If a franchisee signs a Multi-Unit Development Agreement, what is the franchisee obligated to do regarding Chatime stores?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
If you sign a Multi-Unit Development Agreement, you are obligated to open a certain minimum number of Chatime Stores ("Outlets") in your Development Territory in accordance with a specified schedule. ("Development Quota"). You will negotiate the size of your designated Development Territory with us based on your Development Quota.
Each Outlet's location in your Development Territory must be approved by us in writing and meet our then-current real estate, brand and design standards. We will approve each additional location under the Multi-Unit Development Agreement using our then-current site criteria. For each Outlet, you must comply with all your obligations to us and sign our then-current form of the Franchise Agreement with all then-current ongoing fees. The then-current Franchise Agreement may contain materially different terms and conditions than your original Franchise Agreement.
If you do not continue to meet our then-current guidelines for multi-unit development and ownership, we may terminate your Development Rights, vary your Development Territory, and/or terminate the exclusivity attached to the Development Rights in our discretion (following which we may ourselves develop and operate franchises in your Development Territory or may grant a right to a third party to develop and operate franchises in your Development Territory).
We do not require minimum sales quotas for each individual Outlet; provided, however, that you must have open and operating no fewer than the number of Outlets specified in your Development Quota.
Source: Item 12 — Territory (FDD pages 35–38)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a franchisee who signs a Multi-Unit Development Agreement is obligated to open a minimum number of Chatime stores, referred to as "Outlets," within a designated "Development Territory." This obligation is tied to a specified schedule known as the "Development Quota." The size of the Development Territory is negotiated with Chatime based on the franchisee's Development Quota. Therefore, the franchisee's primary obligation is to meet the agreed-upon schedule for opening a certain number of Chatime stores within their territory.
Chatime requires that each Outlet location within the Development Territory must receive written approval and meet the brand's current real estate, brand, and design standards. For each new Outlet, the franchisee must also sign Chatime's then-current form of the Franchise Agreement, which includes all ongoing fees applicable at that time. It's important to note that the terms and conditions of the Franchise Agreement may differ materially from the original agreement. This means that as a multi-unit franchisee expands, they may be subject to new or revised terms for each additional location.
Chatime does not mandate minimum sales quotas for individual Outlets. However, the franchisee must ensure that they have the minimum number of Outlets open and operating as specified in their Development Quota. Failure to meet Chatime's guidelines for multi-unit development and ownership can result in the termination of Development Rights, changes to the Development Territory, or the removal of exclusivity attached to those rights. If this occurs, Chatime reserves the right to develop and operate franchises within the territory themselves or grant that right to a third party. Therefore, maintaining compliance with Chatime's standards is crucial for multi-unit franchisees to retain their development rights and territory.