Is the definition of 'MDA' the same as the definition of 'Disposal' for Chatime?
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 'MDA' (Multi-Unit Development Agreement) is not the same as the definition of 'Disposal.' The FDD provides separate definitions for each term within Item 17, which covers renewal, termination, transfer, and dispute resolution.
'Disposal' is defined in relation to the transfer of a franchise by a franchisee and includes any voluntary, involuntary, direct, or indirect sale, assignment, pledge, or transfer. It also covers transactions involving ownership interests that result in another party gaining legal or equitable control, rights to dividends, pre-emption rights, or control over voting rights. The definition of 'Disposal' is extensive, covering various scenarios where ownership or control of the franchise changes.
In contrast, the term 'MDA' has different meanings depending on the context. In the context of transfer by a franchisee, the definition of MDA is the same as above. However, MDA is also defined as a 'Restraint Period,' which is a two-year period following the expiration or termination of the Franchise Agreement within a specific geographic area. During this period, the franchisee is restricted from engaging in similar businesses or soliciting Chatime's customers or employees. This definition is relevant to non-competition covenants after the franchise is terminated or expires.
Therefore, a prospective Chatime franchisee should understand that 'MDA' and 'Disposal' are distinct terms with different implications. 'Disposal' relates to the transfer of ownership, while 'MDA' can refer to both the agreement itself and the post-termination non-compete period. Franchisees need to be aware of these definitions to fully understand their rights and obligations under the Franchise Agreement and the MDA.