Can Chatime impose additional requirements for a franchisee to maintain its right to operate as a remedy for default?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
(3) Franchisee's Option pursuant to clause 2.6(2) is subject to all of the following conditions being satisfied:
(a) Franchisee has substantially complied with all material provisions of this Agreement throughout the Initial Term.
(b) At the date of giving Franchisor notice of its intention to exercise the Option and as at the end of the Initial Term, there is no outstanding breach of this Agreement or any Collateral Agreement which has not been remedied.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
Based on the 2025 Chatime Franchise Disclosure Document, a franchisee's option to enter into a new franchise agreement for a New Term is contingent upon meeting specific conditions.
The franchisee must have substantially complied with all material provisions of the existing agreement throughout the initial term. Furthermore, at the time the franchisee notifies Chatime of their intent to exercise the option, and at the end of the initial term, there must be no outstanding breaches of the agreement or any collateral agreements that have not been resolved.
These conditions mean that if a Chatime franchisee has defaulted on the agreement and not remedied the default, they may lose the option to renew their franchise agreement for a new term. This incentivizes franchisees to maintain compliance with the franchise agreement to secure their future with Chatime.