What happens if a Chatime multi-unit developer fails to meet their Development Quota?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
We also offer multi-unit development agreement franchises to qualified persons who must establish certain minimum numbers of Chatime Stores within a designated geographic territory (a "Development Territory"). If we grant you a multi-unit development agreement franchise, you will execute our standard form of multi-unit development agreement attached as Exhibit C (the "Multi-Unit Development Agreement") and be granted the right to begin opening Chatime Stores in your Development Territory (the "Development Rights"). Your master franchise business includes the obligation to open a certain number of Chatime Stores in your Development Territory in accordance with a specified schedule (the "Development Quota"). Upon establishing each additional outlet under the Multi-Unit Development Agreement, you will be required to sign our then-current Franchise Agreement, which may differ from the current Franchise Agreement included with this Franchise Disclosure Document. If you fail to meet your Development Quota or fail to comply with any financial obligation relating to the Development Rights, we may terminate your Development Rights, reduce or eliminate your Development Territory or the territorial protections provided under your Multi-Unit Development Agreement, or take other action we deem appropriate in our discretion.
Source: Item 1 — The Franchisor, and Any Parents, Predecessors, and Affiliates (FDD pages 6–9)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a multi-unit developer's failure to meet the Development Quota can result in specific repercussions. The Development Quota refers to the obligation of the multi-unit developer to open a certain number of Chatime stores within their designated Development Territory, according to a pre-determined schedule.
If a multi-unit developer fails to meet the Development Quota, Chatime has several options. Chatime may terminate the developer's Development Rights, which means they would lose the right to open further Chatime stores in the Development Territory. Chatime could also reduce or eliminate the Development Territory, shrinking the geographic area in which the developer is authorized to operate. Additionally, Chatime may remove the territorial protections initially provided in the Multi-Unit Development Agreement, potentially allowing Chatime to franchise additional units nearby.
Chatime also reserves the right to take other action they deem appropriate, offering them flexibility in addressing the situation. This could include measures such as imposing financial penalties or requiring the developer to meet revised, more aggressive development schedules. This clause provides Chatime with broad discretion in handling a developer's failure to meet their obligations, which introduces a degree of uncertainty for the franchisee. Prospective multi-unit developers should carefully consider the feasibility of meeting the Development Quota and the potential consequences of failing to do so.