Is Chatime required to approve a proposed alternate supplier after testing?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
| Uniforms for First | $500 to $1,500 | $500 to $1,500 | $500 to $1,500 |
|---|---|---|---|
| Location | |||
| Initial Training for First | $5,000 | $5,000 | $5,000 |
| Fee(1) Type of | Amount | Due Date | Remarks |
| Audit Fee | Cost of audit | As invoiced | Payable if (i) we find that you have understated any amount you owe to us by more than 2%, or (ii) you fail to furnish reports, supporting records, other information or financial statements as required on a timely basis and we believe an audit is necessary. The Audit Fee includes accountants' fees, legal fees, and associated travel and accommodation expenses for our employees. |
| Interest Rate | The lesser of 1.5% per month or the highest rate allowed by law | As invoiced | If you fail to pay us any amount when due, you will pay interest on that amount at the Interest Rate from the time the amount should have been paid until it is paid. Interest accrues daily and may be capitalized by us. |
| Alternate | Costs incurred | As invoiced | You will reimburse us for our costs to test |
| Supplier Testing | a proposed alternate supplier regardless of | ||
| Fee | whether such supplier is approved. |
Source: Item 6 — Other Fees (FDD pages 13–17)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, franchisees will incur costs to test a proposed alternate supplier, and these costs are invoiced to the franchisee. The FDD does not specify whether Chatime is obligated to approve the proposed alternate supplier if they pass the required testing. Chatime franchisees must reimburse Chatime for these testing costs regardless of whether the alternate supplier is ultimately approved.
This policy means a Chatime franchisee could spend money on testing an alternate supplier without any guarantee of approval. This is a notable risk, as the franchisee bears the financial burden of testing without assurance of a positive outcome. It is common in franchising for franchisors to maintain control over the supply chain to ensure quality and consistency, but the financial responsibility for testing new suppliers is not always borne by the franchisee.
Prospective Chatime franchisees should clarify the criteria and process Chatime uses to approve alternate suppliers. Understanding the standards and potential reasons for rejection can help franchisees make informed decisions about proposing alternate suppliers and managing their costs. Franchisees should also inquire about the typical success rate of alternate supplier approvals after testing to better assess the likelihood of a return on their investment in the testing process.
In summary, while the Chatime FDD outlines the franchisee's responsibility for covering the costs of alternate supplier testing, it does not explicitly state whether Chatime is required to approve a supplier who passes testing. This lack of clarity places the financial risk of testing on the franchisee without a guaranteed outcome.