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, considering the potential for demographic changes in the area?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
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.
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. Chatime may modify site selection criteria and processes, and the franchisee must use the site selection criteria and processes as approved by Chatime for selecting sites. The franchisee must select sites that they reasonably believe conform to Chatime's Development Area Site Selection Criteria.
Chatime will provide its site selection criteria and designate a geographic area where the franchisee must select the site; however, Chatime does not select the site itself. The franchisee's site proposal is subject to Chatime's review and approval, and the site must be developed according to Chatime's requirements. If the franchisee signs a Multi-Unit Development Agreement, they must find suitable locations for each additional location to meet the development schedule, with each location subject to Chatime's approval using its then-current site criteria. Chatime will not reimburse the franchisee for any costs incurred during the site selection and approval process.
The time limit for Chatime to approve or disapprove a proposed site is 30 days from submission. If Chatime disapproves, it must provide a written notice specifying the reasons for withholding approval. If additional information is requested, the 30-day period restarts upon receipt of the additional information. If Chatime and the franchisee cannot agree on a site, Chatime may terminate the franchise agreement, and the initial fee will be forfeited. Chatime may approve or disapprove a proposed site at its discretion, considering factors such as location, occupancy costs, proximity to retail activity, traffic volume, population density, competition, site configuration, parking, accessibility, visibility, and signage. The franchisee cannot begin construction without Chatime's prior approval.
While the FDD outlines site selection criteria and approval processes, it does not explicitly address how Chatime considers or accounts for potential demographic changes in the area surrounding a proposed location. This is a crucial factor that prospective franchisees should discuss directly with Chatime to understand how such changes are evaluated and what impact they might have on the long-term viability of the franchise location.