Can Chatime transfer its rights under the Franchise Agreement, and what is the franchisor's obligation after the transfer?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
| i. Franchisee's obligations on termination/non-renewal | FA: §17 | Upon expiration or termination of your Franchise Agreement, you will immediately (i) cease directly or indirectly identifying yourself as a current or former franchisee, (ii) deliver to us all copies of the Operations Manual and Global Policies and Procedures, all forms of stationery, business cards, all advertising materials, original and all copies of databases and supplier lists, and all other property of ours, (iii) discontinue and forever cease use of the System name, the Trademarks, any trade name, trademark, or commercial symbol that suggests any association with us, and any of our confidential information and other Intellectual Property, (iv) remove all signage containing any of our trademarks or any marks deceptively similar to them, (v) execute all documents we require to transfer, assign, or cancel any trademarks, service marks, domain |
|---|---|---|
| names, or other commercial symbols or intellectual | ||
| property you applied for registration for or registered, | ||
| (vi) | ||
| provide us with all records, files, and other | ||
| materials we require pertaining to your Franchise | ||
| Agreement, | ||
| and | ||
| (vii) | ||
| pay | ||
| all | ||
| unpaid | ||
| monies | ||
| owed | ||
| to | ||
| us | ||
| or | ||
| any | ||
| affiliate | ||
| within | ||
| ten | ||
| business | ||
| days. | ||
| MDA: § 15 | Upon expiration or termination of your MDA, you will immediately (i) cease directly or indirectly identifying yourself as a current or former developer, (ii) ) pay all unpaid monies owed to us or any affiliate within ten business days, and (iii) cease all development efforts. | |
| j. Assignment of contract by franchisor | FA: §12 | We may transfer any of our rights, interests, obligations, or liabilities under your Franchise Agreement to any person or entity. Upon transfer, we will have no further obligation under your Franchise Agreement except for any accrued liabilities. |
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, Chatime has the right to transfer its rights, interests, obligations, or liabilities under the Franchise Agreement to another person or entity.
Upon such a transfer, Chatime's obligations under the Franchise Agreement cease, except for any accrued liabilities. This means that after Chatime transfers the agreement, the new entity assumes most of Chatime's responsibilities, but Chatime remains responsible for any debts or obligations that were outstanding before the transfer.
This is a fairly standard clause in franchise agreements, allowing the franchisor flexibility in structuring its business. However, it is important for a prospective franchisee to understand that the 'parent' company they initially contract with may not be the entity they deal with throughout the entire term of the agreement. It would be prudent for a prospective franchisee to inquire about Chatime's history of such transfers and the reasons behind them.