Is a Chatime franchisee required to pay a transfer fee to the franchisor during a transfer?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
| k. "Transfer" by | FA: §1.1(16); §13 | Defined as a "Disposal." Disposal includes any |
|---|---|---|
| franchisee | voluntary, involuntary, direct, or indirect sale, | |
| – | ||
| defined | ||
| assignment, pledge, bequeath, trade, or transfer. | ||
| In | ||
| relation | ||
| to | ||
| a | ||
| business | ||
| entity, | ||
| Disposal | ||
| includes | ||
| entering | ||
| into a transaction in relation to an ownership interest | ||
| that | ||
| results | ||
| in | ||
| a | ||
| person | ||
| other | ||
| than | ||
| the | ||
| registered | ||
| holderof the ownership interest (i) acquiring any legal | ||
| or equitable | ||
| interest in the ownership interest | ||
| including an | ||
| equitable | ||
| interest arising | ||
| from a | ||
| declaration | ||
| of | ||
| trust, an agreement for sale and purchase | ||
| or an option agreement or an agreement creating a | ||
| charge or other encumbrance in the ownership interest, | ||
| (ii) acquiring any | ||
| right | ||
| to | ||
| directly | ||
| or | ||
| indirectly | ||
| receive | ||
| any | ||
| dividends payable | ||
| from | ||
| the | ||
| ownership | ||
| interest, | ||
| (iii) | ||
| acquiring | ||
| any rights | ||
| of | ||
| pre- | ||
| emption, | ||
| first | ||
| refusal, | ||
| or | ||
| like | ||
| control | ||
| over the ownership interest, (iv) acquiring | ||
| any rights of control over the exercise of any voting | ||
| rights or rights to | ||
| appoint | ||
| directors | ||
| attaching | ||
| to | ||
| the | ||
| ownership | ||
| interest, or (v) otherwise acquiring legal or | ||
| equitable rights against the registered holder of the | ||
| ownership interest which | ||
| have | ||
| the | ||
| effect | ||
| of | ||
| placing | ||
| the | ||
| person | ||
| in | ||
| the | ||
| same position as if the person had | ||
| acquired a legal or equitable interest in the ownership | ||
| interest. | ||
| MDA: | Same | |
| §1.1(24) | as above. | |
| l. Franchisor approval | FA: §13.2 | You may only transfer a direct or indirect interest in your |
| of | Franchise Agreement with our prior written consent, | |
| transfer | ||
| by | ||
| franchisee | ||
| which will not be unreasonably withheld. | ||
| MDA: §11.2 | You may only transfer a direct or indirect interest in your | |
| MDA | ||
| with our prior written consent, which will not be | ||
| unreasonably withheld. | ||
| m. Conditions of | FA: §13.3 | We may impose any of the following conditions on our |
| franchisor | approval of your proposed transfer: (i) you establish to | |
| approval | ||
| of | ||
| transfer | our | |
| reasonable | ||
| satisfaction | ||
| that | ||
| the | ||
| transferee | ||
| meets | ||
| our | ||
| standards, (ii) you pay us a Transfer Fee and any other | ||
| legal and administrative costs we incur related to the | ||
| transfer, (iii) you are not in default of any agreement | ||
| between us or our affiliates, (iv) the transferee signs | ||
| our then-current form of Franchise Agreement, or you | ||
| and the transferee execute an assignment in the form | ||
| we require, (v) the transferee provide a guarantee and |
Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 43–52)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a franchisee may be required to pay a transfer fee to the franchisor when transferring their franchise. Chatime may impose conditions on the approval of a proposed transfer, including that the franchisee pays a Transfer Fee and any other legal and administrative costs incurred by Chatime related to the transfer.
This means that if a Chatime franchisee decides to sell their franchise to someone else, they will likely have to pay a fee to Chatime for processing the transfer. This fee is in addition to any legal and administrative costs that Chatime incurs during the transfer process. The FDD does not specify the amount of the transfer fee.
It is important for prospective franchisees to understand that this transfer fee can impact the profitability of selling their Chatime franchise. Franchisees should factor in this cost when considering a sale. Additionally, Chatime has the right to refuse a transfer if the proposed transferee does not meet their standards or if the franchisee is in default of any agreement with Chatime.
Many franchise systems have transfer fees to cover the costs of reviewing and approving the new franchisee. These fees can vary widely, so it is important to understand the specific terms outlined in the Franchise Agreement. Prospective Chatime franchisees should inquire about the current transfer fee amount and the specific conditions that must be met for a transfer to be approved.