Is the Developer permitted to grant franchises for Chatime Outlets outside of the Development Area?

According to Chatime's 2025 Franchise Disclosure Document, a Developer is explicitly prohibited from granting franchises for Chatime Outlets outside of their designated Development Area. The agreement specifies that the rights granted to the Developer are strictly limited to the Development Area for the Initial Term. The Developer acknowledges and agrees they cannot operate or grant franchises for outlets beyond this area, and they must ensure their affiliates also adhere to this restriction. This condition remains in effect for the duration of the Initial Term.

This restriction is a significant factor for potential Developers, as it defines the geographical scope of their franchising rights. Chatime retains the right to operate or grant others the right to operate Outlets under or in association with the Marks or any other trademarks or service marks at such locations outside the Development Area, and on such terms and conditions as Franchisor, in its sole discretion, deems appropriate. This means Chatime can establish Chatime stores outside the developer's territory, including locations near, on, or adjacent to the Development Area's boundaries.

Chatime also retains various rights outside the Development Area, including the right to offer and sell franchising rights to Multi-Unit Developers located outside the Development Area. They can also provide, franchise, license, sell, distribute and market any services or products through any Special Distribution Channels, in or outside your Development Area, including, without limitation, through airports, train stations, hotels, convention centers, sport complexes, hospitals, or festivals. These retained rights allow Chatime to expand and manage its brand presence independently of the Developer's activities, which could potentially impact the Developer's long-term growth opportunities.

Prospective developers should carefully consider these limitations and how they align with their expansion goals. Understanding the specific boundaries of the Development Area and Chatime's retained rights is crucial for assessing the potential and risks associated with this franchise opportunity. Developers should discuss with Chatime the criteria used for defining and modifying Development Areas and the potential for future expansion opportunities beyond the initial territory.