What is the definition of 'MDA' in relation to franchise transfer for Chatime?
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. | |
| 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. Conditions of | FA: §13.3 | We may impose any of the following conditions on our |
| franchisor | approval of your proposed transfer: (i) you establish to | |
| approval | ||
| of | ||
| transfer | our | |
| reasonable | ||
| satisfaction | ||
| that | ||
| the | ||
| transferee | ||
| meets | ||
| our | ||
| standards, (ii) you pay us a Transfer Fee and any other | ||
| legal and administrative costs we incur related to the | ||
| transfer, (iii) you are not in default of any agreement | ||
| between us or our affiliates, (iv) the transferee signs | ||
| our then-current form of Franchise Agreement, or you | ||
| and the transferee execute an assignment in the form | ||
| we require, (v) the transferee provide a guarantee and | ||
| indemnity in our favor in a form we require, (vi) the | ||
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' in relation to franchise transfer is the same as the definition of 'Disposal.' Disposal is defined as any voluntary, involuntary, direct, or indirect sale, 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 holder of the ownership interest acquiring any legal or equitable interest in the ownership interest.
This definition extends to various scenarios, including acquiring rights to receive dividends, rights of pre-emption, control over voting rights, or any legal or equitable rights that place a person in the same position as if they had acquired a legal or equitable interest in the ownership interest. This broad definition ensures that any form of transfer or change in ownership control is covered under the franchise agreement.
Chatime requires prior written consent for any transfer of a direct or indirect interest in the MDA, which will not be unreasonably withheld. Additionally, Chatime has the right of first refusal to acquire the MDA if a franchisee intends to sell or transfer any ownership interest to a third party, allowing Chatime to maintain control over its franchise network. Chatime may also impose conditions on the approval of a proposed transfer, such as ensuring the transferee meets Chatime's standards, payment of a transfer fee, and the transferee signing the current form of MDA.