What are the specific obligations of a Chatime franchisee regarding site selection (Item 9) and how do these obligations relate to the franchisor's approval process mentioned in Item 12?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
3.2 Site Selection
(1) Franchisor may from time to time modify site selection criteria and processes. Developer must use the site selection criteria and processes as approved by Franchisor (Development Area Site Selection Criteria) for the selection of sites in the Development Area.
(2) Developer must select sites in the Development Area that it reasonably believes conform with the Development Area Site Selection Criteria.
3.3 Site Approval
3. Site and Lease Approval
We will provide you with our site selection criteria and we will designate a geographic area in which you must select the site. We do not select the site. We will review your proposal for the site location. Your site must be approved by us and developed by you in accordance with our requirements. If you sign a Multi-Unit Development Agreement, you must find a suitable location for each additional location in time to meet the development schedule. We will approve each additional location under the Multi-Unit Development Agreement using our then-current site criteria. We will not reimburse you for any costs you incur for any location you submit to us for review and approval. (Clauses 4.7, 4.8 and 4.9 of the Franchise Agreement).
The time limit for us to approve or disapprove a proposed site is within 30 days of your submission. If we do not approve a proposed site, we will provide a written notice to you (i) specifying that approval is withheld, and (ii) setting out the reasons approval is withheld. If any additional information is requested by us for a proposed site, the 30 day-period will restart on the date of our receipt of any such additional information. (Clauses 4.7, 4.8 and 4.9 of the Franchise Agreement). If we cannot agree on a site, we may terminate your franchise agreement and your initial fee will be forfeited.
We may approve or disapprove a proposed site in our discretion. Factors affecting our approval generally include location, occupancy costs, proximity to major retail activity, traffic volume and speed, density of nearby population (resident or daytime), competition and potential for encroachment on other Chatime Stores, site configuration, parking, accessibility, visibility, signage permitted by the landlord and local governmental authorities, and other factors. (Clauses 4.7, 4.8 and 4.9 of the Franchise Agreement). You will not begin any construction on a site without our prior approval. (Clause 4.11 of the Franchise Agreement).
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, franchisees have several obligations regarding site selection and approval. Chatime may modify its site selection criteria and processes from time to time, and franchisees must adhere to the franchisor's approved criteria when selecting sites. Franchisees are responsible for selecting sites that they reasonably believe conform to Chatime's criteria.
Chatime does not select the site but will provide its site selection criteria and designate a geographic area for site selection. Franchisees must submit their site proposals to Chatime for review, and the site must be approved by Chatime. Chatime will review the franchisee's lease to ensure a lease addendum is included, giving Chatime the option to assume the lease if the franchisee defaults and requiring the landlord to notify Chatime of any defaults. The franchisee bears the costs associated with finding a suitable location, and Chatime will not reimburse these expenses.
Chatime has a 30-day period to approve or disapprove a proposed site from the date of submission. If Chatime withholds approval, it must provide a written notice specifying the reasons for disapproval. The 30-day period restarts if Chatime requests additional information. Chatime may approve or disapprove a site at its discretion, considering factors such as location, occupancy costs, traffic volume, population density, competition, site configuration, parking, accessibility, visibility, and signage. Franchisees cannot begin construction without Chatime's prior approval. If Chatime and the franchisee cannot agree on a site, Chatime may terminate the franchise agreement, and the initial fee will be forfeited.