What standards must a transferee meet to gain Chatime's approval for a franchise transfer?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
| k. "Transfer" by | FA: §1.1(16); §13 | Defined as a "Disposal." Disposal includes any |
|---|---|---|
| franchisee | voluntary, involuntary, direct, or indirect sale, | |
| – | ||
| defined | ||
| assignment, pledge, bequeath, trade, or transfer. | ||
| In | ||
| relation | ||
| to | ||
| a | ||
| business | ||
| entity, | ||
| Disposal | ||
| includes | ||
| entering | ||
| into a transaction in relation to an ownership interest | ||
| that | ||
| results | ||
| in | ||
| a | ||
| person | ||
| other | ||
| than | ||
| the | ||
| registered | ||
| holderof the ownership interest (i) acquiring any legal | ||
| or equitable | ||
| interest in the ownership interest | ||
| including an | ||
| equitable | ||
| interest arising | ||
| from a | ||
| declaration | ||
| of | ||
| trust, an agreement for sale and purchase | ||
| or an option agreement or an agreement creating a | ||
| charge or other encumbrance in the ownership interest, | ||
| (ii) acquiring any | ||
| right | ||
| to | ||
| directly | ||
| or | ||
| indirectly | ||
| receive | ||
| any | ||
| dividends payable | ||
| from | ||
| the | ||
| ownership | ||
| interest, | ||
| (iii) | ||
| acquiring | ||
| any rights | ||
| of | ||
| pre- | ||
| emption, | ||
| first | ||
| refusal, | ||
| or | ||
| like | ||
| control | ||
| over the ownership interest, (iv) acquiring | ||
| any rights of control over the exercise of any voting | ||
| rights or rights to | ||
| appoint | ||
| directors | ||
| attaching | ||
| to | ||
| the | ||
| ownership | ||
| interest, or (v) otherwise acquiring legal or | ||
| equitable rights against the registered holder of the | ||
| ownership interest which | ||
| have | ||
| the | ||
| effect | ||
| of | ||
| placing | ||
| the | ||
| person | ||
| in | ||
| the | ||
| same position as if the person had | ||
| acquired a legal or equitable interest in the ownership | ||
| interest. | ||
| MDA: | Same | |
| §1.1(24) | as above. | |
| l. Franchisor approval | FA: §13.2 | You may only transfer a direct or indirect interest in your |
| of | Franchise Agreement with our prior written consent, | |
| transfer | ||
| by | ||
| franchisee | ||
| which will not be unreasonably withheld. | ||
| MDA: §11.2 | You may only transfer a direct or indirect interest in your | |
| MDA | ||
| with our prior written consent, which will not be | ||
| unreasonably withheld. | ||
| m. Conditions of | FA: §13.3 | We may impose any of the following conditions on our |
| franchisor | approval of your proposed transfer: (i) you establish to | |
| approval | ||
| of | ||
| transfer | 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 Franchise Agreement, 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 successfully completes our training | ||
| programs, (vi) the transferee's owners sign a personal | ||
| guaranty, (vii) the transferee's owners and managers |
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, a franchisee looking to transfer their franchise must ensure the transferee meets certain standards to gain Chatime's approval. Chatime may impose conditions such as ensuring the transferee meets their standards. The transferring franchisee must also pay a Transfer Fee and cover any legal and administrative costs Chatime incurs during the transfer.
Additionally, the franchisee must not be in default of any agreements with Chatime or its affiliates. The transferee is required to sign Chatime's current Franchise Agreement or execute an assignment in the form Chatime requires. They must also provide a guarantee and indemnity in Chatime's favor, in a form that Chatime requires. If the transferee is a business entity, its owners must sign a personal guaranty, as well as confidentiality and non-competition agreements.
Furthermore, the transferring franchisee must provide Chatime with the purchase agreement between themselves and the transferee, along with any other relevant documents. Finally, the franchisee must establish to Chatime's satisfaction that the transfer will not negatively impact the Chatime system or network. These conditions are subject to state law, meaning specific requirements may vary depending on the location of the franchise.
These stipulations are typical in franchising, as franchisors like Chatime need to protect their brand and ensure that new franchisees are capable and committed. Prospective Chatime franchisees should carefully review these transfer conditions to understand the requirements and potential costs associated with selling their franchise in the future.