During the Restraint Period, is a Chatime franchisee prohibited from advising or consulting with any person connected to a Restrained Business?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
ion:
- (i) to Franchisee's directors, employees and professional advisers provided that they agree to keep the Confidential Information confidential;
- (ii) if the disclosure is necessary solely for the Permitted Purpose; or
- (iii) in order to comply with any applicable law or legally binding order of any court, Government Authority, or administrative or judicial body.
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.
**4.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a franchisee is restricted from advising or consulting with any person associated with a Restrained Business during the Restraint Period. The agreement specifies that the franchisee must ensure that they, and any entity they control, do not advise, assist, or consult with any Restrained Business or any person connected to it. This restriction applies directly or indirectly, through any corporate entity, trust, partnership, or as a trustee, principal, agent, shareholder, beneficiary, independent contractor, consultant, adviser, or in any other capacity.
The Restraint Period, as defined in the FDD, is a continuous, uninterrupted period of two years starting from the expiration or termination date of the Franchise Agreement. A Restrained Business is defined as a business that is the same as or substantially similar to the Franchised Business, or engaged in retailing or supplying products or services similar to those offered by the Chatime franchise. The Restraint Area includes the Territory, any area within twenty-five miles from any Outlet operated by the franchisee, and any area within twenty-five miles of any Chatime Store.
This non-compete clause is designed to protect Chatime's business interests, including relationships with other franchisees, investments in the business system, and the goodwill of the brand. The franchisee acknowledges that these restrictions are reasonable and necessary for the maintenance and protection of the franchise network. The agreement also specifies that these restrictions are severable, meaning that if any part of the non-compete agreement is deemed unenforceable, the remaining provisions will still apply. This ensures that Chatime retains as much protection as possible under the law.
For a prospective Chatime franchisee, this means that after the franchise agreement ends, they cannot provide advice or consultation to any competing business within the defined Restraint Area for two years. This restriction is broad and covers various forms of involvement, so franchisees need to be aware of these limitations if they plan to engage in similar business activities after their franchise agreement expires or is terminated.