Does the 'Development Business' for Chatime include the right to grant franchises?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
y, or other form of fiduciary relationship between Developer and Franchisor.
- (2) Neither party has the power to bind any other party except as authorized by this Agreement.
2 Grant of Rights and Development Obligations
2.1 Grant of Rights for Initial Term
- (1) Franchisor grants to Developer and Developer accepts:
- (a) The right to use the Intellectual Property in the conduct of Developer's operation of Chatime Stores in the Development Area;
- (b) The right to operate Chatime Stores in the Development Area on its own, for the Initial Term subject to the terms and conditions of this Agreement.
- (2) The rights granted to Developer pursuant to this Agreement are limited to the Development Area and apply only for the Initial Term. Developer acknowledges and agrees that it is not being granted any rights to franchise and that it will not operate or grant Franchises for Outlets in locations outside the Development Area and will ensure that Developer Affiliates do not operate or grant Franchises for Outlets in locations outside the Development Area.
2.2 Exclusivity
(1) Except as provided in clause 2.3, Franchisor will not operate or grant Franchises or other development rights for Outlets to any other party within the Development Area during the Initial Term.
(2) Upon the termination of this Agreement or expiration of the Initial Term (unless the parties enter into a new agreement which prohibits Franchisor from operating or granting Franchises), Franchisor and its Affiliates will be free to operate and grant Franchises for Outlets within the Development Area.
2.3 Rights Retained by Franchisor
- (1) Franchisor, on behalf of itself and its Affiliates, retains all rights with respect to Outlets, the Intellectual Property and the sale of Raw Materials and other Products and any other products and services, anywhere in the world including, without limitation, the rights to:
- (a) 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;
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a Developer is granted specific rights within a defined Development Area for an initial term. However, the agreement explicitly states that the Developer is not granted the right to franchise. This means the Developer cannot offer or award Chatime franchises to other parties within or outside their designated area. The Developer's rights are strictly limited to operating Chatime stores within their Development Area.
Chatime retains all rights to operate or grant others the right to operate outlets outside the Development Area. This includes the ability to franchise, license, sell, distribute, and market any services or products through various channels. Chatime also reserves the right to offer and sell franchising rights to Multi-Unit Developers located outside the Development Area.
This arrangement is typical in franchise development agreements, where the franchisor retains control over franchise expansion and the developer focuses on establishing and operating units within their assigned territory. Upon termination of the agreement, Chatime is free to operate and grant franchises within the former Development Area unless a new agreement prohibits it.