Is prior written consent required from Chatime to transfer a franchise agreement?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
have no further obligation under your MDA except for any accrued liabilities. |
| k. "Transfer" by | FA: §1.1(16); §13 | Defined as a "Disposal." Disposal includes any |
|---|---|---|
| franchisee | voluntary, involuntary, direct, or indirect sale, | |
| – | ||
| defined | ||
| assignment, pledge, bequeath, trade, or transfer. | ||
| In | ||
| relation | ||
| to | ||
| a | ||
| business | ||
| entity, | ||
| Disposal | ||
| includes | ||
| entering | ||
| into a transaction in relation to an ownership interest | ||
| that | ||
| results | ||
| in | ||
| a | ||
| person | ||
| other | ||
| than | ||
| the | ||
| registered | ||
| holderof the ownership interest (i) acquiring any legal | ||
| or equitable | ||
| interest in the ownership interest | ||
| including an | ||
| equitable | ||
| interest arising | ||
| from a | ||
| declaration | ||
| of | ||
| trust, an agreement for sale and purchase | ||
| or an option agreement or an agreement creating a | ||
| charge or other encumbrance in the ownership interest, | ||
| (ii) acquiring any | ||
| right | ||
| to | ||
| directly | ||
| or | ||
| indirectly | ||
| receive | ||
| any | ||
| dividends payable | ||
| from | ||
| the | ||
| ownership | ||
| interest, | ||
| (iii) | ||
| acquiring | ||
| any rights | ||
| of | ||
| pre- | ||
| emption, | ||
| first | ||
| refusal, | ||
| or | ||
| like | ||
| control | ||
| over the ownership interest, (iv) acquiring | ||
| any rights of control over the exercise of any voting | ||
| rights or rights to | ||
| appoint | ||
| directors | ||
| attaching | ||
| to | ||
| the | ||
| ownership | ||
| interest, or (v) otherwise acquiring legal or | ||
| equitable rights against the registered holder of the | ||
| ownership interest which | ||
| have | ||
| the | ||
| effect | ||
| of | ||
| placing | ||
| the | ||
| person | ||
| in | ||
| the | ||
| same position as if the person had | ||
| acquired a legal or equitable interest in the ownership | ||
| interest. |
Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 43–52)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a franchisee needs prior written consent from Chatime to transfer their franchise agreement. Chatime defines "transfer" as a "Disposal," which includes any voluntary, involuntary, direct, or indirect sale, assignment, pledge, bequeath, trade, or transfer. This definition extends to transactions involving ownership interests in a business entity that could result in another person acquiring legal or equitable interest, rights to dividends, control over voting rights, or other rights that place the person in the same position as if they had acquired a legal or equitable interest in the ownership interest.
Chatime also has the right of first refusal to acquire the franchisee's business. Before a franchisee can sell their franchise or transfer any ownership interest to a third party, they must first offer to sell the ownership interest to Chatime on the same terms and conditions offered by the third party.
Furthermore, upon the death or permanent incapacity of a person with an interest in the franchise, the interest must be transferred to a third party approved by Chatime within one year. If an approved transfer is not completed within this time frame, Chatime has the right to terminate the agreement. Chatime may also impose conditions on approving a transfer, such as ensuring the transferee meets Chatime's standards, payment of a transfer fee and legal/administrative costs, ensuring the franchisee is not in default, the transferee signing Chatime's current MDA form, and establishing that the transfer will not adversely affect the Chatime system.