Under what circumstances is a Chatime developer excused from including a provision in their lease that permits assignment or transfer to Chatime?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
11.3 Conditions to be Satisfied Before Assignment can be Approved
Franchisor must not unreasonably withhold its consent under clause 11.2(2) if the sale, assignment, or other Disposal is of the whole of Developer's interest in the Developer's Operation and each of the following conditions are satisfied:
(1) Developer establishes to Franchisor's reasonable satisfaction that the proposed assignee (and its directors and Owners if the assignee is a business entity):
- (a) Possesses the financial resources necessary to conduct and operate Developer's Operation as a Developer and to service any borrowings it makes in order to acquire Developer's Operation;
- (b) Is a reputable and responsible and has the business experience and capabilities necessary to operate Developer's Operation successfully; and
- (c) Otherwise meets Franchisor's criteria for the selection of new Chatime developers;
(2) Developer pays to Franchisor the Transfer Fee;
(3) Developer, both when seeking consent to the assignment and when the assignment is to occur, is not in default under this Agreement or any Collateral Agreement;
(4) At the option of Franchisor:
(a) The assignee executes Franchisor's then-standard form development business agreement for the balance remaining of the Initial Term (including any existing option for a New Term); or
(b) Developer and the assignee execute an assignment of Developer's rights and obligations under this Agreement to the assignee in a form required by Franchisor,
and Developer and the assignee execute any other documents then used by Franchisor for the grant of Chatime development business;
- (5) When the assignee is a business entity, those directors and Owners or other Affiliates of the assignee nominated by Franchisor each:
- (a) Execute and deliver a personal guarantee and indemnity and undertake similar personal restraints to those given by Guarantor under this Agreement in favor of, and in a form required by, Franchisor; and
- (b) Execute and deliver a confidentiality and non-competition agreement in the Franchisor's then-current form.
(6) Developer:
(a) Gives to Franchisor all details of the proposed assignment including a copy of the applicable contract (which must comply with Franchisor's requirements) and any other agreements between Developer and the assignee.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
Based on the 2025 Chatime Franchise Disclosure Document, a Chatime developer is not explicitly excused from including a provision in their lease that permits assignment or transfer to Chatime. However, the FDD outlines conditions under which Chatime will not unreasonably withhold consent for a developer to sell or dispose of their interest in the franchise.
Specifically, Chatime will not unreasonably withhold consent if the sale, assignment, or disposal involves the entirety of the developer's interest in the operation, and several conditions are met. These conditions include the proposed assignee demonstrating the necessary financial resources, a reputable business background, and meeting Chatime's criteria for new developers. The developer must also pay a transfer fee and not be in default under any agreements with Chatime.
Additionally, Chatime has the option to require the assignee to execute the then-standard development business agreement or an assignment of the developer's rights and obligations. If the assignee is a business entity, its directors and owners may need to provide personal guarantees, indemnities, and confidentiality agreements. The developer must also provide all details of the proposed assignment to Chatime, including a copy of the contract.
In practical terms, while a developer cannot avoid the assignment provision, Chatime outlines clear conditions under which they will approve a transfer. Meeting these conditions is crucial for a developer looking to sell their Chatime business. Prospective developers should carefully review these conditions and understand the requirements for securing Chatime's consent for any future transfer of their franchise.