Under what conditions can Chatime terminate a Developer's Development Rights?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
2.5 Failure to Meet Development Quota
- (1) If Developer fails to meet the Development Quota for any Development Period or fails to comply with any financial obligation relating to the Development Rights, Franchisor may at its absolute discretion:
- (a) Terminate Developer's Development Rights;
- (b) Vary the Development Area by providing written notice to Developer; and/or
- (c) Terminate the exclusivity attached to the Development Rights (following which Franchisor may itself develop and operate Franchises in the Development Area, or may grant a right to a third party to develop and operate Franchises in the Development Area).
- (2) Subject to clause 2.5(3), termination of Developer's Development Rights pursuant to clause 2.5(1) is without prejudice to Developer's right to operate Outlets already developed under this Agreement and in operation in the Development Area during the Initial Term.
(3) If Developer's Development Rights are terminated by Franchisor pursuant to clause 2.5(1), all other rights otherwise granted pursuant to this Agreement automatically become nonexclusive.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, Chatime has the right to terminate a Developer's Development Rights under specific circumstances. If the Developer fails to meet the Development Quota for any Development Period, or does not comply with any financial obligation relating to the Development Rights, Chatime has the discretion to terminate these rights.
If Chatime chooses to terminate the Development Rights, it does not affect the Developer's right to operate any Chatime outlets already developed and in operation within the Development Area during the Initial Term. However, if the Development Rights are terminated, all other rights granted to the Developer automatically become nonexclusive.
This clause is important for potential Chatime developers as it outlines the conditions under which their development rights can be terminated, which could significantly impact their investment and business plans. It is essential for developers to understand and meet the Development Quota and financial obligations to avoid termination and the loss of exclusivity.