Does the definition of 'Disposal' for a Chatime franchise include involuntary sales?
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, the definition of "Disposal" includes involuntary sales. The FDD specifies that a Disposal includes any voluntary, involuntary, direct, or indirect sale, assignment, pledge, bequeath, trade, or transfer.
This definition is important for prospective Chatime franchisees because it clarifies that any transfer of ownership, whether voluntary or forced, is considered a Disposal under the franchise agreement. This has implications for how a franchisee can exit the business, and what rights Chatime has in the event of a transfer.
Chatime maintains certain rights over franchise transfers. The franchisee must first offer to sell the ownership interest to Chatime on the same terms and conditions offered by a third party. Additionally, Chatime's approval is required for any transfer of interest in the Franchise Agreement or MDA, which will not be unreasonably withheld. Chatime may also impose conditions on the approval of a transfer, such as ensuring the transferee meets Chatime's standards, payment of a transfer fee, and that the transferee signs the current franchise agreement.