Under what conditions will Chatime not unreasonably withhold consent for a Disposal of Ownership Interests by the franchisee?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
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 and deliver a confidentiality and non-competition agreement in the form attached as Exhibit 4; and
- (c) Execute the new franchise agreement or assignment in their personal capacities;
- (6) The assignee's proposed manager is approved by Franchisor and successfully completes
Franchisor's required training program;
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 Disposal of Ownership Interests by the franchisee under specific conditions. These conditions pertain to situations where the sale, assignment, or disposal involves the franchisee's entire interest in the franchise and the franchised business.
Firstly, the franchisee must demonstrate to Chatime's satisfaction that the proposed assignee has the necessary financial resources to operate the franchised business and service any related borrowings. The assignee must also be reputable, responsible, and possess the business experience and capabilities required for successful operation. Additionally, the assignee must meet Chatime's criteria for selecting new franchisees. The franchisee must also pay Chatime the transfer fee.
Furthermore, the franchisee must not be in default under the Franchise Agreement or any associated collateral agreements when seeking consent and when the assignment occurs. At Chatime's discretion, the assignee must execute Chatime's standard franchise agreement for the remaining term or execute an assignment of the franchisee's rights and obligations. If the assignee is a company, its nominated directors, shareholders, or affiliates must provide a personal guarantee and indemnity, a confidentiality and non-competition agreement, and execute the new franchise agreement or assignment in their personal capacities. Finally, the assignee's proposed manager must be approved by Chatime and complete the required training program.