What conditions must be satisfied for Chatime's consent to be granted for a developer to sell their interest in the Developer's Operation?
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, the franchisor will not unreasonably withhold consent for a developer to sell their entire interest in the Developer's Operation if certain conditions are met. These conditions ensure that the new assignee is capable and suitable to continue the Chatime business.
First, the developer must prove to Chatime's satisfaction that the proposed assignee has the necessary financial resources to operate the business and service any related debts. The assignee must also be reputable, responsible, and possess the business experience and capabilities to successfully run the Developer's Operation, meeting Chatime's standards for new developers. Second, the developer must pay Chatime the applicable transfer fee. Third, the developer must not be in default of any agreements with Chatime at the time of seeking consent and when the assignment occurs.
Additionally, Chatime has the option to require the assignee to execute the then-standard development business agreement for the remaining term, or the developer and assignee can execute an assignment of rights and obligations under the existing agreement, using Chatime's required forms. If the assignee is a business entity, Chatime may require the directors, owners, or affiliates to provide personal guarantees, indemnities, and confidentiality/non-competition agreements similar to those of the original guarantor. Finally, the developer must provide Chatime with all details of the proposed assignment, including a copy of the contract that complies with Chatime's requirements and any other relevant agreements.