What activities are prohibited for a Hyper Kidz transferee and its Principals?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
(a) the transferee must have sufficient business experience, aptitude and financial resources to operate the Hyper Kidz Business and perform the obligations of the transferor under this Agreement, and neither the transferee nor its Principals may be engaged in or intend to engage in a Competitive Business;
(h) if this Agreement is being transferred, you and your Principals must execute a non-competition agreement in favor of us and the transferee.
If a Principal is transferring his/her interest, such Principal must execute a non-competition agreement in favor of us and the transferee.
In either case, the non-competition agreement shall provide that neither you, your Principal(s) nor your transferring Principal(s) (whichever is applicable) nor any member of their immediate families shall directly or indirectly for a period of two (2) years commencing on the effective date of such transfer:
(1) have any interest as a disclosed or beneficial owner in any Competitive Business located or operating within fifteen (15) miles of your Hyper Kidz Business or any other Hyper Kidz Business in the System; or
(2) perform services as a director, officer, manager, employee, consultant, representative, agent, or otherwise for any Competitive Business located or operating within fifteen (15) miles of your Hyper Kidz Business or any other Hyper Kidz Business in the System.
16.3.3 Clauses (h) and (i) of Section 16.3.2 shall not apply to transfers by gift, bequest, or inheritance.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, a transferee and its Principals must not be engaged in or intend to engage in a Competitive Business. This condition is part of the requirements that Hyper Kidz assesses to approve a transfer of the franchise agreement.
Additionally, if the franchise agreement is being transferred, the transferor (the original franchisee) and their Principals must sign a non-competition agreement. This agreement restricts them, including their immediate family members, from having any ownership interest in a Competitive Business or performing services for one. The restriction applies to any Competitive Business located or operating within fifteen (15) miles of the transferring franchisee's Hyper Kidz Business or any other Hyper Kidz Business in the System. This non-compete lasts for two (2) years, starting from the effective date of the transfer.
These restrictions do not apply to transfers by gift, bequest, or inheritance. This means that if the franchise is transferred due to death or as part of an inheritance, the non-compete obligations are waived. This provides some flexibility in succession planning and allows for family members to inherit the business without being subject to the same restrictions as a typical sale or transfer.