Can a Chatime franchisee advise or consult with any Restrained Business or any person connected to a Restrained Business?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
I agree that I shall not, and I will ensure that any person or entity which I control shall not:
- (a) be concerned or interested in any Restrained Business (directly or indirectly, or through any interposed corporate entity, trust, partnership, or entity as trustee, principal, agent, shareholder, beneficiary, or as an independent contractor, consultant, adviser or in any other capacity);
- (b) advise, assist, consult with or for or in connection with any Restrained Business or any person associated with or in any manner whatsoever connected to or engaged by or in connection with any Restrained Business;
- (c) hold or own (beneficially or non-beneficially) whether directly or indirectly and whether absolutely or contingently or hold options over shares or any other securities or units of any entity engaging in a Restrained Business; and
- (d) procure, employ, seek to employ or engage, or appoint in any capacity (whether as a consultant, director or otherwise), any person who is or has been in the 12 months prior to such action an employee or independent contractor of the Franchisor or any Chatime Store Business
during the Restraint Period in the Restraint Area.
Nothing in this Agreement, including this Section 3, prevents the Covenantor (or any of its affiliates) from:
- (a) owning less than 5%, by value, of securities in a listed corporation; or
- (b) engaging or being concerned or interested in the Franchised Business in accordance with this Agreement.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, franchisees are restricted from advising or consulting with any Restrained Business or individuals associated with a Restrained Business. The agreement specifies that franchisees, and any entities they control, cannot be involved with a Restrained Business in any capacity, including as an advisor or consultant. This restriction applies during the restraint period and within the restraint area, as defined in the franchise agreement.
The non-compete clause extends to preventing franchisees from holding shares or securities in entities engaged in a Restrained Business, and from employing individuals who were recently associated with Chatime. There are limited exceptions to these restrictions. Franchisees may own less than 5% of securities in a listed corporation and can engage in the Franchised Business as permitted by the agreement.
Chatime's restrictions are designed to protect its business interests, relationships with other franchisees, investments in the business system, and the goodwill of the franchise. The FDD states that these restrictions are considered reasonable and necessary to protect Chatime and its network. The agreement also specifies that if any part of the non-compete agreement is deemed unenforceable, the remaining provisions will still be in effect.
These restrictions are broad and apply to the franchisee, their Interested Parties, and anyone acting on their behalf in various capacities, including as a consultant or advisor. Franchisees must also ensure that their directors, managers, and key employees sign confidentiality and non-competition agreements. Violation of these non-compete clauses can result in the franchisee having to pay Chatime all compensation, profits, or other benefits derived from the breach, in addition to other remedies available to Chatime.