If a Chatime franchisee is adjudicated a bankrupt or insolvent, can Chatime immediately terminate the agreement?

According to the 2025 Chatime Franchise Disclosure Document, Chatime can terminate the franchise agreement immediately if a franchisee is adjudicated bankrupt or insolvent. Specifically, section 15.3(4)(h) states that Chatime can terminate the agreement immediately upon written notice if the franchisee files a voluntary petition in bankruptcy, files any pleading seeking reorganization, liquidation, or dissolution, admits to or fails to contest allegations of such a pleading, or is adjudicated bankrupt or insolvent.

This clause means that if a Chatime franchisee faces severe financial difficulties leading to bankruptcy or insolvency, Chatime reserves the right to terminate the franchise agreement promptly. This is a significant risk for franchisees, as it means they could lose their business and investment if they encounter financial distress.

However, Chatime also has the option to pursue other remedies instead of immediate termination. These options include temporarily operating the franchise, suspending services or supply delivery, changing credit terms, or requiring the franchisee to sign a release. Chatime's decision to terminate or pursue alternative remedies is at its sole discretion. This flexibility allows Chatime to address franchisee defaults in a way that it deems best for the brand and the network as a whole.