What is a condition for Chatime's Developer to exercise the option for a new term?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
(1) Franchisor grants to Franchisee the option to:
(a) Operate as Franchisee in the Territory; and
(b) Enter into a new franchise agreement with Franchisor (based on Franchisor's thencurrent franchise agreement), for the New Term subject to the conditions set out in these clauses 2.6(1) to 2.6(4) (the Option).
(2) Franchisee must notify Franchisor in writing of its intention to exercise the Option not more than 12 Months and not less than 8 Months prior to the end of the Initial Term.
(3) Franchisee's Option pursuant to clause 2.6(2) is subject to all of the following conditions being satisfied:
(a) Franchisee has substantially complied with all material provisions of this Agreement throughout the Initial Term.
(b) At the date of giving Franchisor notice of its intention to exercise the Option and as at the end of the Initial Term, there is no outstanding breach of this Agreement or any Collateral Agreement which has not been remedied.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a Developer's option to operate as a franchisee in the territory and enter into a new franchise agreement for a new term is contingent upon several conditions. One key condition is that the Developer must have substantially complied with all material provisions of the existing agreement throughout the initial term. This means the Developer must have adhered to the core requirements and obligations outlined in the franchise agreement.
Another condition is that, both at the time of notifying Chatime of the intention to exercise the option and at the end of the initial term, there must be no outstanding breach of the agreement or any collateral agreements that have not been resolved. This implies that any violations or failures to meet the terms of the agreement must be corrected before the option can be exercised.
Furthermore, the Developer is required to notify Chatime in writing of their intent to exercise the option within a specific timeframe: not more than 12 months and not less than 8 months prior to the end of the initial term. This notification period allows Chatime to assess the Developer's compliance and make necessary arrangements for the new term. These conditions ensure that only Developers who have demonstrated a commitment to fulfilling their obligations and maintaining a positive relationship with Chatime are granted the opportunity to continue operating under a new agreement.