Who bears the costs and expenses for Chatime's evaluation of a franchisee's request for a new alternate supplier?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- (2) If Franchisee requests approval of a new alternate supplier, Franchisee shall provide Franchisor with samples of the proposed alternate supplier's product, all information and back-up documentation requested by Franchisor concerning the proposed alternate supplier and its products, and access to inspect the proposed alternate supplier's production facilities, and Franchisee shall pay Franchisor for all of its costs and expenses in evaluating and deciding upon the request, including without limitation out of pocket expenses, compensation for the time spent evaluating the request, and overhead expenses.
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 covering all costs and expenses associated with Chatime's evaluation of a request for a new alternate supplier. This includes out-of-pocket expenses, compensation for the time Chatime spends evaluating the request, and overhead expenses.
In practical terms, if a Chatime franchisee wants to use a different supplier than those already approved by Chatime, they must not only find the alternate supplier but also pay for Chatime to assess and potentially approve that supplier. This assessment can involve providing product samples, detailed documentation, and access to the supplier's production facilities for inspection.
This requirement places a significant financial burden on the franchisee. The costs can be unpredictable and potentially substantial, depending on the complexity of the evaluation and the location of the proposed supplier. It is important for prospective franchisees to factor in these potential costs when considering their operating budget and to discuss with Chatime the typical expenses involved in such an evaluation.
This arrangement is not uncommon in franchising, as franchisors need to maintain quality control and protect their brand standards. However, the extent of the franchisee's financial responsibility can vary. Therefore, it is crucial for potential Chatime franchisees to fully understand this obligation and its potential financial impact.