What section of the Chatime Franchise Agreement addresses franchisor approval of transfer?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
petition agreement, | | | | (viii) you provide us with the purchase agreement |
| between you and transferee and any other documents related to the transfer, and (ix) you establish to our reasonable satisfaction that the transfer would not lead to or have any adverse effect on the System or the Chatime network. This provision is subject to state law. | ||
|---|---|---|
| MDA: §11.3 | We may impose any of the following conditions on our approval of your proposed transfer: (i) you establish to our reasonable satisfaction that the transferee meets our standards, (ii) you pay us a Transfer Fee and any other legal and administrative costs we incur related to the transfer, (iii) you are not in default of any agreement between us or our affiliates, (iv) the transferee signs our then-current form of MDA, or you and the transferee execute an assignment in the form we require, (v) the transferee provide a guarantee and indemnity in our favor in a form we require, (vi) the transferee's owners sign a personal guaranty, (vii) the transferee's owners and managers sign a confidentiality and non-competition agreement, (viii) you provide us with the purchase agreement between you and transferee and any other documents related to the transfer, and (ix) you establish to our reasonable satisfaction that the transfer would not lead to or have any adverse effect on the System or the Chatime network. This provision is subject to state law. | |
| n. Franchisor's right of first refusal to acquire franchisee's business | §13.4 | You may not sell your franchise or otherwise transfer any ownership interest without first offering to sell the ownership interest to us on the same terms and conditions offered by a third party. |
| MDA: §11.4 | You may not sell your MDA or otherwise transfer any ownership interest without first offering to sell the ownership interest to us on the same terms and conditions offered by a third party. | |
| o. Franchisor's option to purchase franchisee's | Not applicable | Not applicable. |
| business | Not | Not |
| applicable | applicable | |
| p. Death or disability of franchisee | Section 13.7 | Upon the death or permanent incapacity of any person with an interest in the franchisee, such interest must be transferred to a third party approved by us within one year following the death or incapacity. We have the right to terminate the agreement if an approved transfer is not completed within the designated period of time. |
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 conditions for franchisor approval of a transfer are detailed in Section 11.3 of the MDA (Multiple Development Agreement). Chatime may impose conditions such as ensuring the transferee meets Chatime's standards, payment of a Transfer Fee and legal/administrative costs, ensuring the franchisee is not in default, requiring the transferee to sign the current MDA form, and obtaining a guarantee and indemnity from the transferee. Additionally, personal guarantees from the transferee's owners, confidentiality and non-competition agreements, and the provision of the purchase agreement are required. Chatime also needs to be satisfied that the transfer will not adversely affect the Chatime system or network. This provision is subject to state law.
Furthermore, Section 13.4 of the Franchise Agreement and Section 11.4 of the MDA state that a franchisee cannot sell their franchise or ownership interest without first offering it to Chatime on the same terms offered by a third party. This is known as the right of first refusal, which is a common clause in franchise agreements that allows the franchisor to maintain control over who enters the system.
Section 13.7 addresses the death or disability of a franchisee. In such cases, the interest in the franchise must be transferred to a Chatime-approved third party within one year. Failure to complete the transfer within this timeframe gives Chatime the right to terminate the agreement. This ensures business continuity and adherence to Chatime's standards even in unforeseen circumstances.