Under the Chatime franchise agreement, what is the obligation of the Developer and Guarantor regarding the use of Confidential Information after the agreement expires or terminates?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
6 Confidential Information
- 6.1 Obligation to Maintain Confidentiality
- (1) Developer and Guarantor acknowledge and agree that neither Developer nor any Guarantor will acquire any interest in the Confidential Information, other than the right to utilize the Confidential Information in performing their obligations under this Agreement, and that the use or duplication of any Confidential Information would constitute an unfair method of competition.
- (2) Developer and Guarantor hereby agree that during the term of this Agreement and following the expiration or termination of this Agreement that they:
- (a) Will not use the Confidential Information in any other business operation or capacity;
- (b) Will maintain the absolute confidentiality of the Confidential Information;
- (c) Will not make unauthorized copies of any portion of the Confidential Information; and
- (d) Will adopt and implement all reasonable procedures that Franchisor prescribes from time to time to prevent unauthorized use or disclosure of the Confidential Information, including, without limitation, restrictions on the disclosure of the Confidential Information to Franchisees, Outlet personnel and others;
- (3) Notwithstanding anything to the contrary contained in this Agreement, the restrictions set out in clause 6.1(2) will not apply to information that:
- (a) Is or becomes publicly available, other than by breach of this Agreement;
- (b) Developer or Guarantor (as applicable) is legally compelled to disclose, provided Developer/Guarantor must have used its best efforts and afforded Franchisor the opportunity to obtain an appropriate protective order or other assurance
satisfactory to Franchisor of confidential treatment for the information required to be disclosed; or
- (c) Is otherwise permitted under the terms of this Agreement.
- (4) If required by Franchisor, Developer must ensure that Developer's Owner managers, directors, shareholders, agents, employees and any Interested Party enter into a confidentiality agreement in a form that is acceptable to Franchisor.
Source: Item 23 — Receipts (FDD pages 58–262)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, the Developer and Guarantor have specific obligations regarding the use of Confidential Information both during the term of the agreement and after its expiration or termination. They acknowledge that they do not acquire any interest in the Confidential Information beyond the right to use it for fulfilling their obligations under the agreement. They recognize that using or duplicating any Confidential Information would be an unfair method of competition.
Specifically, the Developer and Guarantor agree that, both during and after the agreement, they will not use the Confidential Information in any other business operation or capacity. They must maintain the absolute confidentiality of the Confidential Information and not make unauthorized copies of any portion of it. Furthermore, they are required to adopt and implement all reasonable procedures prescribed by Chatime to prevent unauthorized use or disclosure of the Confidential Information. This includes restrictions on disclosing the Confidential Information to franchisees, outlet personnel, and others.
However, these restrictions do not apply to information that becomes publicly available without breach of the agreement, information that the Developer or Guarantor is legally compelled to disclose (provided they have made their best efforts to obtain a protective order), or information that is otherwise permitted under the terms of the agreement. Chatime may also require the Developer to ensure that their owner managers, directors, shareholders, agents, employees, and any Interested Party enter into a confidentiality agreement acceptable to Chatime. This ensures a comprehensive approach to protecting Chatime's Confidential Information, even after the franchise agreement concludes.