Does Chatime have the right to terminate the multi-unit development agreement without cause?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
ys' written notice of termination. These provisions are subject to state law. | | e. Termination by franchisor without | FA: Not applicable | Not applicable. | | "cause" | MDA: Not applicable | Not applicable | | f. Termination by franchisor with "cause" | FA: §15.3 | We have the right to terminate your Franchise Agreement with cause. Depending upon the reason for termination, we may not provide you with an opportunity to cure. | | | MDA: § 13.3 | We have the right to terminate your MDA with cause. Depending upon the reason for termination, we may not provide you with an opportunity to cure. | | g. Curable defaults | FA: §15.3(1) | All defaults must be cured within 30 days after notice. | | | MDA: § 13.3(1) | All defaults must be cured within 30 days after notice. | | h. n-curable defaults | FA: §15.3(4) | We may terminate your Franchise Agreement immediately upon written notice to you if (i) you or a guarantor breach any provision under Clauses 6, 9.2, or 9.3 of your Franchise Agreement, (ii) a force majeure event continues for more than 180 days, (iii) you no longer hold a license required to carry on your franchise business, (iv) you voluntarily abandon your franchise business, (v) you or a guarantor are convicted of a serious offense, (vi) your operations endanger public health or safety, (vii) you are fraudulent in connection with your operations or commit a fraud upon us, or (viii) you voluntarily petition in bankruptcy, are adjudicated a bankrupt or insolvent, or a receiver, manager, liquidator, or other person is appointed for a substantial part of your assets. | |-----------------------------|------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | | MDA: §13.3(4) | We may terminate your MDA immediately upon written notice to you if (i) you or a guarantor breach any provision under Clauses 6, 7.2, or 7.3 of your MDA, (ii) a force majeure event continues for more than 180 days, (iii) you no longer hold a license required to carry on your franchise business, (iv) you voluntarily abandon your multi-unit development business, (v) you or a guarantor are convicted of a serious offense, (vi) your operations endanger public health or safety, (vii) you are fraudulent in connection with your operations or commit a fraud upon us, or (viii) you voluntarily petition in bankruptcy, are adjudicated a bankrupt or insolvent, or a receiver, manager, liquidator, or other person is appointed for a substantial part of your assets. |
| i.
Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 43–52)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, the company does not have the right to terminate the Multi-Unit Development Agreement (MDA) without cause. Item 17 of the FDD outlines the conditions under which either the franchisee or Chatime can terminate the MDA. Specifically, section e in the provided table indicates that termination by Chatime without cause is 'Not applicable'.
This means that Chatime can only terminate the MDA if there is a valid reason or 'cause' as defined in the agreement. This provides a level of security for the franchisee, ensuring that Chatime cannot arbitrarily terminate the agreement without justification. The FDD further clarifies in section f that Chatime does have the right to terminate the MDA with cause, and depending on the reason for termination, the franchisee may not be provided with an opportunity to cure the default.
Several events can trigger termination with cause. According to section h, Chatime may terminate the MDA immediately with written notice if the franchisee or a guarantor breaches specific clauses within the MDA, a force majeure event lasts over 180 days, the franchisee loses a required license, the franchisee abandons the multi-unit development business, the franchisee or a guarantor is convicted of a serious offense, the franchisee's operations endanger public health or safety, the franchisee commits fraud, or the franchisee becomes bankrupt or insolvent. These stipulations protect Chatime from significant risks and ensure adherence to the terms of the agreement.