Does Hyper Kidz assume any direct or indirect liability to franchisees with respect to the maintenance, direction, or administration of the Fund?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
ivalent to the contributions to the Fund by Hyper Kidz Businesses operating in that geographic area or that any Hyper Kidz Business will benefit directly or in proportion to its contribution to the Fund from the development of advertising and marketing materials or the placement of advertising. You acknowledge that your failure to derive any such benefit will not serve as a basis for a reduction or elimination of your obligation to contribute to the Fund. Except as expressly provided in this Paragraph (h), we assume no direct or indirect liability or obligation to you with respect to the maintenance, direction, or administration of the Fund. You acknowledge and agree that we have no fiduciary obligation to you or any other Hyper Kidz Business in connection with the establishment of the Fund or the collection, control or administration of monies paid into the Fund. We expressly disavow the existence of any such fiduciary relationship.
- (i) We retain the right, in our sole discretion, to terminate the Fund. The Fund shall not be terminated until all monies in the Fund have been expended for advertising and promotional purposes. If we terminate the Fund, we shall have the right to reinstate such Fund. Any reinstated Fund shall be maintained and operated as described in this Section 12.1.
12.2 Local Marketing
12.2.1 You must conduct local marketing and promotional programs in the Designated Territory to promote your Hyper Kidz Business. During the term of this Agreement, you must spend two percent (2%) of Gross Sales each month for local marketing and promotion. You must provide us with a report within fifteen (15) days after the end of each calendar quarter detailing your local marketing activities.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, Hyper Kidz assumes no direct or indirect liability or obligation to franchisees regarding the maintenance, direction, or administration of the advertising fund, except as expressly provided. Hyper Kidz also states that it has no fiduciary obligation to franchisees in connection with the establishment of the fund or the collection, control, or administration of monies paid into the fund and expressly disavows the existence of any such fiduciary relationship.
This means that while Hyper Kidz manages the advertising fund, franchisees cannot hold them liable for how the fund is maintained, directed, or administered, unless explicitly stated otherwise in the franchise agreement. Franchisees contribute to the fund with the understanding that Hyper Kidz has significant discretion in how the money is spent to maximize brand recognition and patronage.
This arrangement carries potential risks for franchisees. They are obligated to contribute to the fund but have limited control over how the money is spent and no guarantee of direct benefit proportional to their contribution. Hyper Kidz does endeavor to utilize the fund to develop advertising and marketing materials and programs and to place advertising in order to benefit all Hyper Kidz Businesses. However, Hyper Kidz undertakes no obligation to ensure that expenditures by the Fund in or affecting any geographic area are proportionate or equivalent to the contributions to the Fund by Hyper Kidz Businesses operating in that geographic area or that any Hyper Kidz Business will benefit directly or in proportion to its contribution to the Fund from the development of advertising and marketing materials or the placement of advertising. This is a fairly standard practice in franchising, where franchisors typically maintain control over advertising funds to ensure consistent brand messaging and maximize overall system benefits.