Does a Chatime franchisee with a Multi-Unit Development Agreement have exclusive rights to any potential customer base within their Development Territory?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
Your Multi-Unit Development Agreement sets out one or more protected geographic areas ("Development Territory") identified specifically for the development of new Outlets. This does not mean that you have any exclusive right to any potential customer base for your Outlets. You have no rights relating to the distribution or competitive brands that we control. You have no rights relating to the alternative distribution channels referenced above. Under certain conditions, you will have the first opportunity for special distribution opportunities inside your Development Territory. This first opportunity is conditioned upon your compliance with all material provisions of your agreements with us and our affiliates, your meeting our criteria for your Multi-Unit Development
expansion schedule, and the permission of the party that controls the special distribution opportunities. You do not have any other rights to pursue special distribution opportunities.
Unless we have terminated the exclusivity of your Development Rights, we will not establish or operate, nor license any other person to establish or operate, an Outlet under the System and the Trademarks at any traditional location in your Development Territory during the term of your Multi-Unit Development Agreement except for Outlets already established or permitted by us prior to the execution of your Multi-Unit Development Agreement, and except for any non-traditional or special distribution channel (i.e., airports, train stations, gas/convenience stores, limited-access highway food facilities, hospitals, convention centers, hotels, casinos and resorts, stadiums, arenas, ballparks, movie theaters, entertainment and sports complexes, department stores and "big box" superstores, supermarkets, festivals, fairs and other mass gathering locations or events, offices, factories, military facilities, and any government buildings or other institutional facilities), including special distribution channels located within your Development Territory.
You will not receive an exclusive development territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.
Source: Item 12 — Territory (FDD pages 35–38)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a franchisee with a Multi-Unit Development Agreement does not have exclusive rights to any potential customer base within their Development Territory. While the agreement sets out protected geographic areas for development, this protection doesn't extend to the customer base itself. Chatime retains the right to compete through other franchisees, company-owned outlets, alternative distribution channels, and competitive brands. This means a franchisee's territory is protected only from new traditional Chatime stores, not from other forms of competition that Chatime controls.
Chatime retains significant rights to operate and license others to operate within a franchisee's Development Territory through non-traditional channels such as airports, train stations, gas/convenience stores, hospitals, convention centers, hotels, casinos, stadiums, movie theaters, and other similar venues. Chatime also maintains the right to sell and distribute goods and services through alternative channels like the internet, regardless of a franchisee's territory. These alternative distribution methods can directly compete with a franchisee's business, and Chatime is not obligated to compensate the franchisee for sales made through these channels within their territory.
Furthermore, Chatime can modify or terminate a franchisee's Development Rights if the franchisee fails to meet the company's guidelines for multi-unit development and ownership. This includes the possibility of varying the Development Territory or terminating the exclusivity attached to the Development Rights. If this occurs, Chatime may develop and operate franchises within the territory or grant that right to a third party. This lack of exclusivity and the potential for increased competition should be carefully considered by prospective franchisees before entering into a Multi-Unit Development Agreement with Chatime.