What are Franchisee and Guarantor obligated to do regarding the confidentiality of Chatime's Confidential Information during and after the term of the Franchise Agreement?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- 8.1 Obligation to Maintain Confidentiality
- (1) Franchisee and Guarantor acknowledge and agree that neither Franchisee nor any Guarantor will acquire any interest in the Confidential Information, other than the right to utilize the Confidential Information in performing their obligations under this Agreement, and that the use or duplication of any Confidential Information would constitute an unfair method of competition.
- (2) Franchisee and Guarantor hereby agree that during the term of this Agreement and following the expiration or termination of this Agreement that they:
- (a) Will not use the Confidential Information in any other business operation or capacity;
- (b) Will maintain the absolute confidentiality of the Confidential Information;
- (c) Will not make unauthorized copies of any portion of the Confidential Information;
- (d) Will adopt and implement all reasonable procedures that Franchisor prescribes from time to time to prevent unauthorized use or disclosure of the Confidential Information including, without limitation, restrictions on the disclosure of the Confidential Information to Outlet personnel and others; and
- (3) Notwithstanding anything to the contrary contained in this Agreement, the restrictions set out in clause 8.1(2) will not apply to information that:
- (a) Is or becomes publicly available, other than by breach of this Agreement;
- (b) Franchisee or Guarantor (as applicable) is legally compelled to disclose, provided Franchisee/Guarantor must have used its best efforts and afforded Franchisor the opportunity to obtain an appropriate protective order or other assurance satisfactory to Franchisor of confidential treatment for the information required to be disclosed; or
- (c) Is otherwise permitted under the terms of this Agreement.
- (4) If required by Franchisor, Franchisee must ensure that Franchisee's Owner managers, directors, shareholders, agents, employees, and any Interested Party enter into a confidentiality agreement in a form that is acceptable to Franchisor.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, both the franchisee and any guarantor have specific obligations regarding the confidentiality of Chatime's confidential information, both during the term of the Franchise Agreement and after its expiration or termination. The franchisee and guarantor acknowledge that they do not acquire any ownership interest in the confidential information, only the right to use it to fulfill their obligations under the agreement. They recognize that any unauthorized use or duplication of this information would be an unfair competitive practice.
Specifically, the franchisee and guarantor must not use the confidential information in any business operation or capacity other than their Chatime franchise. They are required to maintain absolute confidentiality of the information and prevent unauthorized copies from being made. Furthermore, they must implement any reasonable procedures that Chatime prescribes to prevent unauthorized use or disclosure. This includes placing restrictions on disclosing confidential information to outlet personnel and other parties.
However, these confidentiality restrictions do not apply to information that becomes publicly available without any breach of the agreement. Also, if the franchisee or guarantor is legally compelled to disclose confidential information, they must first make their best effort to obtain a protective order or other assurance satisfactory to Chatime that the information will be treated confidentially. Additionally, Chatime may require the franchisee to ensure that their owner-managers, directors, shareholders, agents, employees, and any interested party enter into a confidentiality agreement that is acceptable to Chatime.
These measures are typical in franchising to protect the franchisor's proprietary information and maintain a competitive advantage. Prospective Chatime franchisees should carefully review the definition of "Confidential Information" in the franchise agreement and understand the full scope of their confidentiality obligations. They should also be prepared to implement and enforce procedures to protect this information within their franchise operation.