Under what circumstances is a Chatime developer required to reimburse the franchisor for costs, including legal costs?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
rvives termination of this Agreement. It is not necessary for a party to incur expense or make payment before enforcing a right of indemnity conferred by this Agreement. Any indemnities and assumptions of liabilities or obligations under this Agreement survive termination or expiration of this Agreement.
23.7 Survival of Obligation After Termination and Expiration
Termination or expiration of this Agreement does not release any party from that party's obligations which expressly survive of or are capable of survival of this Agreement and specifically including but not limited to clauses 4.1, 4.2, 6.1, 7.2, 7.8, 8.1, 9.2, 9.6, 13.1(2), 14, 15, 16, 19, and 21.
23.8 Costs and Expenses
- (1) Developer must pay, or reimburse Franchisor on demand for, all Franchisor's Costs (including legal Costs on a solicitor and own client or full indemnity basis, whichever is the greater) in connection with or incidental to:
- (a) Any default by Developer in observing or performing any of its obligations under this Agreement;
- (b) Any termination of this Agreement; and
- (c) The contemplated, attempted, or actual enforcement, preservation, or exercise of any right under this Agreement including the obtaining by Franchisor of any advice or information as to its rights under this Agreement or otherwise arising from a breach of this Agreement by Developer.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a developer may be required to reimburse Chatime for costs, including legal costs, under specific circumstances. If the developer defaults on their obligations under the agreement, they are responsible for covering Chatime's costs. This includes any expenses Chatime incurs while trying to enforce, protect, or exercise its rights under the agreement, or if Chatime seeks advice or information due to a breach of the agreement by the developer. These costs include legal fees, which are calculated on a solicitor and own client or full indemnity basis, whichever is greater, meaning the developer could be responsible for all of Chatime's legal expenses.
Additionally, if an audit reveals that the developer has understated the initial or recurring fees they received from franchisees by more than 2%, the developer must reimburse Chatime for the cost of the audit. This reimbursement covers all expenses related to the inspection or audit, including legal and accounting fees, as well as travel and accommodation expenses for Chatime employees. The need for an audit may arise if the developer fails to provide required reports, records, information, or financial statements in a timely manner.
These provisions highlight the importance of adhering to the franchise agreement and maintaining accurate financial records. Failure to do so can result in significant financial burdens for the Chatime developer, including covering Chatime's legal and audit-related costs. This is a common practice in franchising, where franchisees or developers bear the responsibility for costs incurred due to their non-compliance or default.