What are Chatime's options regarding the franchise agreement when a franchise is assigned to a new party?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor must not unreasonably withhold its consent under clause 13.2(2) if the sale, assignment or other Disposal is of the whole of Franchisee's interest in the Franchise and the Franchised Business and each of the following conditions are satisfied:
- (1) Franchisee establishes to Franchisor's reasonable satisfaction that the proposed assignee (and its Owners and directors if the assignee is a company):
- (a) Possesses the financial resources necessary to conduct and operate the Franchised Business as a franchisee and to service any borrowings it makes in order to acquire The Franchised Business;
- (b) Is a reputable and responsible party and has the business experience and capabilities necessary to operate the Franchised Business successfully; and
- (c) Otherwise meets Franchisor's criteria for the selection of new Chatime franchisees;
- (2) Franchisee pays to Franchisor the Transfer Fee;
- (3) Franchisee, both when seeking consent to the assignment and when the assignment is to occur, is not in default under this Agreement or any Collateral Agreement;
- (4) At the option of Franchisor:
- (a) The assignee executes Franchisor's then-standard form franchise agreement for the balance remaining of the Initial Term (including any existing option for a New Term); or
- (b) Franchisee and the assignee execute an assignment of Franchisee's rights and obligations under this Agreement to the assignee in a form required by Franchisor,
and Franchisee and the assignee execute any other documents then used by Franchisor for the grant of Chatime franchises;
- (5) When the assignee is a company, those directors and shareholders or other Affiliates of the assignee nominated by Franchisor each:
- (a) Executed and deliver a personal guarantee and indemnity and undertake similar personal restraints to those given by Guarantor under this Agreement in favor of, and in the form attached as Exhibit 3;
- (b) Executed and deliver a confidentiality and non-competition agreement in the form attached as Exhibit 4; and
- (c) Execute the new franchise agreement or assignment in their personal capacities;
- (6) The assignee's proposed manager is approved by Franchisor and successfully completes
Franchisor's required training program;
(7) Franchisee:
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, when a franchisee seeks to assign their franchise to a new party, Chatime has specific options regarding the franchise agreement. Chatime's consent to the assignment is required but cannot be unreasonably withheld if the franchisee is selling their entire interest in the franchise and the franchised business, and several conditions are met.
These conditions include the proposed assignee demonstrating the necessary financial resources, a reputable business background, and meeting Chatime's criteria for new franchisees. Additionally, the franchisee must pay a transfer fee and not be in default of the agreement. Chatime then has the option to require the assignee to either execute Chatime's then-standard franchise agreement for the remaining balance of the initial term, including any existing option for a new term, or have the franchisee and assignee execute an assignment of the franchisee's rights and obligations under the existing agreement.
Furthermore, if the assignee is a company, Chatime may require the directors, shareholders, or other affiliates to execute a personal guarantee and indemnity, a confidentiality and non-competition agreement, and the new franchise agreement or assignment in their personal capacities. The assignee's proposed manager must also be approved by Chatime and successfully complete the required training program. These stipulations ensure that Chatime maintains control over the quality and standards of its franchisees, even when ownership changes hands.