Does Chatime require the franchisee's direct and exclusive involvement in the franchised business?

This Agreement is predicated on the ongoing, direct, and exclusive involvement of Franchisee in the Franchised Business. No person other than an employee of Franchisee or a professional or other advisor appointed on normal commercial terms is to be involved in the Franchised Business without the prior written consent of Franchisor. In addition, Franchisee must not sub-franchise, sublicense, subcontract, share, divide, or partition rights under this Agreement without Franchisor's prior written. Franchisor may in its absolute discretion withhold such consent.

Franchisee's Operating Manager may but need not be an owner of your business.

You will ensure that the day-to-day operation of the Franchised Business is always actively managed by an Operating Manager who has attended and successfully completed such training as we may require from time to time.

The Operating Manager will actively devote his or her full time, attention and effort to the Franchised Business and provide direct, day-to-day supervision of the operation of the Franchised Business as provided in the then-current Operations Manual.

The current Operations Manual requires the Operating Manager to devote at least 38 hours per week to the day to day operations of your Chatime Store.

The Operating Manager shall not directly or indirectly engage in any other business or other activity that requires any significant management responsibility or time commitments or that may otherwise conflict with Franchisee's obligations under this Agreement.

• (5) If the Managing Owner or Operating Manager does not satisfactorily complete the initial training program or if we determine that such person cannot satisfactorily complete the training program, or if the Managing Owner or Operating Manager ceases to act as such, then Franchisor may elect to train, at Franchisee's expense, a qualified replacement (who must be reasonably acceptable to us) within 30 days.

Pending the appointment and training of a new Managing Owner or Operating Manager or if, in our judgment, the Franchised Business is not being managed properly, we have the right, but not the obligation, to appoint a manager for the Franchised Business and require you to pay in the manner described in clause 14.

(1) Managing Owner. The "Managing Owner" of your Chatime Store is the person named as such in Section 2 of Schedule 1. The Managing Owner is the primary person who will represent your business in your dealings with us and who will be responsible for overseeing and supervising the operation of the Franchised Business. The Managing Owner must be an owner of an equity interest in your business whom we approve. Franchisee agrees that a shareholder, member or partner will serve as your Managing Owner throughout the term of this Agreement. Franchisee may not replace the Managing Owner without Franchisor's prior written approval, which Franchisor may condition on, among other things, attendance and satisfactory completion by the prospective new Managing Owner of our initial training program at Franchisee's expense.

Source: Item 23 — Receipts (FDD pages 58–262)