What conditions must a Hyper Kidz Cooperative meet regarding its organization, governance, and commencement of operation?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
- 12.3.1 the Cooperative must be organized and governed in a form and manner, and commence operation on a date that we approve in advance in writing;
- 12.3.2 the Cooperative must be organized for the exclusive purpose of administering marketing programs and developing, subject to our approval, standardized promotional materials for the members' use in local marketing within the Cooperative's area;
- 12.3.3 the Cooperative may adopt its own rules and procedures, but such rules or procedures must be approved by us and must not restrict or expand your rights or obligations under this Agreement;
- 12.3.4 except as otherwise provided in this Agreement, and subject to our approval, any lawful action of the Cooperative at a meeting attended by members possessing more than fifty percent (50%) of the total voting power in the Cooperative is binding upon you if approved by members possessing more than fifty percent (50%) of the total voting power possessed by members in attendance, with each
Hyper Kidz Business having one (1) vote, but no franchisee (or commonly controlled group of franchisees) may have more than twenty-five percent (25%) of the vote in the Cooperative regardless of the number of Hyper Kidz Businesses owned. In the event of a tie vote, the franchisor is the tie breaking vote;
- 12.3.5 without our prior written approval, the Cooperative may not use, nor furnish to its members, any marketing or promotional plans or materials; all such plans and materials must be submitted to us in accordance with the procedure set forth in Section 12.2;
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, if Hyper Kidz establishes or approves a marketing cooperative, franchisees must adhere to specific guidelines regarding its organization, governance, and operation. Hyper Kidz retains significant control over these cooperatives to ensure brand consistency and operational standards.
Specifically, the Cooperative's structure, governance, and launch date must receive prior written approval from Hyper Kidz. The Cooperative's sole purpose must be to manage marketing programs and create standardized promotional materials for local marketing, subject to Hyper Kidz's approval. While the Cooperative can create its own rules, Hyper Kidz must approve these, and they cannot alter a franchisee's rights or obligations under the Franchise Agreement.
Furthermore, any action taken by the Cooperative is binding if approved by members holding more than 50% of the total voting power, provided that each Hyper Kidz Business has one vote, and no franchisee can hold more than 25% of the total vote, regardless of how many Hyper Kidz Businesses they own. In the event of a tie, Hyper Kidz holds the tie-breaking vote. The Cooperative also cannot use or provide any marketing or promotional materials without Hyper Kidz's prior written approval, and all materials must be submitted according to the procedure outlined in Section 12.2 of the agreement.
These conditions ensure that Hyper Kidz maintains control over marketing efforts and that no single franchisee can dominate the Cooperative's decision-making process. This structure aims to balance local marketing needs with the brand's overall strategy and compliance requirements. Franchisees should be aware of these conditions and the potential financial contributions required by the Cooperative, as these are credited against their local marketing obligations.