What is the condition for Chatime to collect transfer fees?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor must not unreasonably withhold its consent under clause 11.2(2) if the sale, assignment, or other Disposal is of the whole of Developer's interest in the Developer's Operation and each of the following conditions are satisfied:
(1) Developer establishes to Franchisor's reasonable satisfaction that the proposed assignee (and its directors and Owners if the assignee is a business entity):
- (a) Possesses the financial resources necessary to conduct and operate Developer's Operation as a Developer and to service any borrowings it makes in order to acquire Developer's Operation;
- (b) Is a reputable and responsible and has the business experience and capabilities necessary to operate Developer's Operation successfully; and
- (c) Otherwise meets Franchisor's criteria for the selection of new Chatime developers;
(2) Developer pays to Franchisor the Transfer Fee;
(3) Developer, 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 development business agreement for the balance remaining of the Initial Term (including any existing option for a New Term); or
(b) Developer and the assignee execute an assignment of Developer's rights and obligations under this Agreement to the assignee in a form required by Franchisor,
and Developer and the assignee execute any other documents then used by Franchisor for the grant of Chatime development business;
- (5) When the assignee is a business entity, those directors and Owners or other Affiliates of the assignee nominated by Franchisor each:
- (a) Execute 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 a form required by, Franchisor; and
- (b) Execute and deliver a confidentiality and non-competition agreement in the Franchisor's then-current form.
(6) Developer:
(a) Gives to Franchisor all details of the proposed assignment including a copy of the applicable contract (which must comply with Franchisor's requirements) and any other agreements between Developer and the assignee.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, Chatime can collect a transfer fee from a developer if the developer is selling their entire interest in the Developer's Operation and satisfies certain conditions.
First, the developer must prove to Chatime's satisfaction that the proposed assignee has the financial resources, business experience, and capabilities to operate the business successfully and meets Chatime's criteria for new developers. Second, the developer must pay Chatime the Transfer Fee. According to section 1.1 (67), the Transfer Fee is $10,000. Third, the developer must not be in default under the Development Agreement or any related agreements when seeking consent for the assignment and when the assignment occurs.
Additionally, Chatime has the option to require the assignee to execute Chatime's standard development business agreement or have the developer and assignee execute an assignment of the developer's rights and obligations. If the assignee is a business entity, its directors and owners nominated by Chatime must provide personal guarantees, indemnities, and confidentiality/non-competition agreements. Finally, the developer must provide Chatime with all details of the proposed assignment, including a copy of the contract.
These conditions ensure that Chatime maintains control over who becomes a developer within their system and that the new developer is qualified and committed to the Chatime brand. The $10,000 transfer fee compensates Chatime for the administrative and legal costs associated with reviewing and approving the transfer.