What constitutes a material default regarding the transfer of a Hyper Kidz franchise after the death or permanent disability of the franchisee or principal?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
essly and specifically waive any claims, demands or damages arising from or related to the loss of said Marks (or any variation thereof) and/or the loss of association with or identification of "Boomerang Franchise LLC" as Franchisor. Nothing contained in this Agreement shall require us to remain in the same business or to offer the same products and services, whether or not bearing the Marks, in the event that we exercise our right to assign our rights in this Agreement.
16.2 You May Not Transfer Without Our Approval
- 16.2.1 You understand and acknowledge that the rights and duties created by this Agreement are personal to you and your Principals and that we have granted the rights hereunder to you in reliance upon the individual or collective character, skill, aptitude, attitude, business ability and financial capacity of you and your Principals. Accordingly, neither (a) this Agreement nor (b) any interest in the ownership of you, the Franchise, the Hyper Kidz Business or some or all of the assets of the Hyper Kidz Business, other than inventory items in the ordinary course of business, may be transferred without our prior written approval. Any such transfer without such approval shall constitute a breach hereof and convey no rights to or interests in this Agreement, the Franchise, you, the Hyper Kidz Business or in the assets thereof.
- 16.2.2 As used in this Agreement, the term "transfer" shall mean and include the voluntary, involuntary, conditional, direct or indirect assignment, sale, gift or other transfer by you or any of your Principals of any interest in or grant of any security interest in (a) this Agreement; (b) the Franchise; (c) you; (d) the Hyper Kidz Business; or (e) some or all of the assets of the Hyper Kidz Business, other than inventory items in the ordinary course of business.
- 16.2.3 As used above, an assignment, sale or other transfer shall include the following events:
- (a) the transfer of ownership of shares, partnership interest, or other Ownership Interests;
- (b) merger or consolidation or issuance of additional securities representing Ownership Interests;
- (c) any sale of Ownership Interests carrying voting rights of you or any security convertible to voting Ownership Interests of you or any agreement granting the right to exercise or control the exercise of the voting rights of any holder of an Ownership Interest; or
- (d) transfer in a divorce, insolvency, corporate or partnership dissolution proceeding, or in the event of the death of you or one of your Principals, by will, declaration of or transfer in trust, or under the laws of intestate succession or otherwise by operation of law.
16.3 Conditions for Approval of Transfer
- 16.3.1 We will not unreasonably withhold our approval of a transfer of an interest in this Agreement, you, the Franchise, the Hyper Kidz Business, or any of the Hyper Kidz Business's assets that meets all the applicable requirements of this Section. All of the following conditions must be met prior to or concurrently with the effective date of the transfer:
- (a) you and your Principals shall be in full compliance with this Agreement;
- (b) the proposed transferee and its Principals must be individuals of good moral character and otherwise meet our then-applicable standards for Hyper Kidz Business franchisees, and if the proposed transferee, its owners or Affiliates have any other franchise agreements or development agreements with us, they are in full compliance with any such agreements and comply with clause (f) of Section 16.3.2;
- (c) a transfer of ownership in the Hyper Kidz Business or the assets of the Hyper Kidz Business, other than inventory in the ordinary course of business, may only be made in
conjunction with a transfer of this Agreement.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, a transfer of the franchise without prior written approval from Hyper Kidz constitutes a breach of the agreement. This includes any interest in the ownership of the franchisee, the franchise itself, the Hyper Kidz business, or its assets (excluding inventory sold in the ordinary course of business).
Specifically, the term "transfer" encompasses a wide range of actions, including voluntary, involuntary, conditional, direct, or indirect assignments, sales, gifts, or grants of security interests. This definition extends to the transfer of ownership shares, partnership interests, mergers, consolidations, the issuance of additional securities, and any sale of ownership interests carrying voting rights. It also includes transfers occurring in divorce, insolvency, corporate or partnership dissolution proceedings, or in the event of death or disability, whether through a will, trust, or intestate succession.
If the Hyper Kidz business is not managed by a trained manager upon the death or disability of the franchisee or a principal, the executor must appoint a manager within fifteen (15) days. The manager is required to complete training. If a manager is not appointed or if Hyper Kidz deems the business is not being managed properly, Hyper Kidz has the option to assume management of the business. Funds during this period will be kept in a separate account, with Hyper Kidz charging a reasonable management fee and covering expenses from the account.
Therefore, failing to obtain Hyper Kidz's approval for any transfer, or not appointing a trained manager within the specified timeframe after the death or disability of the franchisee or principal, would constitute a material default under the franchise agreement.