For a Chatime franchise, what is the franchisee required to do to ensure the Franchisor is named as a third-party beneficiary and has the right to assume the franchisee's obligations under the agreement?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- (a) Franchisor is a third-party beneficiary of this Agreement and may enforce it, solely and/or jointly with the Franchisee. I am aware that my violation of this Agreement will cause the Franchisor and the Franchisee irreparable harm; therefore, I acknowledge and agree that the Franchisee and/or the Franchisor may apply for the issuance of an injunction preventing me from violating this Agreement, and I agree to pay to the Franchisee and the Franchisor all the costs it/they incur(s), including, without limitation, legal fees and expenses, if this Agreement is enforced against me.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to the 2025 Chatime Franchise Disclosure Document, the franchisee acknowledges that Chatime is a third-party beneficiary of the franchise agreement and has the right to enforce it, either independently or jointly with the franchisee. The franchisee also acknowledges that violating the agreement will cause irreparable harm to Chatime. Consequently, Chatime and the franchisee can seek an injunction to prevent violations, and the franchisee agrees to cover all costs, including legal fees, if the agreement is enforced against them. This clause ensures Chatime can protect its interests and brand standards, even though they are not a direct party to the agreement between the franchisee and any other involved parties.
This arrangement is typical in franchising, as it allows the franchisor to maintain control over its brand and standards across all franchise locations. By being named a third-party beneficiary, Chatime gains the legal standing to take action against any party that violates the franchise agreement, even if that party's actions don't directly involve Chatime. This provides Chatime with an additional layer of protection and ensures that franchisees adhere to the terms of the agreement.
For a prospective Chatime franchisee, this means understanding that Chatime has a vested interest in the success and compliance of each franchise location. It also means being aware that Chatime can take legal action to enforce the franchise agreement, even if the franchisee's primary relationship is with another entity. Therefore, it is crucial for franchisees to fully understand and comply with all terms of the franchise agreement to avoid potential legal issues and maintain a positive relationship with Chatime.