Can Chatime terminate the agreement immediately if a receiver is appointed for a substantial part of the franchisee's assets?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
- (i) A receiver, manager, liquidator, or other Person acting in a comparable capacity is appointed for a substantial part of the assets of Franchisee.
- 15.4 Other Remedies. In the event of grounds for a default by the Franchisee, Franchisor is entitled in its sole discretion to exercise any other remedies in lieu of or prior to terminating the Agreement, which may include but are not limited to termination or suspension of any and all services provided to Franchisee by Franchisor, its Affiliates, or approved suppliers; suspension of delivery of product or supplies to Franchisee by Franchisor, its Affiliates, or approved suppliers; imposition of different credit terms for delivery of product or supplies to Franchisee by Franchisor, its Affiliates or approved suppliers; temporary operation of the Franchised Business pursuant to Section 14 of this Agreement; removal of Franchisee from the Franchisor's website, directory, or social media; execution and delivery of a Release in the form attached as Exhibit 1, and imposition of any additional or different requirements for Franchisee to maintain its right to continue operating the Franchised Business. Franchisor's exercise of any of these other remedies shall not in any way impair or waive Franchisor's right in the future to terminate the Agreement or to exercise any other rights under this Agreement.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, Chatime has grounds for default and potential termination of the franchise agreement if a receiver, manager, liquidator, or other person acting in a comparable capacity is appointed for a substantial part of the franchisee's assets. This clause gives Chatime the right to protect its brand and business network by ending the agreement with a franchisee facing significant financial instability.
However, Chatime also has the discretion to exercise other remedies instead of immediately terminating the agreement. These remedies can include temporarily suspending services or product delivery, imposing different credit terms, or even temporarily operating the franchised business itself. Chatime's decision to pursue these alternative remedies does not waive their right to terminate the agreement later if the franchisee's default continues or worsens.
This flexibility allows Chatime to work with franchisees to address issues while also protecting its interests. For a prospective franchisee, this means that the appointment of a receiver does not automatically lead to termination, but it does create a serious risk. It would be prudent to discuss with Chatime under what specific circumstances they would opt for immediate termination versus alternative remedies.