Does Chatime have the right to require franchisees to purchase items or services from approved or designated suppliers, including Chatime or its affiliates?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
roval as described more fully in this Item.
We have the right to require you to purchase any items or services necessary to establish and operate your Chatime Store from a supplier that we approve or designate, which may include us
or one of our affiliates. You are required to purchase our then designated point of sale system and associated operating technology stack from an approved supplier. We will provide you with a list of our approved suppliers in writing as part of the Operations Manual or otherwise in writing, and we may update or modify this list as we deem appropriate.
We currently require that you maintain the following insurance coverages: A) general liability coverage with minimums of $1 million per occurrence, $2 million general and products/completed operations aggregate, $1 million personal/advertising injury, $50,000 rented premises damage, and $5,000 medical expenses; B) franchisee commercial auto insurance with a $1 million combined single limit; C) workers compensation insurance with coverage limits of $1 million for bodily injury by disease per accident, $1 million policy limit, and $1 million per employee, regardless of state laws and cannot exclude owner-operators; D) property/business interruption coverage business personal property, tenant improvements, equipment, business interruption, and franchisor royalties, for a minimum of 12 months' actual loss sustained; E) cyber liability insurance with minimum coverage limits of $250,000 per occurrence and $250,000 aggregate; F) employment practices liability insurance with minimum coverage limits of $500,000 per occurrence and $500,000 aggregate, which includes third party liability and wage & hour coverage of at least $25,000, with a maximum deductible that does not exceed $25,000; and G) crime insurance with a minimum coverage of $100,000 for each claim.
We have the right to require you to purchase any items or services necessary to operate your Chatime Store. Currently, we have approved suppliers for the following items: (i) food products and ingredients; (ii) real estate and construction management services; (iii) construction due diligence (unless proposed site does not require such due diligence); (iv) architectural, engineering and design services related to the establishment of your Chatime Store; (v) construction site visits; (vi) signage; (vii) furniture and equipment that must be used in connection with the operation of the Chatime Store; (viii) technology set-up and ongoing services; (viii) branded and proprietary ingredients, inventory and supplies; (ix) payroll and rostering services; (x) human resource services; and (xi) initial local marketing and location launch events. Certain food products that easily spoil (e.g., fresh fruits and milk) may be purchased by you locally with our prior approval.
Our current approved supplier for construction services is Build'M, our approved suppliers for real estate services are Morrow Hill, RE Image, Franreel and Great Earth Realty, and our approved supplier for initial marketing activities is Slique Media.
We may grant you approval to obtain food products, supplies, equipment (including point-of-sale and back office computer systems), and materials for your Chatime Store and services to your Chatime Store from other sources as long as they meet our specifications, standards, and requirements. Every supplier must demonstrate that it can meet all System specifications, standards, and requirements and has adequate capacity to supply our franchisees' quantity and delivery needs to our satisfaction. Before approving any supplier, we may take into consideration, without limitation (i) consistency with products or name brands already in the System, (ii) economies of scale achieved by larger volumes, and (iii) certain other benefits that a supplier may offer such as new product development capability. When approving a supplier, we take into consideration the System as a whole;
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 does have the right to require franchisees to purchase items or services necessary to establish and operate their Chatime store from approved or designated suppliers, which may include Chatime itself or its affiliates. Franchisees are required to purchase a designated point of sale system and associated operating technology stack from an approved supplier.
The FDD specifies that franchisees must purchase or lease all products, ingredients, goods, supplies, equipment, inventory, insurance, payroll service, real estate and project management services, and accounting services from Chatime or one of its approved suppliers, which may be affiliates. Currently, La Kaffa and Chatime Wholesale LLC are the only approved suppliers for certain products and supplies such as ingredients, supplies, and equipment, and officers of the franchisor own an indirect ownership interest in these companies. Chatime estimates that required purchases from approved suppliers will represent approximately 85% of the total purchases for establishing and operating a Chatime store. In 2024, Chatime's affiliates had revenue of $396,652.37 from required purchases and leases of products and services by franchisees.
Chatime also has approved suppliers for various other items and services, including food products and ingredients; real estate and construction management services; construction due diligence; architectural, engineering, and design services; construction site visits; signage; furniture and equipment; technology set-up and ongoing services; branded and proprietary ingredients, inventory, and supplies; payroll and rostering services; human resource services; and initial local marketing and location launch events. Certain food products that easily spoil, such as fresh fruits and milk, may be purchased locally with Chatime's prior approval.
Chatime may grant franchisees approval to obtain food products, supplies, equipment, and materials from other sources as long as they meet Chatime's specifications, standards, and requirements. However, Chatime may withhold approval of a supplier for any reason. The criteria for approving suppliers is not available to franchisees or their proposed suppliers. Chatime may also limit the number of potential suppliers considered for approval and may designate a third party or itself as an exclusive supplier for some categories of products.