How much did Chatime USA LLC pay to the Department for the costs of its investigation?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
osts to New York.
In re Chatime USA, LLC, State of Washington, Department of Financial Institutions, Securities Division, Consent Order No. S-19-2701-19-0001. On or about August 4, 2016, our affiliate Chatime USA LLC entered into a five-year Master Franchise Agreement with a Canadian company based in Edmonton, Alberta (the "Alberta Master Franchisee") pursuant to which our affiliate Chatime USA LLC granted the Alberta Master Franchisee master franchise rights in Washington. In 2019, the Washington Department of Financial Institutions (the "Department") began an investigation into our affiliate Chatime USA LLC's prior franchising activities in connection with its application for franchise registration. The Department concluded that the sale to the Alberta Master Franchisee violated Washington franchise law because (i) Chatime USA LLC granted master franchise rights to the Alberta Master Franchisee in Washington without first obtaining franchise registration in Washington, and (ii) Chatime USA LLC did not provide the Alberta Master Franchisee with a U.S. disclosure document. Under the terms of a consent order dated September 16, 2019, our affiliate Chatime USA LLC agreed to cease and desist from the sale of franchises in Washington in violation of Washington franchise law and paid the Department $2,500 for the costs of its investigation.
No other litigation is required to be disclosed in this Item 3.
Item 4: Bankruptcy
No bankruptcy is required to be disclosed in this Item.
Item 5: Initial Fees
Franchise Fees
You will pay us a nonrefundable "Initial Franchise Fee" of $54,900 when you sign the Franchise Agreement. If you give us notice of termination within seven days after execution of your Franchise Agreement, we will return the Initial Franchise Fee within 14 days after receiving your notice of termination.
We also offer multi-unit development agreements under which you agree to open and operate an agreed number of Chatime Stores within a specific geographic area according to an agreed development schedule. If you enter into a multi-unit development agreement, you will pay us a non-refundable multi-unit development fee at the time of signing the multi-unit development agreement. The amount of the multi-unit development fee will depend on the number of locations to be opened. For each location, you will have to sign a separate individual unit franchise
agreement in our then-current form of franchise agreement, which may be different than our current form of franchise agreement. The multi-unit development fee ("Multi-Unit Development Fee") will serve as a full credit against the initial franchise fees for each location (including the first location), so that you will not be required to pay an Initial Franchise Fee at the time you sign each Franchise Agreement for each location.
The Multi-Unit Development Fee is as follows: For two locations, the fee is $98,900. For three locations, the fee is $134,900. For more than three locations, the fee is $134,900 plus $20,000 for each additional location. For ten locations, the fee is $274,900. The multi-unit development fee is fully-earned by us upon receipt and is not refundable under any circumstances, regardless of the number of units you open.
Source: Item 3 — Litigation (FDD pages 10–11)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, Chatime USA LLC paid $2,500 to the Washington Department of Financial Institutions for the costs of its investigation. This investigation was initiated due to Chatime USA LLC granting master franchise rights in Washington to an Alberta Master Franchisee without proper franchise registration in Washington and without providing a U.S. disclosure document. This payment was part of a consent order dated September 16, 2019, where Chatime USA LLC also agreed to cease and desist from selling franchises in Washington in violation of Washington franchise law.
Additionally, Chatime USA LLC, along with La Kaffa and Yao-Hui Wang, entered into an Assurance of Discontinuance with the Attorney General of the State of New York (NYOAG). This agreement followed inquiries into whether Chatime USA LLC and La Kaffa sold franchises from or in New York without the required registration or exemption. As part of this Assurance of Discontinuance, Chatime USA LLC and La Kaffa were required to offer rescission to franchisees sold franchises in violation of the NY Franchise Sales Act and to pay $25,000 in penalties and costs to New York.
These legal issues and associated costs highlight the importance of Chatime adhering to franchise laws and registration requirements in each state. Prospective franchisees should be aware of these past violations and ensure that Chatime is currently in full compliance with all applicable regulations to avoid potential disruptions or legal issues in the future.