Under what condition can a Chatime developer terminate the Development Agreement?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
2.5 Failure to Meet Development Quota
- (1) If Developer fails to meet the Development Quota for any Development Period or fails to comply with any financial obligation relating to the Development Rights, Franchisor may at its absolute discretion:
- (a) Terminate Developer's Development Rights;
- (b) Vary the Development Area by providing written notice to Developer; and/or
- (c) Terminate the exclusivity attached to the Development Rights (following which Franchisor may itself develop and operate Franchises in the Development Area, or may grant a right to a third party to develop and operate Franchises in the Development Area).
- (2) Subject to clause 2.5(3), termination of Developer's Development Rights pursuant to clause 2.5(1) is without prejudice to Developer's right to operate Outlets already developed under this Agreement and in operation in the Development Area during the Initial Term.
(3) If Developer's Development Rights are terminated by Franchisor pursuant to clause 2.5(1), all other rights otherwise granted pursuant to this Agreement automatically become nonexclusive.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
Based on the 2025 Chatime Franchise Disclosure Document, the franchisor, Chatime, has the right to terminate the Development Agreement if the developer fails to meet the Development Quota for any Development Period or fails to comply with any financial obligation relating to the Development Rights.
If Chatime chooses to terminate the agreement due to the developer's failure to meet the quota or financial obligations, it can do so at its absolute discretion. This means Chatime is not obligated to offer a grace period or opportunity to cure the failure. However, if Chatime terminates the Development Rights, the developer retains the right to operate any Chatime outlets already developed and in operation within the Development Area during the Initial Term, as long as they are in compliance with the Franchise Agreement.
It's important to note that even if the Development Rights are terminated, all other rights granted to the developer under the agreement automatically become nonexclusive. This means Chatime could then develop and operate franchises in the Development Area themselves or grant that right to a third party.