Does Chatime retain rights to trade secrets related to the Franchised Business?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
2.3 Rights Retained by Franchisor
(1) Franchisor, on behalf of itself and its Affiliates, retains all rights with respect to Outlets, the Intellectual Property and the sale of Raw Materials and other Products and any other products and services, anywhere in the world including, without limitation, the rights to:
- (a) operate or grant others the right to operate Outlets under or in association with the Marks or any other trademarks or service marks at such locations outside the Territory, and on such terms and conditions as Franchisor, in its sole discretion, deems appropriate;
(b) provide, franchise, license, sell, distribute and market any services or products (under any brand, including but not limited to our Marks) through any Special Distribution Channels, in or outside your Territory, including, without limitation, through airports, train stations, hotels, convention centers, sport complexes, hospitals, or festivals.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to the 2025 Chatime FDD, Chatime retains all rights with respect to intellectual property, which includes trade secrets, related to the Franchised Business. The FDD defines Intellectual Property as including, among other things, trade secrets associated with or used in the Franchised Business. The Franchisor retains all rights to the Intellectual Property.
Chatime explicitly retains rights to operate or grant others the right to operate outlets under the Marks or any other trademarks or service marks at locations outside the franchisee's territory. They also retain the right to provide, franchise, license, sell, distribute, and market any services or products through alternative methods of distribution, even within the franchisee's territory. This means that Chatime can explore various avenues to promote its brand and offerings without necessarily involving the franchisee, which could potentially impact the franchisee's market share.
This arrangement is typical in franchising, where the franchisor maintains control over the brand and system while granting franchisees the right to operate under it. Prospective Chatime franchisees should understand that while they have the right to use Chatime's intellectual property to operate their franchise, Chatime retains ultimate ownership and control over that intellectual property and can utilize it as they see fit to grow the brand.