If a Chatime franchisee holds a claim and receives a dividend, what are they required to do with it?

The 2025 Chatime Franchise Disclosure Document addresses the scenario where a franchisee breaches specific clauses related to conduct and confidentiality, but it does not specifically detail what happens if a franchisee holds a claim and receives a dividend. However, it does outline the financial responsibilities of the franchisee in cases of a breach of contract.

According to the FDD, if a Chatime franchisee, guarantor, or their interested parties breaches clause 9.2 or 9.3, the franchisee is obligated to account for and pay to Chatime all compensation, profits, monies, accruals, increments, or other benefits derived or received as a result of such a breach. This is referred to as disgorgement.

While the document specifies financial responsibilities in the event of a breach, it lacks specific guidance on handling dividends received by a franchisee who has a claim. A prospective franchisee should seek clarification from Chatime regarding the proper handling and reporting of any dividends received, especially if there are outstanding claims or disputes. It would be prudent to understand how such payments would be treated and whether they would offset any existing obligations to Chatime.