Under what condition can Chatime operate or grant franchises for outlets within the Development Area after the initial term expires?

According to the 2025 Chatime Franchise Disclosure Document, upon the termination of the Development Agreement or the expiration of the initial term, Chatime and its affiliates are free to operate and grant franchises for outlets within the Development Area. However, this is conditional. If the parties enter into a new agreement that prohibits Chatime from operating or granting franchises, then Chatime is not free to do so.

This means that a developer's exclusive rights to the Development Area only last for the initial term of the agreement, unless a new agreement is put in place. If a new agreement isn't established, Chatime can then operate or grant franchises to others in that area, potentially creating competition for the developer's existing Chatime stores.

This clause highlights the importance of negotiating renewal terms. A developer should seek to include terms in any new agreement that would continue to protect their exclusive rights within the Development Area. Without such protections, Chatime could directly compete or allow others to compete in the same area after the initial term.