Can Chatime terminate the agreement immediately if the franchisee no longer holds a required license?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- (4) Notwithstanding any other provision in this clause 15, Franchisor may terminate this Agreement immediately upon written notice to Franchisee if:
- (a) The Defaulting Party breaches any provision under clause 6 (Initial and Continuing Fees), 9.2 (No Other Business Interests) or 9.3 (Restraint Applies to Conduct in Any Capacity).
- (b) A force majeure event (as referred to in clause 23) continues for more than 180 days;
- (c) Franchisee no longer holds a license that Franchisee must hold to carry on The Franchised Business;
- (d) Franchisee voluntarily abandons The Franchised Business;
- (e) Franchisee or a Guarantor is convicted of a serious offense;
- (f) The Franchised Business is operated in a way that endangers public health or safety;
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, Chatime can terminate the franchise agreement immediately if the franchisee no longer holds a license required to operate the franchised business. This is a significant point for prospective franchisees, as it means that maintaining all necessary licenses is not just a matter of compliance, but a condition for keeping the franchise operational. Failing to maintain a required license gives Chatime the right to terminate the agreement without the opportunity to remedy the situation.
This immediate termination clause is in addition to Chatime's general termination rights, which involve providing written notice and an opportunity to remedy a breach of the franchise agreement. However, the license requirement is an exception where Chatime does not need to provide a notice or a cure period. This highlights the critical importance of understanding and adhering to all licensing requirements for the Chatime business.
It is important to note that this termination right is at Chatime's discretion. While they may terminate the agreement, they are not obligated to do so. However, franchisees should not rely on Chatime's forbearance and must prioritize maintaining all necessary licenses to avoid potential termination. This clause is fairly standard in franchise agreements, as franchisors need to ensure franchisees are operating legally and safely.