five consecutive days, slandering or libeling Desi District or its employees, refusing to cooperate with audits or inspections, operating the business in a way that endangers health or safety without rectifying the issue, receiving two or more default notices within a 12-month period and then committing another breach, or the termination of any other agreement with the franchisee (with an exception for Multi-Unit Development Agreements). Finally, being charged with, pleading guilty to, or being convicted of a felony, or being accused of or committing acts that could negatively affect the Desi District brand, can also lead to termination without an opportunity to cure.
These stipulations in the franchise agreement highlight the importance of honesty, legal and financial responsibility, and adherence to the franchisor's standards for franchisees. A prospective franchisee should carefully consider these conditions and ensure they are capable of meeting these obligations to avoid potential termination of their franchise agreement.