On whom is the agreement binding regarding the Chatime franchise?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
1.4 Relationship of Parties
- (1) Nothing in this Agreement constitutes a partnership, joint venture, agency, or other form of fiduciary relationship between Franchisee and Franchisor.
- (2) Neither party has the power to bind any other party except as authorized by this Agreement.
2 Grant of Rights and Development Obligations
2.1 Grant of Rights for Initial Term
- (1) Franchisor grants to Franchisee and Franchisee accepts the right to use the Intellectual Property in the conduct of the Franchised Business at the Premises for the Initial Term, subject to the terms and conditions of this Agreement.
- (2) Franchisee may itself own or operate one and only one Outlet in the Territory and only at the Premises.
- (3) The rights granted to Franchisee pursuant to this Agreement are limited to the Premises and apply only for the Initial Term. Franchisee acknowledges and agrees that it is not being granted any rights to franchise and that it will not operate or grant Franchises, nor solicit prospective franchisees, whether in or outside the Territory.
2.2 Designated Territory
(1) During the term of the Franchise, we will not establish or operate, or grant any person other than you the right to establish or operate, a Chatime Store at any location in the Territory, except as may be provided in Section 2.3.
2.3 Rights Retained by Franchisor
(1) Franchisor, on behalf of itself and its Affiliates, retains all rights with respect to Outlets, the Intellectual Property and the sale of Raw Materials and other Products and any other products and services, anywhere in the world including, without limitation, the rights to:
- (a) operate or grant others the right to operate Outlets under or in association with the Marks or any other trademarks or service marks at such locations outside the Territory, and on such terms and conditions as Franchisor, in its sole discretion, deems appropriate;
(b) provide, franchise, license, sell, distribute and market any services or products (under any brand, including but not limited to our Marks) through any Special Distribution Channels, in or outside your Territory, including, without limitation, through airports, train stations, hotels, convention centers, sport complexes, hospitals, or festivals.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
Based on the 2025 Chatime Franchise Disclosure Document, the franchise agreement primarily binds the franchisee and the franchisor, Chatime Franchise, LLC. The agreement grants the franchisee the right to use Chatime's intellectual property to operate a franchised business at a specific location for a defined initial term, subject to the terms and conditions outlined in the agreement. The franchisee is generally limited to owning and operating only one outlet within their designated territory.
Chatime retains significant rights, including the right to operate or franchise other outlets outside the franchisee's territory and to market products and services through various channels. The agreement explicitly states that neither party has the power to bind the other, except as authorized within the agreement itself, clarifying that there is no partnership, joint venture, agency, or fiduciary relationship established between Chatime and the franchisee.
Amendments to the franchise agreement, such as those for Illinois, New York, and North Dakota, further specify the binding nature of the agreement, particularly in relation to state laws. These amendments ensure that franchisees' rights are protected under state franchise laws and that certain provisions, such as choice of law and non-compete clauses, are interpreted in accordance with state regulations. The receipt section of the FDD also emphasizes the importance of the document summarizing the franchise agreement and other information, reinforcing that the agreement is the primary binding document between Chatime and the franchisee.