In the context of Chatime franchise termination, who is considered a 'Defaulting Party'?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
13.3 Termination by Franchisor
(1) Franchisor may terminate this Agreement if:
- (a) Developer or Guarantor (Defaulting Party) breaches any provision of this Agreement or any Collateral Agreement;
- (b) Franchisor gives to the Defaulting Party a written notice that:
- (i) Specifies the breach;
- (ii) Tells the Defaulting Party what Franchisor wants the Defaulting Party to do to remedy the breach;
- (iii) Gives the Defaulting Party a reasonable time (which can be any number of days between 3 days and 30 days) to remedy the breach; and
- (iv) States that Franchisor proposes to terminate this Agreement and the Franchise if the breach is not remedied within that time; and
- (c) The Defaulting Party does not remedy the breach within the time allowed by a notice issued under clause 13.3(1)(b).
(2) If the breach is remedied in accordance with, and within the time allowed by, a notice issued under clause 13.3(1)(b), Franchisor cannot terminate this Agreement because of that breach.
(3) If Developer does not perform or observe any obligation under this Agreement Franchisor may, but does not have to, remedy that default.
In doing so, Franchisor is entitled to rely on the power of attorney in clause 21.
(4) Notwithstanding any other provision in this clause 13, Franchisor may terminate this Agreement immediately upon written notice to Developer if:
(a) The Defaulting Party breaches any provision under clause 6 (Initial and Continuing Fees), 9.2 (No other business interests) or 9.3 (Restraint applies to conduct in any capacity).
(b) A force majeure event (as referred to in clause 20) continues for more than 180 days;
(c) Developer voluntarily abandons Developer's Operation;
(d) Developer or a Guarantor is convicted of a serious offense;
(e) Developer's Operation is operated in a way that endangers public health or safety;
(f) Developer is fraudulent in connection with the operation of Developer's Operation;
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a 'Defaulting Party' refers to the Developer or Guarantor who breaches any provision of the Franchise Agreement or any Collateral Agreement. This definition is crucial in understanding the circumstances under which Chatime can terminate the franchise agreement.
Specifically, Chatime can issue a written notice to the Defaulting Party, specifying the breach, outlining the necessary steps to remedy it, and setting a reasonable timeframe (between 3 and 30 days) for the Defaulting Party to take corrective action. The notice will also state Chatime's intention to terminate the agreement if the breach is not resolved within the given timeframe. If the breach is remedied within the specified time, Chatime cannot terminate the agreement based on that particular breach.
However, Chatime has the right to terminate the agreement immediately upon written notice if the Defaulting Party breaches certain critical provisions, including those related to initial and continuing fees, engaging in other business interests without approval, or violating non-compete obligations. Immediate termination is also possible if a force majeure event continues for more than 180 days, the Developer voluntarily abandons operations, the Developer or a Guarantor is convicted of a serious offense, the operation endangers public health or safety, or the Developer engages in fraudulent activities related to the operation.