Does Chatime grant an exclusive development territory to franchisees?

According to Chatime's 2025 Franchise Disclosure Document, franchisees will not receive an exclusive development territory. The FDD states this explicitly in multiple sections. Franchisees may face competition from other franchisees, outlets owned by Chatime, alternative distribution channels, and competitive brands controlled by Chatime. This lack of exclusivity applies both to single-unit Franchise Agreements and Multi-Unit Development Agreements.

For single-unit franchises, the Franchise Agreement grants the right to operate a Chatime store in a location approved by Chatime within a designated territory. This territory is typically a two-mile radius around the approved location, but it can be smaller (ranging from a two-block to two-mile radius) in major metropolitan downtown areas or similarly populated central business districts. The boundaries of the territory may be defined using zip codes, streets, landmarks, or county lines. Chatime retains the right to adjust or terminate these territorial rights if the franchisee fails to comply with the Franchise Agreement.

For Multi-Unit Development Agreements, franchisees negotiate the size of their Development Territory with Chatime based on their Development Quota (the minimum number of Chatime stores they are obligated to open). While the Multi-Unit Development Agreement specifies a protected geographic area for development, this does not grant exclusive rights to any potential customer base. Chatime retains the right to establish or license others to establish Chatime stores in non-traditional locations (such as airports, train stations, and supermarkets) within the Development Territory. Chatime may also terminate or vary the Development Territory if the franchisee fails to meet the company's guidelines for multi-unit development and ownership.

Chatime also retains the right to use trademarks and the system to establish Chatime stores outside the franchisee's territory and to sell or distribute goods and services through alternative channels of distribution, such as the Internet, without compensating the franchisee. Franchisees are not allowed to distribute products through alternative channels without Chatime's permission. These conditions highlight the importance of location and business acumen for Chatime franchisees, as they must compete with other outlets and distribution channels.