Who are considered 'Principals' in a Hyper Kidz franchise agreement?

According to Hyper Kidz's 2024 Franchise Disclosure Document, a 'Principal' refers to any individual or entity that holds direct or indirect legal or beneficial ownership interests in the franchisee. This definition extends to those who possess other direct or indirect property rights related to the franchise agreement, the franchise itself, or the Hyper Kidz Business. Furthermore, each Principal having an equity ownership interest is designated as an Owner on Attachment 7 of the Franchise Agreement.

For a prospective Hyper Kidz franchisee, this definition is crucial because it identifies who will be subject to certain obligations and requirements under the franchise agreement. For instance, the FDD states that both the franchisee and their Principals must be in full compliance with the agreement for a transfer of interest to be approved. Additionally, Principals may be required to execute non-competition agreements if they are transferring their interest in the franchise.

Moreover, Hyper Kidz recommends, but does not require, that either the franchisee or one of its Principals actively participate in the operation of the Hyper Kidz Business. If neither the franchisee nor a Principal is involved in the day-to-day operations, they must ensure that a general manager is appointed, and that this manager completes the initial training program. Even if a general manager is in place, the franchisee or one of the Principals must still complete the initial training program and ensure the business complies with the agreement, manual, and system. This highlights the importance of understanding who the Principals are, as they bear significant responsibility for the franchise's operation and compliance.