Does Chatime have any restrictions on how it uses the amounts received from suppliers or vendors?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
accounting services, or insurance provider. We and our affiliates may use all amounts received from suppliers or vendors, whether or not based on you and other franchisees' prospective or actual dealings with them, without restriction for any purposes that we and our affiliates deem appropriate. The commissions, rebates, or fees which we may receive from your purchase of products or services from suppliers, vendors, payroll service, real estate and project management services, and accounting services, or insurance providers, may cause the price for such products or services to be higher than market value.
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.
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, Chatime and its affiliates have no restrictions on how they use the funds received from suppliers or vendors. These funds may come in the form of promotional allowances, volume discounts, commissions, or rebates. Chatime states that it and its affiliates may use these amounts for any purposes they deem appropriate, regardless of whether the payments are based on a franchisee's dealings with the suppliers or vendors.
This arrangement means that Chatime has broad discretion over how it uses these funds, which may or may not directly benefit franchisees. The FDD also notes a potential conflict of interest: the commissions, rebates, or fees Chatime receives from suppliers could cause the price of products or services to be higher than market value for the franchisee. This is a common practice in franchising where franchisors negotiate with suppliers and may receive compensation that influences the selection of those suppliers.
Prospective Chatime franchisees should be aware that they 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 its affiliates. The FDD states that officers of the franchisor own an indirect ownership interest in La Kaffa and Chatime Wholesale LLC, which are currently the only approved suppliers for certain products and supplies such as ingredients, supplies, and equipment. This creates a situation where the franchisor benefits directly from franchisee purchases through these entities.
In 2024, Chatime's affiliates had revenue of $396,652.37 from required purchases and leases of products and services by franchisees. This figure gives a sense of the scale of transactions between franchisees and the franchisor's affiliates. Franchisees should consider the potential for higher costs due to these arrangements and how this might affect their profitability. It is important for prospective franchisees to evaluate the competitiveness of pricing from approved suppliers and understand the overall financial implications of these purchasing requirements.