What specific actions are Chatime Developers and Guarantors prohibited from taking with the Confidential Information during and after the term of the franchise agreement?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
6 Confidential Information
- 6.1 Obligation to Maintain Confidentiality
- (1) Developer and Guarantor acknowledge and agree that neither Developer nor any Guarantor will acquire any interest in the Confidential Information, other than the right to utilize the Confidential Information in performing their obligations under this Agreement, and that the use or duplication of any Confidential Information would constitute an unfair method of competition.
- (2) Developer and Guarantor hereby agree that during the term of this Agreement and following the expiration or termination of this Agreement that they:
- (a) Will not use the Confidential Information in any other business operation or capacity;
- (b) Will maintain the absolute confidentiality of the Confidential Information;
- (c) Will not make unauthorized copies of any portion of the Confidential Information; and
- (d) Will adopt and implement all reasonable procedures that Franchisor prescribes from time to time to prevent unauthorized use or disclosure of the Confidential Information, including, without limitation, restrictions on the disclosure of the Confidential Information to Franchisees, Outlet personnel and others;
- (3) Notwithstanding anything to the contrary contained in this Agreement, the restrictions set out in clause 6.1(2) will not apply to information that:
- (a) Is or becomes publicly available, other than by breach of this Agreement;
- (b) Developer or Guarantor (as applicable) is legally compelled to disclose, provided Developer/Guarantor must have used its best efforts and afforded Franchisor the opportunity to obtain an appropriate protective order or other assurance
satisfactory to Franchisor of confidential treatment for the information required to be disclosed; or
- (c) Is otherwise permitted under the terms of this Agreement.
- (4) If required by Franchisor, Developer must ensure that Developer's Owner managers, directors, shareholders, agents, employees and any Interested Party enter into a confidentiality agreement in a form that is acceptable to Franchisor.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, Developers and Guarantors have specific obligations regarding confidential information, both during and after the franchise agreement. They acknowledge that they do not acquire any ownership interest in the confidential information, only the right to use it to fulfill their obligations under the agreement. Chatime considers any unauthorized use or duplication of confidential information as an unfair competitive practice.
Specifically, Developers and Guarantors are prohibited from using the confidential information in any business operation or capacity other than their Chatime franchise. They must maintain the absolute confidentiality of the information and prevent unauthorized copies from being made. They are also required to implement any reasonable procedures that Chatime prescribes to prevent unauthorized use or disclosure of the confidential information. This includes placing restrictions on disclosing confidential information to franchisees, outlet personnel, and other parties.
However, these restrictions do not apply to information that becomes publicly available through no fault of the Developer or Guarantor, or if they are legally compelled to disclose the information. In the latter case, they must make their best effort to obtain a protective order or assurance of confidential treatment. Additionally, the restrictions do not apply to information otherwise permitted to be disclosed under the terms of the agreement. If required by Chatime, the Developer must also ensure that their owner-managers, directors, shareholders, agents, employees, and any interested party enter into a confidentiality agreement acceptable to Chatime.
These confidentiality obligations are standard in franchising to protect the franchisor's proprietary information and maintain a competitive advantage. Prospective Chatime franchisees should carefully review the definition of "Confidential Information" in the franchise agreement to understand the full scope of these restrictions and ensure they can comply with these obligations.