If a Developer files for bankruptcy, can Chatime immediately terminate the agreement?

According to Chatime's 2025 Franchise Disclosure Document, Chatime can terminate the Development Agreement immediately upon written notice to the Developer if the Developer files a voluntary petition in bankruptcy. This also applies if the Developer files any pleading seeking any reorganization, liquidation, or dissolution under any law, admits or fails to contest the material allegations of any such pleading filed against it, or is adjudicated a bankrupt or insolvent.

This clause gives Chatime a significant protection in the event of a Developer's financial distress. Bankruptcy can severely impact a Developer's ability to meet their obligations under the Development Agreement, including opening new Chatime stores and maintaining brand standards. The immediate termination clause allows Chatime to quickly sever ties with a financially unstable Developer and find a more viable partner to develop the territory.

It is important for a prospective Chatime Developer to understand the implications of this termination clause. Filing for bankruptcy, even if due to unforeseen circumstances, can result in the immediate loss of their development rights. Developers should carefully consider their financial capacity and risk tolerance before entering into a Development Agreement with Chatime. They should also seek legal and financial advice to fully understand the potential consequences of bankruptcy and explore strategies to mitigate these risks.