Under what conditions will Chatime Franchisor's consent not be unreasonably withheld regarding Disposal of Ownership Interests?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
subject to obtaining Franchisor's written consent which must not be unreasonably withheld if all of the conditions mentioned in clause 13.3 have been satisfied.
- (3) A request for Franchisor's consent under clause 13.2(2) must be made in writing.
- 13.3 Conditions to be Satisfied Before Assignment can be Approved
Franchisor must not unreasonably withhold its consent under clause 13.2(2) if the sale, assignment or other Disposal is of the whole of Franchisee's interest in the Franchise and the Franchised Business and each of the following conditions are satisfied:
- (1) Franchisee establishes to Franchisor's reasonable satisfaction that the proposed assignee (and its Owners and directors if the assignee is a company):
- (a) Possesses the financial resources necessary to conduct and operate the Franchised Business as a franchisee and to service any borrowings it makes in order to acquire The Franchised Business;
- (b) Is a reputable and responsible party and has the business experience and capabilities necessary to operate the Franchised Business successfully; and
- (c) Otherwise meets Franchisor's criteria for the selection of new Chatime franchisees;
- (2) Franchisee pays to Franchisor the Transfer Fee;
- (3) Franchisee, both when seeking consent to the assignment and when the assignment is to occur, is not in default under this Agreement or any Collateral Agreement;
- (4) At the option of Franchisor:
- (a) The assignee executes Franchisor's then-standard form franchise agreement for the balance remaining of the Initial Term (including any existing option for a New Term); or
- (b) Franchisee and the assignee execute an assignment of Franchisee's rights and obligations under this Agreement to the assignee in a form required by Franchisor,
and Franchisee and the assignee execute any other documents then used by Franchisor for the grant of Chatime franchises;
- (5) When the assignee is a company, those directors and shareholders or other Affiliates of the assignee nominated by Franchisor each:
- (a) Executed and deliver a personal guarantee and indemnity and undertake similar personal restraints to those given by Guarantor under this Agreement in favor of, and in the form attached as Exhibit 3;
- (b) Executed
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, Chatime will not unreasonably withhold consent for a sale, assignment, or disposal of the franchisee's entire interest in the franchise and franchised business if certain conditions are met. These conditions ensure that the new owner is capable and that Chatime's interests are protected.
First, the franchisee must prove to Chatime's satisfaction that the proposed assignee has the financial resources, business experience, and capabilities to successfully operate the franchised business and meets Chatime's criteria for new franchisees. Second, the franchisee must pay Chatime the transfer fee. Third, the franchisee must not be in default under the Franchise Agreement or any related agreements when seeking consent and when the assignment occurs.
Additionally, Chatime has the option to require the assignee to execute Chatime's standard franchise agreement for the remaining term or to have the franchisee and assignee execute an assignment of the franchisee's rights and obligations. If the assignee is a company, its directors, shareholders, or affiliates nominated by Chatime must provide a personal guarantee and indemnity, as well as a confidentiality and non-competition agreement. Finally, the assignee's proposed manager must be approved by Chatime and successfully complete the required training program.