What are the specific obligations of a Chatime franchisee regarding the use of trademarks (Item 9) and how do these obligations relate to the trademarks licensed in Item 13?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- (1) If it is the owner of any intellectual property (e.g., business or corporate names, trademarks, domain names) similar or identical to the Intellectual Property in the Territory, immediately upon execution of this Agreement, take all steps necessary to transfer ownership of that intellectual property to Franchisor at Franchisee's cost;
- (2) If, during the Initial Term, either Franchisee or any Guarantor registers any intellectual property (e.g., business or corporate names, trademarks, domain names) similar or identical to the Intellectual Property in the Territory, the relevant party must immediately upon such registration, take all steps necessary to transfer ownership of that intellectual property to Franchisor at Franchisee's cost; and
- (3) Not, except as otherwise agreed or directed by Franchisor in writing, register any intellectual property (e.g., business or corporate names, trademarks, domain names) similar or identical to the Intellectual Property or that contains or consists of any Intellectual Property or anything that is substantially identical or deceptively similar thereto or otherwise relates to the Chatime brand or the System. In particular, if Franchisee or Guarantor is a corporation, each must not use the word "Chatime" or any other similar word or derivatives of that word in its corporate name, with acknowledgement that the factors determining similarity of trademarks as stated above include, without limitation, the appearances, concepts, pronunciations, designated classes and designated goods and services of trademarks.
11.7 Franchisee's Improvements
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, franchisees have specific obligations regarding the use of trademarks, which are closely tied to the trademarks licensed to them as detailed in Item 13. Item 13 states that the Franchise Agreement grants franchisees a non-exclusive right to operate their Chatime store under the Trademarks. Chatime has a license from La Kaffa to sublicense the use of the Trademarks in the continental United States, Hawaii and Guam. This license agreement, dated September 23, 2022, has a term of thirty years and a renewal term of an additional ten years unless terminated earlier by Chatime upon 90 days' notice to La Kaffa. All rights in and goodwill from the use of the Trademarks accrue to Chatime and its affiliates.
Item 23 outlines further obligations. If a franchisee owns any intellectual property similar to Chatime's Intellectual Property in the Territory, they must transfer ownership to Chatime upon execution of the agreement, at the franchisee's cost. Similarly, if a franchisee registers any intellectual property similar to Chatime's during the Initial Term, they must transfer ownership to Chatime at their own cost. Franchisees are prohibited from registering any intellectual property similar to Chatime's Intellectual Property, or anything that contains or consists of any Intellectual Property, unless agreed to in writing by Chatime.
These obligations ensure that Chatime maintains control over its brand and intellectual property. This is a common practice in franchising, as consistent brand representation is crucial for maintaining customer recognition and trust. The franchisee's adherence to these rules protects the integrity and value of the Chatime brand, benefiting both the franchisor and all franchisees within the system. Prospective franchisees should carefully consider these obligations and ensure they are willing to comply with these requirements before investing in a Chatime franchise.