If the Chatime franchisor exercises its right of first refusal, what are the obligations of the franchisee?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- (a) Immediately upon request by Franchisor, Franchisee must take all necessary steps (including signing any document) to assign or otherwise transfer its rights under the documents granting the relevant Occupancy Right to Franchisee to Franchisor or its nominee.
- (2) If Franchisor does not require an assignment or other transfer of this Agreement, then this Agreement may, as determined by Franchisor, continue for the remainder of its term, in which case Franchisee must continue to perform all obligations under this Agreement other than in relation to any continued development.
- (3) If upon termination or expiration of this Agreement, Franchisor exercises its right to take an assignment of this Agreement pursuant to clause 17.2(1), then Franchisee will not be entitled to receive payment under this Agreement from the date of the assignment of this Agreement.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to the 2025 Chatime Franchise Disclosure Document, if Chatime exercises its right to take an assignment of the Franchise Agreement upon termination or expiration, the franchisee has specific obligations. The franchisee must take all necessary steps to assign or transfer its rights under the documents granting the relevant Occupancy Right to Chatime or its nominee, which may include signing necessary documents.
However, if Chatime does not require an assignment or other transfer of the agreement, the agreement may continue for the remainder of its term, as determined by Chatime. In this case, the franchisee must continue to perform all obligations under the agreement, except those related to continued development.
Furthermore, the FDD states that if Chatime exercises its right to take an assignment of the agreement, the franchisee will not be entitled to receive payment under the agreement from the date of the assignment. This means the franchisee's income stream from the franchise ceases upon the assignment to Chatime.