Can Chatime immediately terminate the agreement if the franchisee breaches the clause regarding initial and continuing fees?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- (4) Notwithstanding any other provision in this clause 15, Franchisor may terminate this Agreement immediately upon written notice to Franchisee if:
- (a) The Defaulting Party breaches any provision under clause 6 (Initial and Continuing Fees), 9.2 (No Other Business Interests) or 9.3 (Restraint Applies to Conduct in Any Capacity).
- (b) A force majeure event (as referred to in clause 23) continues for more than 180 days;
- (c) Franchisee no longer holds a license that Franchisee must hold to carry on The Franchised Business;
- (d) Franchisee voluntarily abandons The Franchised Business;
- (e) Franchisee or a Guarantor is convicted of a serious offense;
- (f) The Franchised Business is operated in a way that endangers public health or safety;
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to the 2025 Chatime Franchise Disclosure Document, Chatime can terminate the franchise agreement immediately if the franchisee breaches the provisions regarding initial and continuing fees.
Specifically, Chatime can issue an immediate written notice of termination if the franchisee fails to meet their obligations related to these fees. This is an exception to the standard termination process, which usually involves a written notice specifying the breach and providing a period (between 3 and 30 days) to remedy the breach. If the franchisee remedies the breach within the given time, Chatime cannot terminate the agreement based on that particular breach.
This immediate termination clause highlights the critical importance Chatime places on franchisees meeting their financial obligations for initial and continuing fees. Failing to pay these fees can have severe consequences, including the immediate loss of the franchise. Prospective franchisees should ensure they fully understand and can meet these financial obligations to avoid potential termination of their franchise agreement.
This type of clause is not uncommon in franchise agreements, as timely payment of fees is essential for the franchisor's revenue and ability to support the franchise system. Franchisees should carefully review the specific terms related to fee payments and termination rights before entering into a franchise agreement.