What action must a Chatime franchisee take if requested by the franchisor regarding the Confidentiality and Non-Competition Agreements?

According to Chatime's 2025 Franchise Disclosure Document, a franchisee must ensure that their Managing Owner, Operating Manager, and any other management personnel execute and deliver a Confidentiality and Non-Competition Agreement in the form attached as Exhibit 4. Furthermore, at Chatime's request, the franchisee must submit a copy of all such written agreements. The franchisee is also responsible for ensuring that each person complies with the terms of the agreement during their employment or association with the franchised business. Any breach of the agreement by these individuals will be deemed a breach of the Franchise Agreement by the franchisee.

This requirement places a significant responsibility on the Chatime franchisee to manage and oversee their personnel. It is not enough to simply have the agreements signed; the franchisee must actively ensure compliance. This includes monitoring employee behavior and taking appropriate action if a breach is suspected. The franchisee should also familiarize themselves with the terms of Exhibit 4 to fully understand the scope of the confidentiality and non-competition obligations.

This clause is fairly standard in franchising, as franchisors need to protect their confidential information and business systems. However, the burden of enforcement typically falls on the franchisor. In this case, Chatime places the initial burden on the franchisee, which could lead to increased legal and administrative costs for the franchisee if breaches occur. Prospective franchisees should carefully review Exhibit 4 and discuss these obligations with Chatime to fully understand their responsibilities and potential liabilities.