Does Chatime require franchisees to purchase all items and services necessary to operate a Chatime store?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
You are required to purchase or lease all of your products, ingredients, goods, supplies, equipment, inventory, insurance, payroll service, real estate and project management services, and accounting services, from us or one of our approved suppliers which may be one of our affiliates.
Our affiliates La Kaffa and Chatime Wholesale LLC are currently the only approved suppliers for certain products and supplies such as ingredients, supplies, and equipment. Officers of the franchisor own an indirect ownership interest in La Kaffa and Chatime Wholesale LLC.
Except for La Kaffa and Chatime Wholesale LLC, there are no approved suppliers in which any of our officers own an interest.
We estimate that your required purchases from approved suppliers will represent approximately 85% of the total purchases for establishing and operating your Chatime Store. We did not have any revenue in 2024 from required purchases and leases of products and services by franchisees. Our affiliates had revenue of $396,652.37 from required purchases and leases of products and services by franchisees in 2024.
We have the right to require you to purchase any items or services necessary to establish and operate your Chatime Store from a supplier that we approve or designate, which may include us
or one of our affiliates. You are required to purchase our then designated point of sale system and associated operating technology stack from an approved supplier. We will provide you with a list of our approved suppliers in writing as part of the Operations Manual or otherwise in writing, and we may update or modify this list as we deem appropriate.
Our criteria for approving suppliers is not available to you or your proposed suppliers. You or the supplier may request approval by submitting a written request to us. We may require that samples from the supplier be delivered to us or to a designated independent testing laboratory for testing prior to approval. All requests will be reviewed in accordance with our then-current procedures and subject to our available resources for review. You or the supplier will be required to reimburse us for all costs that we incur in the testing and approval process whether the supplier is approved or not. The supplier must meet our then-current specifications, standards, and requirements, which may include signing a non-disclosure agreement or a performance guarantee. We may change our specifications, standards, and requirements at any time and there is no limit on our right to do so. If the supplier that you propose is initially approved or disapproved, we will notify you and the supplier within 30 to 60 days depending on the nature of the products or services. We may withdraw our approval at any time if the supplier's performance does not meet our criteria, we change our specifications, standards or requirements, or for other reasons. If an approved supplier's approval is revoked, we will inform you of the revocation and you will cease to use that supplier.
We may limit the number of potential suppliers that we consider for approval. For some categories of products, we may designate a third party or ourselves as an exclusive supplier. We currently have exclusive supplier arrangements for some categories of products or services.
You must offer forsale the complete range of approved products. The approved products are listed in the Operations Manual (or as otherwise notified by the Franchisor). You are required to purchase an adequate and balanced quantity of stock of approved products. Inventory/stock requirements will be detailed in the Operations Manual or directly communicated to you. Inventory/stock requirements will be predominantly influenced by historical data and experience across the franchised network. There is an obligation to purchase an inventory of stock for opening the franchised business.
Our policy for approved products and approved suppliers is intended to ensure the consistency and quality of product standards and branding of the System and to protect the intellectual property of the Franchisor and to assist the Franchisee to comply with all laws and regulations. which you must purchase.
Source: Item 8 — Restrictions on Sources of Products and Services (FDD pages 22–25)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, franchisees are required to purchase or lease products, ingredients, goods, supplies, equipment, inventory, insurance, payroll, real estate and project management, and accounting services from Chatime or its approved suppliers, which may include Chatime affiliates. Chatime estimates that these required purchases from approved suppliers will constitute approximately 85% of the total purchases necessary for establishing and operating a Chatime store. In 2024, Chatime's affiliates had revenue of $396,652.37 from these required purchases and leases.
Chatime maintains the right to mandate that franchisees purchase any items or services deemed necessary to operate their Chatime store from approved or designated suppliers, potentially including Chatime itself or its affiliates. Franchisees are also obligated to use Chatime's designated point-of-sale system and associated technology stack from an approved supplier. While franchisees may request approval for alternative suppliers, Chatime's criteria for approval are not disclosed to franchisees or potential suppliers.
Chatime may designate exclusive suppliers for certain product categories and has existing exclusive arrangements. Franchisees must offer the complete range of approved products and maintain an adequate inventory, with specific requirements detailed in the Operations Manual or communicated directly by Chatime. This policy ensures product consistency, quality, and protects Chatime's intellectual property.
Prospective franchisees should be aware that Chatime and its affiliates may derive revenue from franchisee purchases, and fees from suppliers may influence supplier approval. This arrangement could potentially result in higher prices for products and services compared to market value. Therefore, it is crucial for potential franchisees to carefully evaluate the approved supplier list, understand the pricing structure, and assess the potential impact on their store's profitability.