Does Chatime or its affiliates currently derive revenue from required purchases by franchisees, other than as described?

According to Chatime's 2025 Franchise Disclosure Document, Chatime states that neither they nor their affiliates currently derive revenue or other material consideration from required franchisee purchases, except as already described in the document. However, it's important to note that earlier in the document, Chatime discloses that in 2024, their affiliates had revenue of $396,652.37 from required purchases and leases of products and services by franchisees. This revenue comes from franchisees being required to purchase or lease products, ingredients, goods, supplies, equipment, inventory, insurance, payroll service, real estate and project management services, and accounting services from Chatime or its approved suppliers, which may include Chatime's affiliates.

Chatime and its affiliates derive revenue from franchisee purchases of products, supplies, signs, uniforms, and other products and services. They may also receive promotional allowances, volume discounts, commissions, rebates, and other payments from suppliers, vendors, accounting services, and insurance providers. Some suppliers may pay fees to Chatime and/or its affiliates for products or services purchased through negotiated agreements, and this willingness to pay fees may be a condition for supplier approval. Chatime and its affiliates can use these amounts received from suppliers without restriction for any purposes they deem appropriate.

The commissions, rebates, or fees Chatime receives from franchisee purchases from suppliers, vendors, payroll service, real estate and project management services, accounting services, or insurance providers may cause the price for such products or services to be higher than market value. Franchisees are required to purchase or lease all of their products, ingredients, goods, supplies, equipment, inventory, insurance, payroll service, real estate and project management services, and accounting services from Chatime or one of its approved suppliers, which may be one of its affiliates. La Kaffa and Chatime Wholesale LLC are currently the only approved suppliers for certain products and supplies such as ingredients, supplies, and equipment, and officers of Chatime own an indirect ownership interest in these companies.

Prospective franchisees should carefully review Item 8 of the FDD and related sections to fully understand the potential for conflicts of interest and the financial implications of these required purchases. It is essential to inquire about the specific markups or fees Chatime and its affiliates receive from these purchases and how these costs compare to market rates. Understanding these revenue streams is crucial for assessing the overall profitability and financial viability of a Chatime franchise.