What are the conditions that must be satisfied for a Chatime franchisee's option to renew to be valid?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
(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.
(c) Franchisee pays the Renewal Outlet Fee to Franchisor in accordance with clause 6.4.
(d) Franchisee undertakes to the satisfaction of Franchisor any additional training required by Franchisor.
Franchisee must bear the full cost of attendance at such training, including all travel, accommodation and meal expenses and payment of any training fee charged by Franchisor.
(e) Franchisee and all guarantors required by Franchisor, executing and returning to Franchisor, Franchisor's current franchise agreement together with all other documents reasonably required by Franchisor, within 28 days of delivery to Franchisee.
(f) If required by Franchisor, Franchisee, Owners, and Guarantor execute general releases on terms satisfactory to Franchisor in its discretion, of any and all claims against Franchisor and its Affiliates and their respective shareholders, directors, officers, employees, agents, successors and assigns.
(g) Franchisee ensures that the Outlet which has been in operations for 5 or more years is renovated and refurbished (including replacing or upgrading any plant, equipment, fixtures, fittings and signs as Franchisor may reasonably require) in order to bring the Outlet up to the then-current standards and specifications of Franchisor for all new Outlets and to comply with any Legal Requirements.
(h) Franchisor confirming in writing to Franchisee that each of the conditions in these
clauses 2.6(3)(a) to 2.6(3)(g) have been satisfied.
(4) If the conditions specified in clauses 2.6(3)(a) to 2.6(3)(g) are not satisfied by the parties or waived by Franchisor prior to the expiration date of the Initial Term, then this Agreement will expire on the expiration date of the Initial Term and Franchisor will be free to operate and grant franchises and development rights for Outlets in the Territory.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a franchisee has the option to operate in the territory and enter into a new franchise agreement, subject to certain conditions. To exercise this option, the franchisee must provide written notice to Chatime between 8 and 12 months before the end of the initial term.
Several conditions must be met for the renewal option to be valid. First, the franchisee must have substantially complied with all material provisions of the existing franchise agreement throughout the initial term. Second, at the time the franchisee gives notice of their intent to renew and at the end of the initial term, there must be no outstanding breaches of the agreement or any collateral agreements that haven't been resolved.
Additionally, the franchisee must pay the Renewal Outlet Fee, which is 25% of the then-current New Outlet Fee. The franchisee must also complete any additional training required by Chatime to its satisfaction, bearing all associated costs like travel, accommodation, meals, and training fees. The franchisee and any required guarantors must execute and return Chatime's current franchise agreement and any other required documents within 28 days of receiving them. If required by Chatime, the franchisee, owners, and guarantor must execute general releases of all claims against Chatime. Finally, if the outlet has been in operation for five or more years, it must be renovated and refurbished to meet Chatime's current standards for new outlets and comply with all legal requirements. Chatime must confirm in writing that all these conditions have been met.
If these conditions are not satisfied or waived by Chatime before the initial term expires, the franchise agreement will terminate, and Chatime will be free to operate or grant franchises in the territory. This comprehensive set of requirements ensures that only franchisees in good standing and those willing to invest in maintaining brand standards are granted the opportunity to renew their franchise agreement.