Is a Chatime franchisee prohibited from taking any action that could harm the goodwill associated with Chatime's intellectual property?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
11.4 Protection of Intellectual Property
- (1) Franchisee must:
- (a) Provide all reasonable assistance to Franchisor to register and enforce Franchisor's intellectual property rights in the Territory;
- (b) Take all reasonable steps to protect the Intellectual Property against any action or infringement by any person;
- (c) Immediately notify Franchisor of any actual or potential threat or claim of infringement with respect to the Intellectual Property.
- (2) Franchisor, at its absolute discretion, will determine whether to commence or defend legal proceedings relating to the Intellectual Property.
- (3) Payment of all Costs incurred in commencing or defending legal proceedings relating to the Intellectual Property will be made by Franchisor, provided that Franchisor has authorized the taking of any such action.
- (4) Franchisee must cooperate fully with Franchisor in relation to any actions conducted under this clause 11.4 and must not bring any actions itself relating to the Intellectual Property.
- (5) Save for remittance of Costs under clause 11.4(3) (if any), Franchisor will be entitled to receive the proceeds of all actions conducted under this clause 11.4.
11.5 Goodwill
Franchisee acknowledges that:
- (1) Franchisor is the owner of all goodwill in the Intellectual Property;
- (2) All goodwill associated with Franchisee's use of the Intellectual Property, and its activities under this Agreement, inures to the benefit of Franchisor; and
- (3) When this Agreement ends, Franchisee is not entitled to any payment from Franchisor for goodwill which may exist in relation to The Franchised Business.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, franchisees have an obligation to protect Chatime's intellectual property and goodwill. The agreement specifies that the franchisor owns all goodwill associated with the intellectual property. The franchisee acknowledges that all goodwill generated through their use of Chatime's intellectual property benefits the franchisor. Upon termination of the franchise agreement, the franchisee is not entitled to any payment for goodwill.
Chatime franchisees must assist the franchisor in registering and enforcing its intellectual property rights within their territory. They are required to take reasonable steps to protect the intellectual property against infringement and must immediately inform the franchisor of any potential threats or claims of infringement. The franchisor retains the sole discretion to initiate or defend legal proceedings related to the intellectual property. Franchisees must fully cooperate with the franchisor in any actions taken to protect the intellectual property and are prohibited from independently pursuing any related legal actions.
These measures ensure that the Chatime brand and its associated intellectual property remain protected, and that the franchisor maintains control over its brand image and reputation. Franchisees benefit from a well-maintained brand, while the franchisor safeguards its long-term interests and the overall value of the franchise system. This is a common practice in franchising, as the brand's reputation is a critical asset for both the franchisor and its franchisees.