Besides meeting the requirements for new multi-unit developers, what other business considerations are taken into account for a Hyper Kidz transfer?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
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pledged, mortgaged, hypothecated, given as security for an obligation or in any manner encumbered. The assignment or transfer of any interest, except in accordance with this Section shall constitute a material breach of this Agreement.
- 11.2 You have represented to us that you are entering into this Agreement with the intention of complying with its terms and conditions and not for the purpose of resale of the Development Rights hereunder. Therefore, you agree that any attempt to assign this Agreement prior to the time that at least twenty-five percent (25%) of the Hyper Kidz Businesses to be constructed hereunder are opened or under construction shall be deemed to be an event of default.
- 11.3 Except as provided in Section 11.2, if you receive from an unaffiliated third party and desires to accept a bona fide written offer to purchase your business, Development Rights and interests, we shall have the option, exercisable within thirty (30) days after receipt of written notice setting forth the name and address of the prospective purchaser, the price and terms of such offer, and a copy of such offer and the other information stated in this Section 11.3, to purchase such business, Development Rights and interests, including your right to develop sites within the Development Area, on the same terms and conditions as offered by said third party. In order that we may have information sufficient to enable us to determine whether to exercise this option, we may require you to deliver to us certified financial statements as of the end of your most recent fiscal year and such other information about your business and operations as we may request. If we decline, or do not accept the offer in writing within thirty (30) days, you may, within thirty (30) days from the expiration of the option period, sell, assign and transfer your business, Development Rights and interest to said third party, provided we have consented to such transfer as required by this Section 11. Any material change in the terms of the offer prior to closing of the sale to such third party shall constitute a new offer, subject to the same rights of first refusal by us or our nominee, as in the case of an initial offer. Our failure to exercise the option afforded by this Section 11.3 shall not constitute a waiver of any other provision of this Agreement, including all of the requirements of this Section with respect to the proposed transfer.
- 11.4 You acknowledge and agree that the restrictions on transfer imposed herein are reasonable and are necessary to protect the Development Rights, the System and the Marks, as well as our reputation and image, and are for the protection of us, you and other multi-unit developers and franchisees. Any assignment or transfer permitted by this Section 11 shall not be effective until we receive a completely executed copy of all transfer documents, and we consent in writing thereto.
- 11.5 Except as provided in Section 11.2 hereof, we agree not to unreasonably withhold our consent to a sale, assignment or transfer by you hereunder. Consent to such transfer otherwise permitted or permissible as reasonable may be refused unless:
- 11.5.1 All of your obligations created by this Agreement, all other franchise documents, including all Franchise Agreements, and the relationship created hereunder are assumed by the transferee.
- 11.5.2 All ascertained or liquidated debts of you to us or our affiliated or subsidiary corporations are paid.
- 11.5.3 You are not in default hereunder.
- 11.5.4 We are reasonably satisfied that the transferee meets all of our requirements for new multi-unit developers, including but not limited to, good reputation and character, business acumen, operational ability, management skills, financial strength and other business considerations.
Source: Item 23 — RECEIPTS (FDD pages 52–205)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, several business considerations are taken into account during a transfer. Hyper Kidz, in the event that a multi-unit developer receives a bona fide offer from an unaffiliated third party, has the option to purchase the developer's business, development rights, and interests under the same terms offered by the third party. Hyper Kidz must exercise this option within 30 days of receiving written notice of the offer, which includes the prospective purchaser's information, the offer's price and terms, and a copy of the offer.
To assess whether to exercise this option, Hyper Kidz may request certified financial statements and other business-related information from the multi-unit developer. If Hyper Kidz declines or does not accept the offer in writing within the 30-day period, the developer may proceed with the transfer to the third party, provided that Hyper Kidz has consented to the transfer. Any material changes to the offer's terms constitute a new offer, which is again subject to Hyper Kidz's right of first refusal.
In addition to these considerations, the multi-unit developer must execute a general release of all claims against Hyper Kidz, its officers, directors, employees, and principal stockholders. The transferee must also execute Hyper Kidz’s standard form of Multi-Unit Development Agreement, Franchise Agreements for all open or under-construction Hyper Kidz Businesses, and any other current ancillary agreements required of new multi-unit developers. The multi-unit developer is also responsible for paying Hyper Kidz a transfer fee of $15,000 to cover the costs associated with the transfer and providing initial assistance to the transferee.
Hyper Kidz emphasizes that these transfer restrictions are reasonable and necessary to protect the development rights, the system, the marks, and the brand's reputation and image, benefiting Hyper Kidz, the multi-unit developer, and other franchisees. No transfer is effective until Hyper Kidz receives a fully executed copy of all transfer documents and provides written consent. Furthermore, Hyper Kidz states that any attempt to transfer the agreement before at least 25% of the Hyper Kidz Businesses are open or under construction is considered an event of default.