Can Chatime require a franchisee to execute a Release as a remedy for default?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
In the event of grounds for a default by the Franchisee, Franchisor is entitled in its sole discretion to exercise any other remedies in lieu of or prior to terminating the Agreement, which may include but are not limited to termination or suspension of any and all services provided to Franchisee by Franchisor, its Affiliates, or approved suppliers; suspension of delivery of product or supplies to Franchisee by Franchisor, its Affiliates, or approved suppliers; imposition of different credit terms for delivery of product or supplies to Franchisee by Franchisor, its Affiliates or approved suppliers; temporary operation of the Franchised Business pursuant to Section 14 of this Agreement; removal of Franchisee from the Franchisor's website, directory, or social media; execution and delivery of a Release in the form attached as Exhibit 1, and imposition of any additional or different requirements for Franchisee to maintain its right to continue operating the Franchised Business. Franchisor's exercise of any of these other remedies shall not in any way impair or waive Franchisor's right in the future to terminate the Agreement or to exercise any other rights under this Agreement.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to the 2025 Chatime FDD, Chatime has the right to request a franchisee to execute and deliver a Release as a remedy for default. Specifically, if a franchisee defaults, Chatime can choose to exercise other remedies instead of or before terminating the agreement. These remedies may include requiring the franchisee to sign a release in the form attached as Exhibit 1. This gives Chatime flexibility in addressing franchisee defaults without immediately resorting to termination.
However, the FDD also includes amendments for franchisees in specific states that may impact this ability. For example, the North Dakota amendment states that franchisees will not be required to sign a general release upon renewal of the Franchise Agreement. Similarly, the Maryland amendment specifies that the general release required as a condition of renewal, sale, and/or assignment/transfer shall not apply to any liability under the Maryland Franchise Registration and Disclosure Law. These state-specific amendments indicate that the enforceability and scope of the release may vary depending on the franchisee's location.
In practical terms, a prospective Chatime franchisee should carefully review the franchise agreement and any state-specific amendments to understand the circumstances under which they may be required to sign a release. They should also be aware of the potential implications of signing a release, as it could limit their ability to pursue claims against Chatime in the future. It is advisable to seek legal counsel to fully understand the terms and conditions of the franchise agreement and any related releases.