After the Hyper Kidz Agreement expires or terminates, for how long is the franchisee restricted from engaging in a Competitive Business?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
12.2 You covenant that, except as otherwise approved in writing by us, you shall not, for a continuous and uninterrupted period commencing upon the expiration or termination of this Agreement, and continuing for two (2) years thereafter (and, in case of any violation of this covenant, for two (2) years after the violation ceases), either directly or indirectly, for yourself, or through, on behalf of or in conjunction with any person, persons, partnership or corporation, own, maintain, advise, help, invest in, make loans to, be employed by, engage in or have any interest in any Competitive Business which is located within fifteen (15) miles of any Hyper Kidz Business in the System.
12.3 The parties agree that each of the foregoing covenants shall be construed as independent of any other covenant or provision of this Agreement.
If all or any portion of a covenant in this Section 12 is held unreasonable or unenforceable by a court or agency having valid jurisdiction in any unappealed final decision to which we are a party, you expressly agree to be bound by any lesser covenant subsumed within the terms of such covenant that imposes the maximum duty permitted by law, as if the resulting covenant were separately stated in and made a part of this Section 12.
12.4 You understand and acknowledge that we shall have the right, in our sole discretion, to reduce the scope of any covenant stated in Sections 12.1 and 12.2 or any portion thereof, without your consent, effective immediately upon receipt by you of written notice thereof, and you agree that you shall comply forthwith with any covenant as so modified, which shall be fully enforceable notwithstanding the provisions of Section 16 hereof.
12.5 You expressly agree that the existence of any claim you may have against us, whether or not arising from this Agreement, shall not constitute a defense to our enforcement of the covenants in this Section 12.
Source: Item 23 — RECEIPTS (FDD pages 52–205)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, following the expiration or termination of the Franchise Agreement, a franchisee is restricted from engaging in a Competitive Business for two years. This restriction applies continuously from the date of expiration or termination and extends for two years afterward. If the franchisee violates this covenant, the restriction extends for two years after the violation ceases.
The restriction prevents the franchisee from directly or indirectly owning, maintaining, advising, helping, investing in, making loans to, being employed by, engaging in, or having any interest in a Competitive Business. This includes any business within 15 miles of any Hyper Kidz Business in the System. The agreement specifies that this restriction is subject to written approval from Hyper Kidz, allowing for potential waivers of the non-compete clause.
Hyper Kidz retains the right to reduce the scope of this covenant without the franchisee's consent by providing written notice. The existence of any claim the franchisee may have against Hyper Kidz does not constitute a defense against the enforcement of these covenants. This means Hyper Kidz can still enforce the non-compete agreement even if the franchisee believes Hyper Kidz has breached the agreement.
These non-compete terms are designed to protect Hyper Kidz's market position and proprietary information. Prospective franchisees should carefully consider the implications of this restriction, especially if they plan to remain in the same geographic area after the franchise agreement ends. It is also important to note that the definition of 'Competitive Business' is broad, covering various forms of involvement, and the geographic scope is measured from any Hyper Kidz location, not just the franchisee's former location.