Under what conditions will Chatime's franchisor not unreasonably withhold consent for changes to the franchisee's ownership, directors, or officers?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
19.3 Directorship and Ownership of Franchisee
Franchisee:
- (1) Warrants that the Owners, directors and officers of Franchisee as at the date of execution are as notified to Franchisor by Franchisee; and
- (2) Must provide to Franchisor immediately upon request details of the Owners of Franchisee, including the number and class of Ownership Interests held by each Owner as of:
- (a) The date of execution of this Agreement; and
- (b) Any other date specified by Franchisor.
19.4 No Changes Without Franchisor's Consent
- (1) Franchisee must not allow any of the following to occur without first obtaining Franchisor's written consent:
- (a) Any change in the composition of Franchisee's Owners, directors, and officers;
- (b) Any alteration to Franchisee's constitution;
- (c) Any Disposal of Ownership Interests in Franchisee; or
- (d) Any reduction or alteration of Franchisee's capital.
- (2) Franchisor must not withhold consent unreasonably if:
- (a) In the case of a Disposal of Ownership Interests, the requirements of clause 19.5 are met;
- (b) Franchisee executes and delivers to Franchisor a Release in substantially the form attached as Exhibit 1;
- (c) All new Owners must execute and deliver to Franchisor a signed personal guarantee in the form attached as Exhibit 3;
- (d) All new Owners executed and delivered to Franchisor a signed Confidentiality and Non-Competition Agreement in the form attached as Exhibit 4; and
- (e) In any case, the change does not adversely affect Franchisee's ability to perform its obligations under this Agreement.
19.5 Transfer of Ownership Interests
Any Disposal of Ownership Interests in Franchisee must be treated as a Disposal by Franchisee of the Franchise and clause 13 will apply to that Disposal.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, the franchisor must not unreasonably withhold consent for changes in the franchisee's ownership, directors, and officers under specific conditions. Chatime requires that the franchisee warrants the accuracy of the information provided about the owners, directors, and officers at the time of the agreement. Franchisees must also provide updated details of the owners, including the number and class of ownership interests held, upon request by Chatime.
Chatime stipulates that franchisees must obtain written consent from the franchisor before any changes occur in the composition of the franchisee's owners, directors, and officers, any alteration to the franchisee's constitution, any disposal of ownership interests in the franchisee, or any reduction or alteration of the franchisee's capital. However, Chatime will not unreasonably withhold consent if certain requirements are met. These include meeting the requirements of clause 19.5 regarding the disposal of ownership interests, executing and delivering a release to the franchisor, ensuring all new owners sign a personal guarantee and a Confidentiality and Non-Competition Agreement, and ensuring that the change does not adversely affect the franchisee's ability to perform its obligations under the franchise agreement.
Furthermore, any disposal of ownership interests in the franchisee is treated as a disposal of the franchise itself, which means that clause 13 of the agreement will apply to such disposals. This indicates that the transfer of ownership interests is subject to similar conditions and requirements as a full franchise transfer, ensuring that Chatime maintains control over who operates its franchises and that the new parties meet their standards. These measures are in place to protect Chatime's brand and network, ensuring that all franchisees meet the necessary qualifications and adhere to the franchise agreement's terms.