Under what conditions can a Chatime developer claim a material breach of the agreement by the franchisor?

Based on the 2025 Chatime Franchise Disclosure Document, a developer's breach of any Collateral Agreement automatically constitutes a breach of the Development Agreement. This means any side agreements or related contracts the developer has with Chatime are considered integral, and violating them has the same weight as violating the main agreement itself.

Chatime retains several rights that, if infringed upon by the developer, could lead to a breach. These include the right to operate or franchise outlets outside the developer's designated area, the right to sell products through special distribution channels (like airports or hotels) regardless of the developer's territory, and the right to develop, manufacture, or sell raw materials through any channel, including the internet, even if it competes with the developer's outlets. The developer is expected to meet development quotas, and failure to do so can also be considered a breach.

Furthermore, the document emphasizes that the developer must comply with the Development Quota for each Development Period. Chatime determines whether the developer has met these obligations based on the number of outlets opened and operating at the end of the period. However, an outlet rendered inoperable due to fire or other casualty (not caused by the developer or franchisee) or closed due to a Force Majeure Event will still count towards the quota. All other outlets must be operating in compliance with the applicable Franchise Agreement to be counted.

It is important for a prospective Chatime developer to carefully review all aspects of the Development Agreement and any Collateral Agreements to fully understand their obligations and the potential consequences of non-compliance. Understanding these conditions is crucial for maintaining a healthy franchisor-franchisee relationship and avoiding potential legal issues.