What is a 'Developer Affiliate' in the context of a Chatime franchise?

According to Chatime's 2025 Franchise Disclosure Document, a 'Developer Affiliate' is defined as an affiliate of the Developer (the franchisee) that is either partially (more than 50%) or wholly-owned by the Developer. This definition is important in understanding the scope and limitations of the agreement between Chatime and the Developer.

This definition clarifies which entities are considered related to the Developer for the purposes of the franchise agreement. This is particularly relevant when considering the rights and obligations of the Developer, especially concerning territorial rights, operational standards, and any potential restrictions or benefits outlined in the agreement. For example, the agreement specifies that the Developer must ensure that Developer Affiliates do not operate or grant franchises for outlets outside the Development Area.

Furthermore, the FDD specifies that if the Developer, a Developer Affiliate, Franchisee, or Guarantor breaches clause 7.2 or 7.3, the Developer must account for and pay to Chatime all compensation, profits, monies, accruals, increments, or other benefits derived or received as a result of any such breach. This highlights the importance of understanding the definition of 'Developer Affiliate' as it extends the Developer's responsibilities and potential liabilities to entities they control.

In practical terms, a prospective Chatime franchisee who plans to involve other business entities in their franchise operations needs to carefully consider this definition. They should ensure that any entity falling under this definition is fully aware of and compliant with the terms and conditions of the franchise agreement to avoid potential breaches and liabilities.