Does the definition of 'Disposal' for a Chatime franchise include acquiring any rights of pre-emption, first refusal, or like control over the ownership interest?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
have no further obligation under your MDA except for any accrued liabilities. |
| 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. | |
| l. Franchisor approval | FA: §13.2 | You may only transfer a direct or indirect interest in your |
| of | Franchise Agreement with our prior written consent, | |
| transfer | ||
| by | ||
| franchisee | ||
| which will not be unreasonably withheld. | ||
| MDA: §11.2 | You may only transfer a direct or indirect interest in your | |
| MDA | ||
| with our prior written consent, which will not be | ||
| unreasonably withheld. | ||
| m. |
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" in the context of a business entity explicitly includes acquiring rights of pre-emption, first refusal, or similar control over the ownership interest. This definition is important because a "Transfer" by a franchisee is defined as a "Disposal."
This means that any transaction that results in someone acquiring rights of pre-emption, first refusal, or like control over the ownership interest in the Chatime franchise is considered a transfer. This could include various agreements or arrangements, not just outright sales.
For a prospective Chatime franchisee, this definition has significant implications. It means that they need to be aware of any agreements or actions that could be interpreted as giving someone else control over their ownership interest, as this would be considered a transfer and subject to Chatime's approval and conditions. This also means Chatime has a right of first refusal if a franchisee wants to sell their franchise.