factual

Is a transferee required to provide a guarantee and indemnity in favor of Chatime during a transfer?

Chatime Franchise · 2025 FDD

Answer from 2025 FDD Document

k. "Transfer" by FA: §1.1(16); §13 Defined as a "Disposal." Disposal includes any
franchisee voluntary, involuntary, direct, or indirect sale,
–
defined
assignment, pledge, bequeath, trade, or transfer.
In
relation
to
a
business
entity,
Disposal
includes
entering
into a transaction in relation to an ownership interest
that
results
in
a
person
other
than
the
registered
holderof the ownership interest (i) acquiring any legal
or equitable
interest in the ownership interest
including an
equitable
interest arising
from a
declaration
of
trust, an agreement for sale and purchase
or an option agreement or an agreement creating a
charge or other encumbrance in the ownership interest,
(ii) acquiring any
right
to
directly
or
indirectly
receive
any
dividends payable
from
the
ownership
interest,
(iii)
acquiring
any rights
of
pre-
emption,
first
refusal,
or
like
control
over the ownership interest, (iv) acquiring
any rights of control over the exercise of any voting
rights or rights to
appoint
directors
attaching
to
the
ownership
interest, or (v) otherwise acquiring legal or
equitable rights against the registered holder of the
ownership interest which
have
the
effect
of
placing
the
person
in
the
same position as if the person had
acquired a legal or equitable interest in the ownership
interest.
MDA: Same
§1.1(24) as above.
l. Franchisor approval FA: §13.2 You may only transfer a direct or indirect interest in your
of Franchise Agreement with our prior written consent,
transfer
by
franchisee
which will not be unreasonably withheld.
MDA: §11.2 You may only transfer a direct or indirect interest in your
MDA
with our prior written consent, which will not be
unreasonably withheld.
m. Conditions of FA: §13.3 We may impose any of the following conditions on our
franchisor approval of your proposed transfer: (i) you establish to
approval
of
transfer our
reasonable
satisfaction
that
the
transferee
meets
our
standards, (ii) you pay us a Transfer Fee and any other
legal and administrative costs we incur related to the
transfer, (iii) you are not in default of any agreement

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 may require a transferee to provide a guarantee and indemnity in Chatime's favor as a condition of transfer approval. Specifically, Chatime can impose conditions such as the transferee providing a guarantee and indemnity in a form that Chatime requires. This condition is listed among other potential requirements that Chatime may place on the transfer.

This means that if a franchisee decides to sell their Chatime franchise, the person or entity buying the franchise (the transferee) might have to provide a guarantee and indemnity to Chatime. A guarantee is a promise to be responsible for the franchisee's obligations, and an indemnity is a promise to protect Chatime from any losses or damages.

This requirement protects Chatime by ensuring that the new franchisee is financially responsible and committed to upholding the franchise agreement. It also aligns with standard franchising practices, where franchisors often seek guarantees to mitigate risks associated with new franchisees. Prospective franchisees should carefully review the specific terms of the guarantee and indemnity required by Chatime, as these can have significant legal and financial implications for the transferee.

Disclaimer: This information is extracted from the 2025 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.
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