If Chatime transfers its rights under the Franchise Agreement, does the benefit of the guarantee and indemnity extend to the transferee?

According to the 2025 Chatime Franchise Disclosure Document, the guarantor's liability, as outlined in clauses 18.3 and 18.4, remains unaffected by a transfer of the Franchise Agreement by the franchisee. This means that if Chatime were to transfer its rights under the Franchise Agreement, the guarantor's obligations to the new holder of the agreement would continue without change. The guarantor's responsibilities persist regardless of the transfer.

This provision protects Chatime (or its transferee) by ensuring that the guarantee and indemnity remain valid even if the franchise changes hands. It prevents the guarantor from claiming that the transfer nullifies their obligations. The guarantor remains liable for the franchisee's performance, irrespective of who currently holds the franchise rights.

For a prospective Chatime franchisee, this clause highlights the importance of the guarantor's role. The guarantor's commitment is a continuing security for Chatime, offering financial protection against potential franchisee defaults. This arrangement is typical in franchising, where franchisors seek to minimize risk through guarantees and indemnities. The franchisee should ensure that any guarantor fully understands the extent and duration of their obligations, even in the event of a transfer of the franchise agreement.