What costs are deducted from the refund if a Chatime franchisee terminates the agreement during the cooling-off period?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
s employees and agents against all damages, sums of money, costs, charges, expenses, actions, claims, liabilities, injuries, and demands made against or suffered by Franchisor, its employees, and agents for the period Franchisor operates and manages the Franchise pursuant to this clause 14.
15 Termination of Agreement
- 15.1 Franchisee may terminate during cooling off period as follows:
- (1) Franchisee may terminate this Agreement by giving written notice to Franchisor within 7 days of the date of this Agreement.
- (2) If Franchisee terminates this Agreement in accordance with clause 15.1(1), Franchisor must, within 14 days after receiving the notice of termination, return all payments (whether of money or other valuable consideration) made by Franchisee to Franchisor under this Agreement less the following amounts which constitute the reasonable Costs of Franchisor in connection with the grant of this Agreement:
- (a) 20% of the New Outlet Fee representing the reasonable Costs of Franchisor in relation to the selection and induction of Franchisee;
- (b) The amount of $5,000 representing the reasonable Costs of F
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 right to terminate the agreement within 7 days of signing. If a franchisee exercises this right, Chatime is obligated to return all payments made under the agreement within 14 days of receiving the termination notice. However, Chatime can deduct certain costs to cover their expenses.
The costs that Chatime can deduct from the refund include 20% of the New Outlet Fee, which covers the expenses related to the selection and induction of the franchisee. Additionally, Chatime can deduct a fixed amount of $5,000 to cover the costs associated with the instructions, negotiation, preparation, and execution of the Franchise Agreement and any related collateral agreements.
Finally, Chatime can also deduct all reasonable costs associated with the training of the franchisee. This includes any payments made to the franchisee by Chatime during the training period. This means that the franchisee will not be fully reimbursed for all payments made, as Chatime retains a portion to cover its administrative and training expenses incurred during the initial phase of the franchise agreement.