Under what conditions can Chatime terminate a Developer's Development Rights if the Development Quota is not met?
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 if the Development Quota is not met for any Development Period. Additionally, Chatime can terminate the Development Rights if the developer fails to comply with any financial obligation related to those Development Rights.
In the event that a Developer fails to meet the Development Quota or comply with financial obligations, Chatime has several options. Besides terminating the Development Rights, Chatime can also vary the Development Area by providing written notice to the Developer. Another option is to terminate the exclusivity attached to the Development Rights, which would allow Chatime to develop and operate franchises within the Development Area itself or grant that right to a third party.
It is important to note that if Chatime terminates the Development Rights, the Developer retains the right to operate any Outlets already developed and in operation within the Development Area during the Initial Term. However, all other rights granted to the Developer automatically become nonexclusive upon termination of the Development Rights.