Under what conditions can a lien on a Desi District business be contested to avoid termination?
Desi_District Franchise · 2024 FDDAnswer from 2024 FDD Document
- (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;
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Desi District Franchise Disclosure Document, a franchisee can contest a lien on their business to avoid termination of the franchise agreement if the lien is being duly contested in good faith. Specifically, if an attachment or lien remains on the Desi District business for 30 days, this can be grounds for termination of the franchise agreement.
However, Desi District provides an exception to this rule. If the franchisee is actively and genuinely disputing the lien through appropriate legal channels, the franchisor will not terminate the agreement. This good faith contest must be underway to prevent Desi District from terminating the agreement based on the existence of the lien.
This provision protects franchisees from involuntary termination due to circumstances beyond their immediate control, such as unexpected legal claims. However, it places the onus on the franchisee to demonstrate they are actively challenging the lien through legitimate means. A prospective franchisee should consult with a legal professional to understand what constitutes a 'duly contested' lien and the necessary steps to take to protect their business.