Under what conditions can the exclusive license granted to Chatime for franchisee improvements be terminated?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
AGREEMENT
In consideration of the mutual undertakings and commitments set forth herein, the receipt and sufficiency of which are hereby acknowledged, agree as follows:
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- Use Clause. The Leased Premises shall be used solely for the operation of a Chatime Store and identified by the mark Chatime or such other name as may be specified by Franchisor. Landlord acknowledges that such use shall not violate any then-existing exclusive rights granted to any existing tenant of Landlord. Landlord consents to Tenant's use of Franchisor's marks and signs, décor items, color schemes and related components of Franchisor's proprietary system. Landlord further acknowledges that during the term of this Lease or any extension thereof, Landlord will not lease space to another business in the same building, shopping center or facility as the Leased Premises which serves primarily bubble tea or other specialized tea drinks.
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- Termination of the Franchise Agreement. If the Franchise Agreement between Franchisor and Tenant is terminated for any reason during the term of the Lease or any extension thereof,
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
Based on the 2025 Chatime Franchise Disclosure Document, the franchise agreement includes a clause related to the termination of the agreement if the franchisee's lease is terminated. Specifically, if the Franchise Agreement between Chatime and the tenant (franchisee) is terminated for any reason during the term of the lease or any extension thereof, it affects the lease agreement.
This means that a Chatime franchisee's ability to operate is directly tied to the status of their lease. If the lease is terminated for any reason, the franchise agreement itself can also be terminated. This could occur due to various factors such as failure to pay rent, violation of lease terms, or other issues with the landlord.
Prospective franchisees should carefully review the terms of both the franchise agreement and the lease agreement to understand their rights and obligations. It is important to maintain a good relationship with the landlord and adhere to the lease terms to avoid potential termination of both the lease and the franchise agreement with Chatime.