What is considered a 'Disposal' in the context of a Chatime franchise transfer?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
| k. "Transfer" by | FA: §1.1(16); §13 | Defined as a "Disposal." Disposal includes any |
|---|---|---|
| franchisee | voluntary, involuntary, direct, or indirect sale, | |
| – | ||
| defined | ||
| assignment, pledge, bequeath, trade, or transfer. | ||
| In | ||
| relation | ||
| to | ||
| a | ||
| business | ||
| entity, | ||
| Disposal | ||
| includes | ||
| entering | ||
| into a transaction in relation to an ownership interest | ||
| that | ||
| results | ||
| in | ||
| a | ||
| person | ||
| other | ||
| than | ||
| the | ||
| registered | ||
| holderof the ownership interest (i) acquiring any legal | ||
| or equitable | ||
| interest in the ownership interest | ||
| including an | ||
| equitable | ||
| interest arising | ||
| from a | ||
| declaration | ||
| of | ||
| trust, an agreement for sale and purchase | ||
| or an option agreement or an agreement creating a | ||
| charge or other encumbrance in the ownership interest, | ||
| (ii) acquiring any | ||
| right | ||
| to | ||
| directly | ||
| or | ||
| indirectly | ||
| receive | ||
| any | ||
| dividends payable | ||
| from | ||
| the | ||
| ownership | ||
| interest, | ||
| (iii) | ||
| acquiring | ||
| any rights | ||
| of | ||
| pre- | ||
| emption, | ||
| first | ||
| refusal, | ||
| or | ||
| like | ||
| control | ||
| over the ownership interest, (iv) acquiring | ||
| any rights of control over the exercise of any voting | ||
| rights or rights to | ||
| appoint | ||
| directors | ||
| attaching | ||
| to | ||
| the | ||
| ownership | ||
| interest, or (v) otherwise acquiring legal or | ||
| equitable rights against the registered holder of the | ||
| ownership interest which | ||
| have | ||
| the | ||
| effect | ||
| of | ||
| placing | ||
| the | ||
| person | ||
| in | ||
| the | ||
| same position as if the person had | ||
| acquired a legal or equitable interest in the ownership | ||
| interest. |
Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 43–52)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a 'Disposal' is defined as any voluntary, involuntary, direct, or indirect sale, assignment, pledge, bequeath, trade, or transfer by a franchisee. This definition is crucial for franchisees to understand because any action that falls under this broad definition is considered a transfer of the franchise, triggering certain requirements and potential restrictions outlined in the FDD.
For business entities, a 'Disposal' includes entering into a transaction related to an ownership interest that results in a person other than the registered holder acquiring legal or equitable interest. This includes acquiring any right to receive dividends, pre-emption, first refusal, or control over voting rights. It also covers acquiring legal or equitable rights that place a person in the same position as if they had acquired a legal or equitable interest in the ownership interest.
This definition is important because it clarifies the scope of activities that Chatime considers a transfer, ensuring that franchisees are aware of when they need to seek franchisor approval and comply with transfer conditions. The comprehensive nature of the definition aims to prevent franchisees from circumventing the transfer requirements through indirect means. Franchisees should carefully review this definition and consult with legal counsel to ensure they fully understand their obligations when considering any action that could be construed as a 'Disposal' of their franchise interest.