What is the dependency for Chatime to be liable for the tenant's obligations under the lease?

According to Chatime's 2025 Franchise Disclosure Document, Chatime's liability for a tenant's obligations under a lease is dependent on Chatime becoming the tenant through either an assignment of the existing lease or by entering into a new lease with the landlord.

Specifically, the Lease Addendum states that "notwithstanding any terms or conditions contained in this Agreement or any other agreement, Franchisor shall in no way be construed as a guarantor or surety of Tenant's obligations under the Lease." This means that under normal circumstances, Chatime is not responsible for the financial obligations of its franchisees related to their leases.

However, there is an exception: "in the event Franchisor becomes the tenant by assignment of the Lease in accordance with the terms hereof or enters into a new lease with Landlord, then Franchisor shall be liable for all obligations of Tenant on its part to be performed or observed under the Lease or a new lease." This clause indicates that if Chatime takes over the lease from the franchisee, either by assignment or by creating a new lease directly with the landlord, Chatime assumes the tenant's responsibilities and liabilities under the lease agreement.

This arrangement protects Chatime from being automatically responsible for a franchisee's lease obligations, while also providing a mechanism for Chatime to potentially take over a location if a franchisee defaults or leaves the system. For a prospective franchisee, this means they are solely responsible for their lease unless Chatime specifically assumes the lease through assignment or a new agreement.