Under what circumstances will Chatime's franchisor be liable to the developer while operating and managing the Development Business?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
Franchisor will not be liable to Developer in any way for anything done by Franchisor while it operates and manages the Development Business in accordance with this clause 12, except for acts or omissions arising from the gross negligence or willful misconduct of Franchisor. Developer indemnifies Franchisor and its employees and agents against all damages, sums of money, costs, charges, expenses, actions, claims, liabilities, injuries and demands made against or suffered by Franchisor, its employees and agents for the period Franchisor operates and manages the Development Business pursuant to this clause 12.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, the franchisor will not be liable to the developer for actions taken while operating and managing the Development Business, except in cases of gross negligence or willful misconduct. This means Chatime assumes significant control during temporary operation without liability for ordinary mistakes or errors in judgment.
This clause protects Chatime from liability for most actions taken while temporarily managing the Development Business. However, the developer must bear any losses incurred during Chatime's operation and management and must reimburse Chatime for such losses upon demand. This arrangement places a significant financial risk on the developer, as they are responsible for losses even when Chatime is in control.
Furthermore, the developer is required to indemnify Chatime, its employees, and agents against all damages, costs, expenses, actions, claims, liabilities, injuries, and demands made against or suffered by Chatime during the period they operate and manage the Development Business. This indemnity extends beyond just the franchisor's actions to include the actions of its employees and agents, providing broad protection to Chatime while increasing the developer's potential financial exposure.