Does Chatime require the franchisee to cover the franchisor's legal costs associated with the termination of the franchise agreement?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- The language in Clause 25.9 of the Franchise Agreement, under the heading "Costs and Expenses," is hereby deleted in its entirety, and replaced with the following:
The prevailing party must pay or reimburse the non-prevailing party, on demand, for all of its Costs (including Legal Costs) in connection with or incidental to:
- (a) Any default by the Franchisee in observing or performing any of its obligations under this Agreement
- (b) Any termination of this Agreement; and
- (c) The contemplated, attempted or actual enforcement, preservation or exercise of any right under this Agreement including the obtaining by the Franchisor of any advice or
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, the franchisee may be required to cover Chatime's legal costs associated with the termination of the franchise agreement, depending on the circumstances and which state the franchise is located in.
Specifically, the North Dakota Amendment modifies the standard franchise agreement. Clause 25.9 of the standard agreement, regarding "Costs and Expenses," is replaced entirely. Under the amended clause, the prevailing party in a dispute must be reimbursed by the non-prevailing party for all costs, including legal costs, related to any default by the franchisee, any termination of the agreement, and any enforcement of rights under the agreement. This means that in North Dakota, if Chatime prevails in a dispute over the termination, the franchisee would have to cover Chatime's legal costs.
Outside of North Dakota, the franchisee is required to indemnify Chatime against losses, liabilities, legal costs, and other expenses incurred by Chatime due to a breach of the agreement by the franchisee. This includes costs arising from the termination of the agreement if the termination was a result of the franchisee's breach. Therefore, franchisees outside of North Dakota may also be responsible for Chatime's legal costs in the event of a termination if the termination is due to the franchisee's breach of contract.