Can a Chatime franchisee replace the Managing Owner without the franchisor's approval?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
al and ongoing costs associated with the capture of data by Franchisor's central polling server and must comply with any associated payment procedures specified from time to time in the Operations Manual or Global Policies and Procedures.
5 Other Obligations of Franchisee
5.1 Personnel
(1) Managing Owner. The "Managing Owner" of your Chatime Store is the person named as such in Section 2 of Schedule 1. The Managing Owner is the primary person who will represent your business in your dealings with us and who will be responsible for overseeing and supervising the operation of the Franchised Business. The Managing Owner must be an owner of an equity interest in your business whom we approve. Franchisee agrees that a shareholder, member or partner will serve as your Managing Owner throughout the term of this Agreement. Franchisee may not replace the Managing Owner without Franchisor's prior written approval, which Franchisor may condition on, among other things, attendance and satisfactory completion by the prospective new Managing Owner of our initial training program at Franchisee's expense.
- (2) Operating Manager. Franchisee will appoint at least one "Operating Manager". The Managing Owner and Operating Manager may be the same person. Franchisee's Operating Manager may but need not be an owner of your business. You will ensure that the day-to-day operation of the Franchised Business is always actively managed by an Operating Manager who has attended and successfully completed such training as we may require from time to time. The Operating Manager will actively devote his or her full time, attention and effort to the Franchised Business and provide direct, day to-day supervision of the operation of the Franchised Business as provided in the then-current Operations Manual. The current Operations Manual requires the Operating Manager to devote at least 38 hours per week to the day to day operations of your Chatime Store.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a franchisee cannot replace the Managing Owner of their Chatime store without prior written approval from the franchisor. The franchisor may also require that the prospective new Managing Owner attend and satisfactorily complete the initial training program at the franchisee's expense. The Managing Owner is defined as the primary person representing the franchisee's business in dealings with Chatime and is responsible for overseeing the operation of the franchised business. This individual must also hold an equity interest in the business and be approved by Chatime.
This requirement ensures that Chatime maintains a consistent standard of management and operational expertise across all franchise locations. By retaining approval rights over the Managing Owner, Chatime can ensure that individuals in this critical role meet their standards and are adequately trained to uphold the brand's reputation and operational guidelines. This also protects Chatime's interests by ensuring the Managing Owner is committed to the business, as they must hold an equity stake.
Furthermore, Chatime retains the right to train a qualified replacement at the franchisee's expense if the Managing Owner does not satisfactorily complete the initial training program, cannot complete the training program, or ceases to act as such. In the interim, if Chatime believes the franchised business is not being managed properly, they have the right, but not the obligation, to appoint a manager for the franchised business, with the franchisee bearing the costs as outlined in clause 14 of the agreement. This provision underscores the importance Chatime places on competent management and its willingness to intervene to protect the brand and the network's overall performance.
In addition to the Managing Owner, any proposed change or replacement of the Operating Manager must also be approved by Chatime in writing, unless otherwise provided in the agreement. Both the Managing Owner and the Operating Manager must attend and complete to Chatime's satisfaction such training programs as Chatime prescribes, including the initial training. This ensures that both key management positions are held by individuals who meet Chatime's standards and are adequately trained to operate the franchise effectively.