During the Restraint Period, is a Chatime Developer Party prohibited from advising, assisting, or consulting with any Restrained Business?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
2. NON-COMPETITION DURING AND AFTER THE RELATIONSHIP WITH FRANCHISEE
I agree that I shall not, and I will ensure that any person or entity which I control shall not:
- (a) be concerned or interested in any Restrained Business (directly or indirectly, or through any interposed corporate entity, trust, partnership, or entity as trustee, principal, agent, shareholder, beneficiary, or as an independent contractor, consultant, adviser or in any other capacity);
- (b) advise, assist, consult with or for or in connection with any Restrained Business or any person associated with or in any manner whatsoever connected to or engaged by or in connection with any Restrained Business;
- (c) hold or own (beneficially or non-beneficially) whether directly or indirectly and whether absolutely or contingently or hold options over shares or any other securities or units of any entity engaging in a Restrained Business; and
- (d) procure, employ, seek to employ or engage, or appoint in any capacity (whether as a consultant, director or otherwise), any person who is or has been in the 12 months prior to such action an employee or independent contractor of the Franchisor or any Chatime Store Business
during the Restraint Period in the Restraint Area.
Nothing in this Agreement, including this Section 3, prevents the Covenantor (or any of its affiliates) from:
- (a) owning less than 5%, by value, of securities in a listed corporation; or
- (b) engaging or being concerned or interested in the Franchised Business in accordance with this Agreement.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a Developer Party is restricted from advising, assisting, or consulting with any Restrained Business during the Restraint Period. The agreement specifies that the Developer Party must ensure that any person or entity they control does not advise, assist, or consult with any Restrained Business. This restriction applies directly or indirectly, through any corporate entity, trust, partnership, or as a trustee, principal, agent, shareholder, beneficiary, consultant, adviser, or in any other capacity.
The Restraint Period for Chatime is defined as a continuous, uninterrupted period of two years, starting from the date of expiration or termination of the Development Agreement. A Restrained Business is defined as a business that is the same as or substantially similar to Chatime stores, or any business engaged in retailing or supplying products or services similar to those offered by Chatime stores.
This non-compete clause is designed to protect Chatime's business interests by preventing former developers from using their knowledge and experience to benefit competing businesses. However, the agreement also includes exceptions. The Developer Party is allowed to own less than 5% of securities in a listed corporation or engage in the Franchised Business in accordance with the Development Agreement. These exceptions provide some flexibility for the Developer Party while still upholding the non-compete obligations.
Prospective Chatime developers should carefully consider the implications of these restrictions, as they could significantly limit their business activities for two years after the agreement ends. It is important to understand the scope of the Restrained Business definition and the geographical limitations of the Restraint Area to assess the potential impact on future business ventures.