If a Chatime franchisee files any pleading seeking any reorganization, liquidation, or dissolution under any law, can Chatime immediately terminate the agreement?

According to Chatime's 2025 Franchise Disclosure Document, Chatime has the right to terminate the franchise agreement immediately if the franchisee files any pleading seeking reorganization, liquidation, or dissolution under any law. This is explicitly stated as a condition that allows Chatime to declare a default.

This provision means that if a Chatime franchisee faces severe financial difficulties and seeks legal protection through bankruptcy or similar proceedings, Chatime can terminate the franchise agreement. This could have significant implications for the franchisee, as it would lose the right to operate the Chatime business and potentially any invested assets.

However, it's important to note that the enforceability of termination clauses related to bankruptcy may be subject to federal bankruptcy laws. For example, the Maryland Addendum to the Chatime Franchise Disclosure Document states that the provision in the Franchise Agreement which provides for termination upon bankruptcy of the franchisee may not be enforceable under federal bankruptcy law. Franchisees should consult with legal counsel to understand their rights and obligations under such circumstances, especially considering the laws of their specific state.