Does the definition of 'Disposal' for a Chatime franchise include acquiring any right to directly or indirectly receive any dividends payable from the ownership interest?
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. | ||
| MDA: | Same | |
| §1.1(24) | as above. | |
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, the definition of "Disposal" related to a franchisee's ownership interest does include acquiring any right to directly or indirectly receive dividends payable from that ownership interest. This falls under the broader context of what constitutes a "Transfer" of the franchise.
Specifically, the FDD states that a "Disposal" includes entering into a transaction where someone other than the registered holder of the ownership interest acquires the right to receive dividends. This means that if a franchisee enters into an agreement that allows another party to receive the dividends from their Chatime franchise, it is considered a disposal and therefore a transfer.
This is significant because Chatime franchisees are restricted in their ability to transfer their franchise without the franchisor's approval. Item 17 outlines the conditions under which Chatime may approve or deny a transfer, including the payment of transfer fees, the transferee meeting Chatime's standards, and the transferee signing Chatime's current franchise agreement. Therefore, franchisees must seek approval from Chatime before entering into any agreement that would allow another party to receive dividends from their franchise ownership.