Does the Hyper Kidz agreement consider the issuance of additional securities representing Ownership Interests as a transfer?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
- 16.2.3 As used above, an assignment, sale or other transfer shall include the following events:
- (a) the transfer of ownership of shares, partnership interest, or other Ownership Interests;
- (b) merger or consolidation or issuance of additional securities representing Ownership Interests;
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, the issuance of additional securities representing Ownership Interests is considered a transfer. This is explicitly stated within the definition of what constitutes a transfer under the franchise agreement.
For a prospective Hyper Kidz franchisee, this means that if the ownership structure of their franchise entity changes through the issuance of new securities, it will be treated as a transfer of ownership. As such, it would be subject to the transfer restrictions and require approval from Hyper Kidz. This includes adhering to conditions such as paying transfer fees, ensuring the transferee meets Hyper Kidz's standards, and potentially executing new agreements.
This provision is important because it gives Hyper Kidz control over who owns and operates its franchises. It prevents franchisees from diluting their ownership or bringing in new partners without the franchisor's consent. Franchisees need to be aware of these restrictions and plan accordingly if they anticipate changes to their ownership structure during the term of the franchise agreement.