Under what conditions can Chatime set-off payments due to a Developer?

According to Chatime's 2025 Franchise Disclosure Document, Chatime has the right to offset payments in certain situations. Specifically, Chatime, in its sole discretion, can set-off any unpaid debts, including contingent debts, that a Developer owes to Chatime against any payment that Chatime owes to the Developer. This means that if a Developer has outstanding financial obligations to Chatime, Chatime can deduct those amounts from any payments it is scheduled to make to the Developer.

For a prospective Chatime Developer, this clause highlights the importance of maintaining good financial standing with the franchisor. Any outstanding debts, even those that are not yet due (contingent debts), could be used to offset payments that the Developer expects to receive from Chatime. This could impact the Developer's cash flow and financial planning.

This type of set-off clause is relatively common in franchise agreements, as it protects the franchisor's financial interests and provides a mechanism for recovering outstanding debts. However, the broad discretion granted to Chatime in this case means that Developers need to be particularly diligent in managing their financial relationship with the franchisor to avoid potential set-offs.