What were the two reasons the Washington Department of Financial Institutions concluded that Chatime USA LLC violated Washington franchise law?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
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In re Chatime USA, LLC, State of Washington, Department of Financial Institutions, Securities Division, Consent Order No. S-19-2701-19-0001. On or about August 4, 2016, our affiliate Chatime USA LLC entered into a five-year Master Franchise Agreement with a Canadian company based in Edmonton, Alberta (the "Alberta Master Franchisee") pursuant to which our affiliate Chatime USA LLC granted the Alberta Master Franchisee master franchise rights in Washington. In 2019, the Washington Department of Financial Institutions (the "Department") began an investigation into our affiliate Chatime USA LLC's prior franchising activities in connection with its application for franchise registration. The Department concluded that the sale to the Alberta Master Franchisee violated Washington franchise law because (i) Chatime USA LLC granted master franchise rights to the Alberta Master Franchisee in Washington without first obtaining franchise registration in Washington, and (ii) Chatime USA LLC did not provide the Alberta Master Franchisee with a U.S. disclosure document. Under the terms of a consent order dated September 16, 2019, our affiliate Chatime USA LLC agreed to cease and desist from the sale of franchises in Washington in violation of Washington franchise law and paid the Department $2,500 for the costs of
Source: Item 3 — Litigation (FDD pages 10–11)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, the Washington Department of Financial Institutions investigated Chatime USA LLC's franchising activities in Washington. The department concluded that Chatime USA LLC violated Washington franchise law for two reasons. First, Chatime USA LLC granted master franchise rights to an Alberta Master Franchisee in Washington without first obtaining franchise registration in Washington. Second, Chatime USA LLC did not provide the Alberta Master Franchisee with a U.S. disclosure document.
As a result of these violations, Chatime USA LLC entered into a consent order with the Department on September 16, 2019. Under the terms of the consent order, Chatime USA LLC agreed to cease and desist from selling franchises in Washington in violation of Washington franchise law. Chatime USA LLC also paid the Department $2,500 for the costs of its investigation.
This litigation indicates the importance of Chatime following franchise laws and regulations when offering or selling franchises. Prospective franchisees should be aware of these past violations and ensure that Chatime is currently in full compliance with all applicable franchise laws and regulations in their state.