Can Chatime withhold approval of a supplier for any reason?
Chatime Franchise · 2025 FDDAnswer from 2025 FDD Document
We may grant you approval to obtain food products, supplies, equipment (including point-of-sale and back office computer systems), and materials for your Chatime Store and services to your Chatime Store from other sources as long as they meet our specifications, standards, and requirements. Every supplier must demonstrate that it can meet all System specifications, standards, and requirements and has adequate capacity to supply our franchisees' quantity and delivery needs to our satisfaction. Before approving any supplier, we may take into consideration, without limitation (i) consistency with products or name brands already in the System, (ii) economies of scale achieved by larger volumes, and (iii) certain other benefits that a supplier may offer such as new product development capability. When approving a supplier, we take into consideration the System as a whole; some franchisees may pay higher prices to an approved supplier than they might pay to an unapproved supplier. We may withhold approval of a supplier for any reason. A list of approved suppliers is available on request. Suppliers are required to share
shipping, distribution, and all other relevant information with us.
Source: Item 8 — Restrictions on Sources of Products and Services (FDD pages 22–25)
What This Means (2025 FDD)
According to Chatime's 2025 Franchise Disclosure Document, Chatime may withhold approval of a supplier for any reason. While franchisees can propose suppliers for food products, supplies, equipment, and materials, these suppliers must meet Chatime's specifications, standards, and requirements.
Chatime considers factors such as consistency with existing products, economies of scale, and potential benefits like new product development when evaluating suppliers. However, the FDD explicitly states that Chatime may withhold approval for any reason, indicating broad discretion in supplier selection. This policy is in place to ensure the consistency and quality of product standards and branding within the Chatime system, as well as to protect Chatime's intellectual property and assist franchisees in complying with laws and regulations.
Prospective franchisees should be aware that Chatime's criteria for approving suppliers are not disclosed to franchisees or potential suppliers. The approval process involves submitting a written request and potentially providing samples for testing, with the franchisee or supplier bearing all associated costs, regardless of the outcome. Chatime also has the right to change its specifications, standards, and requirements at any time, and there is no limit to this right. Furthermore, Chatime may withdraw approval from a supplier at any time if the supplier's performance is unsatisfactory, if Chatime changes its standards, or for other reasons. If a supplier's approval is revoked, franchisees must cease using that supplier.
Chatime may also limit the number of potential suppliers considered for approval and may designate exclusive suppliers for certain product categories. Franchisees are required to purchase an adequate and balanced quantity of stock of approved products, with inventory requirements detailed in the Operations Manual or communicated directly by Chatime. This system ensures that Chatime maintains control over the quality and consistency of products used in its franchise locations, but it also means that franchisees have limited flexibility in sourcing their own supplies.