What is being assigned in the Collateral Assignment of Lease for a Hyper Kidz franchise?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
CONSENT TO COLLATERAL ASSIGNMENT AND AGREEMENT OF LESSOR
The undersigned Lessor under the Lease:
- (a) Agrees to notify Assignee in writing of and upon Assignee's failure to cure any default by Assignor under the Lease;
- (b) Agrees that Assignee will have the right but not the obligation to cure any default by Assignor under the Lease within thirty (30) days after Lessor's delivery of notice of the default under section (a) above;
- (c) Consents to the Collateral Assignment and agrees that if Assignee takes possession of the premises the Lease demises and confirms to Lessor that it has assumed the Lease as tenant, Lessor will recognize Assignee as tenant under the Lease provided that Assignee cures within the thirty (30) day period noted in section (b) above Assignor's defaults under the Lease; and
- (d) Agrees that Assignee may further assign the Lease to or enter into a sublease with a person, firm or corporation who agrees to assume the tenant's obligations under the Lease and is reasonably acceptable to Lessor and that upon that assignment Assignee will have no further liability or obligation under the Lease as assignee, tenant or otherwise other than to certify that the additional assignee or sublessee operates the premises the Lease demises as a Hyper Kidz Business.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, the Collateral Assignment of Lease involves the franchisee (Assignor) assigning their rights and interests in the lease to Hyper Kidz (Assignee) as collateral.
Specifically, the lessor agrees to notify Hyper Kidz of any default by the franchisee under the lease and allows Hyper Kidz the right, but not the obligation, to cure any default within thirty days of receiving notice. The lessor also consents to the collateral assignment, agreeing to recognize Hyper Kidz as the tenant if they take possession of the premises, provided Hyper Kidz cures any outstanding defaults.
Furthermore, Hyper Kidz has the right to further assign the lease or enter into a sublease with another party who agrees to assume the tenant's obligations, provided this party is reasonably acceptable to the lessor. Upon such assignment, Hyper Kidz will have no further liability under the lease, except to certify that the new assignee or sublessee operates the premises as a Hyper Kidz Business. This arrangement provides Hyper Kidz with a mechanism to protect its interests in the location of the franchise, ensuring continued operation and brand consistency even if the original franchisee defaults.