Is a Chatime franchisee required to comply with the terms and conditions of any Collateral Agreement they enter into?

According to the 2025 Chatime Franchise Disclosure Document, a franchisee must comply with all the terms and conditions outlined in any Collateral Agreement they enter into. Furthermore, the FDD states that any breach of a Collateral Agreement is considered a breach of the Franchise Agreement itself. This means that failing to meet the obligations specified in a Collateral Agreement can have serious repercussions for the franchisee.

Collateral Agreements are separate agreements that are related to the franchise agreement. These agreements could cover various aspects of the business relationship, such as financing, leasing, or supply arrangements. Because a breach of a Collateral Agreement is considered a breach of the Franchise Agreement, Chatime has the right to terminate the franchise agreement if the franchisee fails to comply with the terms of the Collateral Agreement.

This requirement is significant for prospective franchisees because it emphasizes the importance of carefully reviewing and understanding all related agreements before signing them. Franchisees should seek legal counsel to fully understand their obligations under any Collateral Agreements and ensure they can meet those obligations. This also extends to the transfer of a Chatime franchise, as the franchisee must not be in default under any Collateral Agreement when seeking consent for the assignment.