What is a 'Collateral Agreement' in the context of a Chatime franchise agreement?

According to Chatime's 2025 Franchise Disclosure Document, a Collateral Agreement refers to any agreement between the franchisor and franchisee, or between the franchisee and an affiliate of the franchisor, that is connected to the franchise agreement and the franchised business. This definition is important for prospective franchisees to understand, as these agreements are legally binding and can impact their rights and obligations.

Chatime emphasizes the importance of adhering to the terms and conditions outlined in any Collateral Agreement. A breach of any Collateral Agreement is considered a breach of the main franchise agreement itself. This means that failing to comply with a Collateral Agreement can have serious consequences, potentially leading to penalties, legal action, or even termination of the franchise agreement.

Several clauses within the Chatime franchise agreement reference Collateral Agreements, highlighting their significance. For instance, franchisees must not be in default under the franchise agreement or any Collateral Agreement when seeking consent for assignment. Additionally, the indemnity clause states that franchisees must indemnify Chatime against losses or liabilities resulting from a breach of the franchise agreement or any Collateral Agreement. These references underscore the need for franchisees to carefully review and understand all Collateral Agreements associated with their franchise.