What state's law governs the Chatime Franchise Agreement and MDA?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
| Provision | Section in Franchise | Summary |
|---|---|---|
| Agreement (FA) and Multi-Unit Development Agreement (MDA) | ||
| a. Length of the | FA: §1.1(27) | The term is ten years. |
| franchise term | ||
| MDA: §1.1(34) | The period ending the end date of the agreed Development Period. . | |
| b. Renewal or extension of the term | FA: §1.1(40); §2.6 | At the end of the initial term of your Franchise Agreement, we may grant you the option to continue operating as a franchisee in your Territory and to enter into a new Franchise Agreement for a renewal term of ten years. |
| MDA: § 2.7 | At the end of the initial term of your Franchise Agreement, you may request to enter into an additional term of ten years under the terms of our then-current form of multi-unit development agreement, which may contain different terms | |
| u. Dispute resolution by arbitration or mediation | §16 | Except as otherwise provided, all disputes and claims relating to your Franchise Agreement or the relationship of the parties must be settled by mediation or arbitration in New York in accordance with the rules of the American Arbitration Association (“AAA”) mediation and arbitration service. These provisions are subject to state law. |
| MDA: §14 | Except as otherwise provided, all disputes and claims relating to your MDA or the relationship of the parties must be settled by mediation or arbitration in New York in accordance with the rules of the AAA mediation and arbitration service. These provisions are subject to state law | |
| v. Choice of forum | §16 | Arbitration in New York in accordance with the rules of the AAA service. These provisions are subject to state law. |
| MDA: §14 | Arbitration in New York in accordance with the rules of the AAA service. These provisions are subject to state law. | |
| w. Choice of law | §25.1 | Delaware law. These provisions are subject to state law. |
| MDA: §23.16 | Delaware law. These provisions are subject to state law |
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, the Franchise Agreement and Multi-Unit Development Agreement (MDA) are governed by Delaware law. However, the FDD also states that these provisions are subject to state law, which means that while Delaware law is the primary governing law, specific state laws may also apply and potentially override certain aspects of the agreement depending on the franchisee's location.
This is a fairly common practice in franchising, where a franchisor selects a particular state's law to govern the agreement for consistency, but acknowledges that certain state-specific regulations may take precedence. Delaware is often chosen due to its business-friendly legal environment.
For a prospective Chatime franchisee, this means understanding both Delaware law and the laws of the state in which they will operate their franchise. It would be prudent to consult with a legal professional to understand how both sets of laws apply to their specific situation and to ensure compliance with all applicable regulations. This is especially important in areas such as dispute resolution, termination rights, and non-compete clauses, where state laws can significantly impact the enforcement of the franchise agreement.