What must a Chatime Developer establish to the Franchisor's satisfaction regarding the proposed assignment of the franchise?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
prior written consent, and without first offering to sell the Ownership Interest of Outlets (Business) to Franchisor in accordance with clause 11.4.
- (2) If an offer made by Developer pursuant to clause 11.2(1) is not accepted, Developer may sell or otherwise Dispose of its interest in the Developer's Operation subject to obtaining Franchisor's written consent which must not be unreasonably withheld if all of the conditions mentioned in clause 11.3 have been satisfied.
- (3) A request for Franchisor's consent under clause 11.2(2) must be made in writing.
11.3 Conditions to be Satisfied Before Assignment can be Approved
Franchisor must not unreasonably withhold its consent under clause 11.2(2) if the sale, assignment, or other Disposal is of the whole of Developer's interest in the Developer's Operation and each of the following conditions are satisfied:
- (1) Developer establishes to Franchisor's reasonable satisfaction that the proposed assignee (and its directors and Owners if the assignee is a business entity):
- (a) Possesses the financial resources necessary to conduct and operate Developer's Operation as a Developer and to service any borrowings it makes in order to acquire Developer's Operation;
- (b) Is a reputable and responsible and has the business experience and capabilities necessary to operate Developer's Operation successfully; and
- (c) Otherwise meets Franchisor's criteria for the selection of new Chatime developers;
- (2) Developer pays to Franchisor the Transfer Fee;
- (3) Developer, both when seeking consent to the assignment and when the assignment is to occur, is not in default under this Agreement or any Collateral Agreement;
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a Developer seeking to assign their interest in the Developer's Operation must establish several factors to Chatime's reasonable satisfaction. The proposed assignee (and its directors and Owners if the assignee is a business entity) must demonstrate that they possess the financial resources necessary to conduct and operate the Developer's Operation and to service any borrowings made to acquire the Operation. Additionally, the assignee must be reputable and responsible, possessing the business experience and capabilities needed to successfully operate the Developer's Operation. Finally, the assignee must meet Chatime's criteria for selecting new Chatime developers.
Furthermore, the Developer must provide Chatime with all details of the proposed assignment, including a copy of the applicable contract (which must comply with Chatime's requirements) and any other agreements between the Developer and the assignee. The Developer must also demonstrate to Chatime's reasonable satisfaction that the proposed assignment will not have a significantly adverse effect on the Chatime System or the Network. The Developer is also responsible for paying all of Chatime's costs associated with the request for consent to the transfer and sale, regardless of whether the assignment or sale is completed.
In addition to the assignee's qualifications and the provision of necessary documentation, the Developer must sell all essential assets used in the business to the assignee. The Developer and its Owners must also execute and deliver a general release in the form required under the then-current Franchise Agreement. These conditions ensure that the assignee is well-qualified and that Chatime's interests and the integrity of the franchise system are protected during the transfer of ownership.