During the term of the Chatime franchise agreement, are Franchisee and Guarantor allowed to use the Confidential Information in any other business operation or capacity?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- 8.1 Obligation to Maintain Confidentiality
- (1) Franchisee and Guarantor acknowledge and agree that neither Franchisee nor any Guarantor will acquire any interest in the Confidential Information, other than the right to utilize the Confidential Information in performing their obligations under this Agreement, and that the use or duplication of any Confidential Information would constitute an unfair method of competition.
- (2) Franchisee and Guarantor hereby agree that during the term of this Agreement and following the expiration or termination of this Agreement that they:
- (a) Will not use the Confidential Information in any other business operation or capacity;
- (b) Will maintain the absolute confidentiality of the Confidential Information;
- (c) Will not make unauthorized copies of any portion of the Confidential Information;
- (d) Will adopt and implement all reasonable procedures that Franchisor prescribes from time to time to prevent unauthorized use or disclosure of the Confidential Information including, without limitation, restrictions on the disclosure of the Confidential Information to Outlet personnel and others; and
- (3) Notwithstanding anything to the contrary contained in this Agreement, the restrictions set out in clause 8.1(2) will not apply to information that:
- (a) Is or becomes publicly available, other than by breach of this Agreement;
- (b) Franchisee or Guarantor (as applicable) is legally compelled to disclose, provided Franchisee/Guarantor must have used its best efforts and afforded Franchisor the opportunity to obtain an appropriate protective order or other assurance satisfactory to Franchisor of confidential treatment for the information required to be disclosed; or
- (c) Is otherwise permitted under the terms of this Agreement.
- (4) If required by Franchisor, Franchisee must ensure that Franchisee's Owner managers, directors, shareholders, agents, employees, and any Interested Party enter into a confidentiality agreement in a form that is acceptable to Franchisor.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, franchisees and guarantors are restricted from using confidential information in any business operation or capacity other than fulfilling their obligations under the franchise agreement. This restriction is in place both during the term of the agreement and after its expiration or termination. This measure aims to prevent unfair competition by ensuring that franchisees do not exploit Chatime's proprietary information for their own separate ventures.
The agreement explicitly states that franchisees and guarantors must maintain the absolute confidentiality of the information and avoid making unauthorized copies. They are also required to adhere to any procedures Chatime establishes to prevent unauthorized use or disclosure, including limiting access to outlet personnel. This underscores the importance Chatime places on protecting its trade secrets and operational methods.
However, there are exceptions to these restrictions. Franchisees and guarantors are not bound by these confidentiality obligations if the information becomes publicly available without any breach of the agreement, if they are legally compelled to disclose it (provided they make efforts to obtain a protective order), or if the agreement otherwise permits the use of the information. Additionally, Chatime may require the franchisee to ensure that their owner-managers, directors, shareholders, agents, employees, and any interested parties also enter into a confidentiality agreement acceptable to Chatime. This ensures a comprehensive approach to safeguarding confidential information across all levels of the franchisee's operations.