Before selling a Chatime franchise, what right does the franchisor have regarding the sale?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
| 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. | ||
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| 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. |
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, Chatime has the right of first refusal to acquire a franchisee's business. Before a franchisee can sell their franchise or transfer any ownership interest to a third party, they must first offer to sell that ownership interest to Chatime. This offer must be on the same terms and conditions that were offered by the third party. This right applies to both the franchise itself and the Master Development Agreement (MDA).
This means that if a Chatime franchisee receives an offer from someone to buy their franchise, they can't immediately accept it. Instead, they must present the offer to Chatime, giving Chatime the option to purchase the franchise on the exact same terms. This allows Chatime to control who enters the franchise system and prevent unwanted or unqualified individuals from becoming franchisees.
This right of first refusal is a fairly common practice in franchising. It protects the franchisor's brand and ensures that any new franchisees meet their standards. However, it could potentially delay the sale of a franchise, as the franchisee must wait for Chatime to decide whether or not to exercise its right of first refusal. Franchisees should carefully consider this when planning to sell their Chatime franchise.