If Chatime materially breaches the multi-unit development agreement, how long does the franchisee have to provide written notice of termination?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in Franchise | Summary |
|---|---|---|
| Agreement (FA) and Multi-Unit Development Agreement (MDA) | ||
| a. Length of the | FA: §1.1(27) | The term is ten years. |
| franchise term | ||
| MDA: §1.1(34) | The period ending the end date of the agreed Development Period. . | |
| b. Renewal or extension of the term | FA: §1.1(40); §2.6 | At the end of the initial term of your Franchise Agreement, we may grant you the option to continue operating as a franchisee in your Territory and to enter into a new Franchise Agreement for a renewal term of ten years. |
| MDA: § 2.7 | At the end of the initial term of your Franchise Agreement, you may request to enter into an additional term of ten years under the terms of our then-current form of multi-unit development agreement, which may contain different terms | |
| u. Dispute resolution by arbitration or mediation | §16 | Except as otherwise provided, all disputes and claims relating to your Franchise Agreement or the relationship of the parties must be settled by mediation or arbitration in New York in accordance with the rules of the American Arbitration Association (“AAA”) mediation and arbitration service. These provisions are subject to state law. |
| MDA: §14 | Except as otherwise provided, all disputes and claims relating to your MDA or the relationship of the parties must be settled by mediation or arbitration in New York in accordance with the rules of the AAA mediation and arbitration service. These provisions are subject to state law | |
| v. Choice of forum | §16 | Arbitration in New York in accordance with the rules of the AAA service. These provisions are subject to state law. |
| MDA: §14 | Arbitration in New York in accordance with the rules of the AAA service. These provisions are subject to state law. | |
| w. Choice of law | §25.1 | Delaware law. These provisions are subject to state law. |
| MDA: §23.16 | Delaware law. These provisions are subject to state law | |
| d. Termination by franchisee | FA: §15.1; §15.2 | You may terminate your Franchise Agreement if (i) you give us written notice of termination within seven days after execution, or (ii) you are in substantial compliance with the Franchise Agreement, we materially breach the Franchise Agreement, you notify us of such breach and give us at least 60 days to remedy the breach, we do not timely remedy the breach or we fail to show continuing efforts to correct the breach, and you provide 60 days' written notice of termination. These provisions are subject to state law. |
| MDA: § 13.1 and 13.2 | You may terminate your MDA if (i) you give us written notice of termination within seven days after execution, or (ii) you are in substantial compliance with the MDA, we materially breach the MDA, you notify us of such breach and give us at least 60 days to remedy the breach, we do not timely remedy the breach or we fail to show continuing efforts to correct the breach, and you provide 60 days' written notice of termination. These provisions are subject to state law. | |
| e. Termination by franchisor without | FA: Not applicable | Not applicable. |
| "cause" | MDA: Not applicable | Not applicable |
| f. Termination by franchisor with "cause" | FA: §15.3 | We have the right to terminate your Franchise Agreement with cause. Depending upon the reason for termination, we may not provide you with an opportunity to cure. |
| MDA: § 13.3 | We have the right to terminate your MDA with cause. Depending upon the reason for termination, we may not provide you with an opportunity to cure. | |
| g. Curable defaults | FA: §15.3(1) | All defaults must be cured within 30 days after notice. |
| MDA: § 13.3(1) | All defaults must be cured within 30 days after notice. | |
| h. |
Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 43–52)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a franchisee may terminate the Multi-Unit Development Agreement (MDA) if they are in substantial compliance with the MDA, Chatime materially breaches the MDA, the franchisee notifies Chatime of the breach and gives them at least 60 days to remedy the breach, Chatime does not timely remedy the breach or fails to show continuing efforts to correct it. After these conditions are met, the franchisee must provide 60 days' written notice of termination. These provisions are subject to state law.
In practical terms, this means that if Chatime violates a significant term of the MDA, the franchisee isn't immediately able to terminate the agreement. First, the franchisee must formally notify Chatime of the specific breach and provide Chatime a 60-day window to fix the problem. If Chatime fails to correct the breach within that timeframe or doesn't demonstrate ongoing efforts to resolve it, the franchisee can then issue a final written termination notice, which takes effect 60 days later.
This process allows Chatime an opportunity to rectify the situation and maintain the development agreement. However, it also means the franchisee must continue operating under the potentially unfavorable conditions caused by the breach for at least 60 days, and potentially longer depending on how long Chatime takes to address the initial notice. The franchisee bears the responsibility of documenting the breach, providing formal notice, and tracking Chatime's response within the specified timeframes to protect their right to terminate the MDA.
It's important to note that the FDD states these termination provisions are subject to state law, meaning specific state regulations could modify or supersede the terms outlined in the MDA. A prospective Chatime franchisee should consult with a legal professional to understand how local laws might affect their termination rights under the Multi-Unit Development Agreement.