What constitutes a material breach of the Hyper Kidz agreement regarding transfer of interest?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
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- 9.2.8 If you fail to obtain execution of a covenant required by Section 12.8 below.
SECTION 10: OBLIGATIONS FOLLOWING TERMINATION
- 10.1 Upon termination of this Agreement becoming effective for any reason, or upon expiration of the term hereof, you agree as follows:
- 10.1.1 To cease immediately any attempts to select sites on which to establish Hyper Kidz Businesses.
- 10.1.2 To cease immediately to hold yourself out in any way as a multi-unit developer of ours or to do anything which would indicate a relationship between you and us.
- 10.2 No right or remedy herein conferred upon or reserved to us is exclusive of any other right or remedy provided or permitted by law or in equity.
SECTION 11: TRANSFER
11.1 This Agreement is personal to you and you shall neither sell, assign, transfer nor encumber this Agreement, the Development Rights, or any other interest hereunder, nor suffer or permit any such assignment, transfer or encumbrance to occur directly, indirectly or contingently by agreement or by operation of law without our prior written consent. You understand that this Agreement may not be
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.
Source: Item 23 — RECEIPTS (FDD pages 52–205)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, a material breach regarding the transfer of interest occurs if the franchisee attempts to sell, assign, transfer, or encumber the agreement, development rights, or any other interest without prior written consent from Hyper Kidz. This includes any direct or indirect transfer, whether by agreement or by operation of law. The agreement specifies that it cannot be pledged, mortgaged, hypothecated, or given as security for an obligation.
Furthermore, any attempt to assign the agreement before at least 25% of the Hyper Kidz businesses to be constructed are opened or under construction is considered an event of default. Additionally, if the franchisee dies or becomes permanently disabled, failure to transfer the interest in the agreement within six months to a third party approved by Hyper Kidz also constitutes a material default.
These restrictions are in place to protect the Hyper Kidz development rights, the system, the marks, and the brand's reputation. Hyper Kidz retains the right to approve any transfer to ensure that the new party meets their standards and is capable of upholding the franchise agreement. The franchisor's consent to a transfer does not waive any claims they may have against the transferring party or their right to demand compliance from the transferee.
For a prospective Hyper Kidz franchisee, this means that transferring the franchise is not a simple process and requires adherence to specific conditions and approvals from Hyper Kidz. Failure to comply with these transfer conditions can result in termination of the agreement. It is important to understand these conditions thoroughly before entering into the agreement.