During the Restraint Period, is a former Chatime franchisee prohibited from engaging in a business that supplies similar products or services within the Restraint Area?

According to Chatime's 2025 Franchise Disclosure Document, a former franchisee is restricted from engaging in certain business activities during the Restraint Period. The Restraint Period is defined as two years following the expiration or termination of the Franchise Agreement within the Restraint Area. The Restraint Area includes the franchisee's territory or any area within twenty-five miles of any Chatime store.

During this Restraint Period, the franchisee and any guarantors are prohibited from engaging or being involved in any business within the Restraint Area that supplies products or services similar to those supplied by the franchise or that could be considered a market competitor of the Chatime network or any store. They are also restricted from soliciting any person who was a customer, employee, or prospective franchisee of Chatime in the twelve months prior to the termination or expiration of their Franchise Agreement. Furthermore, they cannot employ any person who was employed by Chatime or any other franchisee without obtaining written consent from Chatime.

These restrictions do not apply if the franchisee continues to operate individual Chatime stores under valid Franchise Agreements that have not been terminated and are not in default. It is important to note that these provisions are subject to state law, which may impose additional regulations or limitations on non-compete agreements.

For a prospective Chatime franchisee, this means that upon termination or expiration of their franchise agreement, they will face significant restrictions on their ability to operate a similar business within a defined geographic area for a period of two years. This could impact their future business opportunities and should be carefully considered before investing in a Chatime franchise.