Under what circumstances is a Chatime franchisee prohibited from selling their interest in the franchise?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
(1) Franchisee must not sell or otherwise Dispose of its interest in the Franchise or The Franchised Business, whether in whole or in part, voluntarily or involuntarily, by operation of law (including as a result of bankruptcy, divorce, death or disability, without Franchisor's prior written consent and without first offering to sell the Ownership Interest of the Outlet
(Business) to Franchisor in accordance with clause 13.4.
- (2) If an offer made by Franchisee pursuant to clause 13.2(1) is not accepted, Franchisee may sell or otherwise Dispose of its interest in the Franchise or the Franchised Business subject to obtaining Franchisor's written consent which must not be unreasonably withheld if all of the conditions mentioned in clause 13.3 have been satisfied.
- (3) A request for Franchisor's consent under clause 13.2(2) must be made in writing.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, a franchisee is initially prohibited from selling their interest in the franchise or the franchised business without Chatime's prior written consent. This prohibition applies whether the sale is voluntary or involuntary, including situations arising from bankruptcy, divorce, death, or disability. The franchisee must first offer to sell the ownership interest of the outlet to Chatime. This initial right of refusal allows Chatime to maintain control over who enters the franchise system.
If Chatime declines the franchisee's offer to sell the business back to them, the franchisee may then proceed to sell their interest to a third party. However, this is still subject to obtaining Chatime's written consent. Chatime's consent cannot be unreasonably withheld if certain conditions are met, which are detailed in clause 13.3 of the franchise agreement.
This clause ensures that Chatime has the opportunity to approve any potential new franchisees, maintaining standards and protecting the brand. For a prospective franchisee, this means that selling the franchise is not a straightforward process and requires adherence to specific procedures and conditions outlined in the franchise agreement. It is important to carefully review these conditions to understand the requirements for a successful transfer of ownership.