If a Chatime franchisee receives an Acceptance Notice during the Offer Period, what action is the franchisee required to take?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- (5) If Franchisee receives the Acceptance Notice during the Offer Period Franchisee must sell
and Franchisor must purchase the Business upon the terms and conditions contained in the Offer Notice as may be varied by the Acceptance Notice.
- (6) If Franchisor does not accept the offer contained in the Offer Notice within the Offer Period, Franchisee is entitled to sell the Business or allow the Disposal of shares or units to a third party within 60 days after the end of the Offer Period as long as the:
- (a) Franchisee complies with clause 13.3; and
- (b) Sale or Disposal is not made for less than the price specified in the Offer Notice or on terms and conditions more favorable to the third party than those contained in the Offer Notice.
- (7) If Franchisee does not sell the Business or allow the Disposal of shares or units within the period referred to in clause 13.4(6), the rights of Franchisor are revived and Franchisee must not permit any sale or Disposal without first offering the Business to Franchisor in accordance with this clause 13.4.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, if a franchisee receives an Acceptance Notice from Chatime during the Offer Period, the franchisee is obligated to sell their business, and Chatime is obligated to purchase it. This transaction must occur under the terms and conditions outlined in the Offer Notice, potentially with variations specified in the Acceptance Notice.
The Offer Period, as defined in the FDD, spans 45 days after Chatime receives the Offer Notice from the franchisee. The Acceptance Notice itself may include terms that differ from the original Offer Notice, provided these terms are not commercially less favorable to the franchisee. For instance, if a third party offers consideration, terms, or conditions that Chatime cannot reasonably match, Chatime may opt to purchase the interests for a reasonable cash equivalent.
If Chatime does not accept the offer within the 45-day Offer Period, the franchisee has the right to sell the business to a third party within 60 days after the Offer Period ends. However, this sale must comply with specific conditions, including adherence to clause 13.3 and ensuring that the sale price is not less than what was specified in the Offer Notice, with terms and conditions no more favorable to the third party than those initially offered to Chatime.
Should the franchisee fail to sell the business within this 60-day window, Chatime's rights are reinstated, and the franchisee must not proceed with any sale or disposal without first re-offering the business to Chatime in accordance with the outlined procedure. This clause ensures Chatime retains the first right of refusal for the franchise, subject to the conditions specified in the franchise agreement.