What is the first step a Chatime franchisee must take if they want to sell the franchised business?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor must not unreasonably withhold its consent under clause 13.2(2) if the sale, assignment or other Disposal is of the whole of Franchisee's interest in the Franchise and the Franchised Business and each of the following conditions are satisfied:
- (1) Franchisee establishes to Franchisor's reasonable satisfaction that the proposed assignee (and its Owners and directors if the assignee is a company):
- (a) Possesses the financial resources necessary to conduct and operate the Franchised Business as a franchisee and to service any borrowings it makes in order to acquire The Franchised Business;
- (b) Is a reputable and responsible party and has the business experience and capabilities necessary to operate the Franchised Business successfully; and
- (c) Otherwise meets Franchisor's criteria for the selection of new Chatime franchisees;
- (2) Franchisee pays to Franchisor the Transfer Fee;
- (3) Franchisee, 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;
- (4) At the option of Franchisor:
- (a) The assignee executes Franchisor's then-standard form franchise agreement for the balance remaining of the Initial Term (including any existing option for a New Term); or
- (b) Franchisee and the assignee execute an assignment of Franchisee's rights and obligations under this Agreement to the assignee in a form required by Franchisor,
and Franchisee and the assignee execute any other documents then used by Franchisor for the grant of Chatime franchises;
- (5) When the assignee is a company, those directors and shareholders or other Affiliates of the assignee nominated by Franchisor each:
- (a) Executed and deliver a personal guarantee and indemnity and undertake similar personal restraints to those given by Guarantor under this Agreement in favor of, and in the form attached as Exhibit 3;
- (b) Executed and deliver a confidentiality and non-competition agreement in the form attached as Exhibit 4; and
- (c) Execute the new franchise agreement or assignment in their personal capacities;
- (6) The assignee's proposed manager is approved by Franchisor and successfully completes
Franchisor's required training program;
(7) Franchisee:
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a franchisee seeking to sell their franchise must first obtain consent from Chatime. Chatime cannot unreasonably withhold consent if the sale involves the franchisee's entire interest in the franchise and franchised business, provided certain conditions are met. These conditions ensure the proposed buyer is qualified and that Chatime's interests are protected.
Specifically, the franchisee must demonstrate to Chatime's satisfaction that the proposed buyer has the necessary financial resources to operate the business and service any related debts. The buyer must also have a good reputation, possess the required business experience, and meet Chatime's general criteria for new franchisees. This vetting process is standard in franchising to maintain brand consistency and operational standards across all locations.
Additionally, the franchisee must pay Chatime a transfer fee, and must not be in default of the franchise agreement or any related agreements at the time of seeking consent and when the transfer occurs. Chatime also has the option to require the buyer to execute either Chatime's current standard franchise agreement or an assignment of the existing agreement. The buyer may also need to provide personal guarantees, confidentiality agreements, and non-competition agreements, similar to the original franchisee's obligations. The buyer's proposed manager must also be approved by Chatime and complete the required training program.
These stipulations are typical in franchise agreements to ensure that any new franchisee meets the franchisor's standards and is capable of maintaining the brand's reputation and operational effectiveness. By retaining control over the transfer process, Chatime aims to minimize risks associated with new ownership and ensure a smooth transition that benefits both the brand and the new franchisee.