Under what condition can Chatime terminate the MDA agreement related to death or incapacity transfer?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
| MDA: §11.7 | Upon the death or permanent incapacity of any person with an interest in the development business, such interest must be transferred to a third party approved by us within one year following the death or incapacity. We have the right to terminate the agreement if an approved transfer is not completed within the designated period of time. |
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Source: Item 17 — Renewal, Termination, Transfer, and Dispute Resolution (FDD pages 43–52)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, if a person with interest in the development business dies or becomes permanently incapacitated, that interest must be transferred to a Chatime-approved third party within one year. Chatime retains the right to terminate the Master Development Agreement (MDA) if this transfer is not completed within that one-year timeframe.
This condition protects Chatime by ensuring that the development business continues to be managed by a competent and approved operator, even in unforeseen circumstances. It also provides a clear timeline for the transfer of ownership, giving the franchisee's estate or representatives a defined period to find a suitable buyer.
For a prospective Chatime franchisee, this means having a succession plan in place is crucial. Franchisees should consider how their business will be managed and transferred in the event of death or incapacity to avoid potential termination of the MDA. This may involve identifying potential successors and ensuring they meet Chatime's approval standards, or having legal mechanisms in place to facilitate a swift transfer of ownership.