Who bears the costs associated with the Chatime franchisor's consent to the transfer of the franchise?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor must not unreasonably withhold its consent under clause 13.2(2) if the sale, assignment or other Disposal is of the whole of Franchisee's interest in the Franchise and the Franchised Business and each of the following conditions are satisfied:
- (1) Franchisee establishes to Franchisor's reasonable satisfaction that the proposed assignee (and its Owners and directors if the assignee is a company):
- (a) Possesses the financial resources necessary to conduct and operate the Franchised Business as a franchisee and to service any borrowings it makes in order to acquire The Franchised Business;
- (b) Is a reputable and responsible party and has the business experience and capabilities necessary to operate the Franchised Business successfully; and
- (c) Otherwise meets Franchisor's criteria for the selection of new Chatime franchisees;
- (2) Franchisee pays to Franchisor the Transfer Fee;
- (3) Franchisee, both when seeking consent to the assignment and when the assignment is to occur, is not in default under this Agreement or any Collateral Agreement;
- (4) At the option of Franchisor:
- (a) The assignee executes Franchisor's then-standard form franchise agreement for the balance remaining of the Initial Term (including any existing option for a New Term); or
- (b) Franchisee and the assignee execute an assignment of Franchisee's rights and obligations under this Agreement to the assignee in a form required by Franchisor,
and Franchisee and the assignee execute any other documents then used by Franchisor for the grant of Chatime franchises;
- (5) When the assignee is a company, those directors and shareholders or other Affiliates of the assignee nominated by Franchisor each:
- (a) Executed and deliver a personal guarantee and indemnity and undertake similar personal restraints to those given by Guarantor under this Agreement in favor of, and in the form attached as Exhibit 3;
- (b) Executed and deliver a confidentiality and non-competition agreement in the form attached as Exhibit 4; and
- (c) Execute the new franchise agreement or assignment in their personal capacities;
- (6) The assignee's proposed manager is approved by Franchisor and successfully completes
Franchisor's required training program;
(7) Franchisee:
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, the franchisee is responsible for paying the transfer fee to the franchisor when seeking consent to transfer the franchise. This means that if a franchisee decides to sell their Chatime business to a new owner, they must pay a fee to Chatime to obtain their approval for the transfer.
In addition to the transfer fee, the franchisee is also responsible for ensuring that the proposed assignee meets Chatime's criteria for new franchisees. This includes demonstrating the financial resources to operate the business and service any debt, having a reputable business background, and meeting Chatime's overall selection criteria. The assignee's proposed manager must also be approved by Chatime and successfully complete the required training program.
Furthermore, the franchisee must ensure they are not in default of the Franchise Agreement or any related agreements when seeking consent for the assignment and when the assignment occurs. The franchisor has the option to require the assignee to execute Chatime's current standard franchise agreement or an assignment of the franchisee's rights and obligations. The franchisee is responsible for ensuring all necessary documents are executed.
In summary, the franchisee bears the costs associated with the transfer of the franchise, including the transfer fee and ensuring the assignee meets all requirements set by Chatime. This is a standard practice in franchising, as the franchisor needs to ensure that any new franchisee is qualified and capable of maintaining the brand's standards.