What is a Chatime franchisee required to do regarding actions that may prejudice the Franchisor's ownership of, or the goodwill associated with, the Intellectual Property?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
[Item 23: Receipts]
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.
- 11.6 Franchisee and Guarantor Must Not Register Similar Intellectual Property
Franchisee and Guarantor must:
[Item 23: Receipts]
Franchisee and Guarantor must:
- (1) If it is the owner of any intellectual property (e.g., business or corporate names, trademarks, domain names) similar or identical to the Intellectual Property in the Territory, immediately upon execution of this Agreement, take all steps necessary to transfer ownership of that intellectual property to Franchisor at Franchisee's cost;
- (2) If, during the Initial Term, either Franchisee or any Guarantor registers any intellectual property (e.g., business or corporate names, trademarks, domain names) similar or identical to the Intellectual Property in the Territory, the relevant party must immediately upon such registration, take all steps necessary to transfer ownership of that intellectual property to Franchisor at Franchisee's cost; and
- (3) Not, except as otherwise agreed or directed by Franchisor in writing, register any intellectual property (e.g., business or corporate names, trademarks, domain names) similar or identical to the Intellectual Property or that contains or consists of any Intellectual Property or anything that is substantially identical or deceptively similar thereto or otherwise relates to the Chatime brand or the System. In particular, if Franchisee or Guarantor is a corporation, each must not use the word "Chatime" or any other similar word or derivatives of that word in its corporate name, with acknowledgement that the factors determining similarity of trademarks as stated above include, without limitation, the appearances, concepts, pronunciations, designated classes and designated goods and services of trademarks.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, franchisees have several obligations to protect Chatime's intellectual property. Franchisees must provide reasonable assistance to Chatime to register and enforce its intellectual property rights within their territory. This could involve providing information or documentation to support Chatime's legal efforts. Franchisees must also take reasonable steps to protect the intellectual property from infringement by others, such as monitoring for unauthorized use of Chatime's trademarks or business system. If a franchisee detects any potential infringement, they are required to notify Chatime immediately. Chatime retains the sole discretion to decide whether to initiate or defend legal proceedings related to its intellectual property. Franchisees are obligated to fully cooperate with Chatime in any legal actions and are prohibited from independently pursuing legal actions related to the intellectual property.
Furthermore, franchisees and their guarantors are prohibited from registering any intellectual property (like business names, trademarks, or domain names) that are similar or identical to Chatime's intellectual property. If a franchisee or guarantor already owns such intellectual property at the start of the agreement, they must transfer ownership to Chatime at their own cost. Similarly, if they register any such intellectual property during the term of the agreement, they must also transfer it to Chatime at their own cost. Franchisees and guarantors are specifically prohibited from using the word "Chatime" or similar words in their corporate names if they are corporations.
Chatime emphasizes that it owns all goodwill associated with its intellectual property, and any goodwill generated through a franchisee's use of the intellectual property benefits Chatime. Upon termination of the franchise agreement, the franchisee is not entitled to any payment for goodwill related to the franchised business. These measures collectively aim to protect Chatime's brand and business system, preventing unfair competition and maintaining the integrity of the Chatime network.