Under what conditions can Chatime require a franchisee to deposit unpaid amounts in a designated account due to legal restrictions on currency exchange?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
6.9 Exchange Controls
- (1) Franchisee must use its best efforts to obtain any consents or authorizations which may be necessary in order to permit timely payments in Dollars of all amounts payable pursuant to this Agreement.
- (2) If at any time, any legal restriction is imposed upon the purchase of Dollars or the transfer to or credit of a non-resident party with payments in Dollars, Franchisee must notify Franchisor immediately. While such restrictions are in effect, Franchisor may require payment in any currency designated by Franchisor that is available to Franchisee or, at Franchisor's option, may require Franchisee to deposit all amounts due but unpaid as a result of such a restriction in any type of account, in any bank or institution in the Territory designated by Franchisor. Franchisor will be entitled to all interest earned on such deposits. Franchisor may also elect to receive payment in the form of products or services available to Franchisee, the value of which will be based on the actual cost of such products or services to Franchisee. If payment is made in products or services, Franchisee agrees to deliver such products or services to Franchisor or its designated agent or shipper within the Territory.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, if legal restrictions are imposed on purchasing or transferring U.S. dollars to a non-resident party, a franchisee must immediately notify Chatime. While these restrictions are in place, Chatime has the option to require the franchisee to deposit any unpaid amounts into an account designated by Chatime within the franchisee's territory. Chatime is entitled to all interest earned on these deposits.
Alternatively, Chatime may choose to receive payment in the form of products or services available to the franchisee. The value of these products or services will be based on the franchisee's actual cost. If Chatime opts for this form of payment, the franchisee is responsible for delivering the products or services to Chatime or its designated agent or shipper within the territory.
This clause protects Chatime from currency exchange issues that could arise in international franchise locations. It ensures that Chatime can still receive value for payments due, even if direct currency transfers are restricted. For a prospective franchisee, this means they need to be aware of the potential for these alternative payment arrangements and be prepared to comply with Chatime's directions in such situations. Franchisees should clarify with Chatime what types of accounts would be acceptable and how the value of products or services would be determined in lieu of currency payments.