When is the development fee payable for a Hyper Kidz Multi-Unit Development Agreement?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
Multi-Unit Development Agreement
Development Fee: If you sign a Multi-Unit Development Agreement, you must pay us a development fee. The development fee is payable to us in a lump sum when you sign the Multi-Unit Development Agreement and is not refundable under any circumstances.
The development fee is calculated as 100% of the initial franchise fee for the first Hyper Kidz Business to be developed ($42,500), plus 50% of the initial franchise fee ($21,250) for each additional Hyper Kidz Business to be developed in the Development Area. For example, if you commit to develop
three Hyper Kidz Businesses in the Development Area, the development fee is calculated as $42,500 + (2 x $21,250 = $42,500) = $85,000.
We expect that you will sign the Franchise Agreement for your first Hyper Kidz Business at the same time you sign the Multi-Unit Development Agreement, and a portion of the development fee will be used to pay the initial franchise fee for this Hyper Kidz Business in full. For each Hyper Kidz Business developed after the first one, a pro rata portion of the development fee is applied toward the initial franchise fee due for that Hyper Kidz Business, and the balance of the initial franchise fee ($19,750) is payable in a lump sum when you sign the Franchise A
Source: Item 5 — INITIAL FEES (FDD pages 9–10)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, if a franchisee signs a Multi-Unit Development Agreement, the development fee is payable in a lump sum when the agreement is signed. This fee is non-refundable under any circumstances. The development fee is calculated as 100% of the initial franchise fee ($42,500) for the first Hyper Kidz Business, plus 50% of the initial franchise fee ($21,250) for each additional Hyper Kidz Business to be developed in the Development Area.
For example, if a franchisee commits to developing three Hyper Kidz Businesses, the development fee would be calculated as follows: $42,500 + (2 x $21,250 = $42,500) = $85,000. The FDD states that Hyper Kidz expects the franchisee to sign the Franchise Agreement for the first Hyper Kidz Business at the same time as the Multi-Unit Development Agreement. A portion of the development fee will be used to pay the initial franchise fee for this first business in full.
For each Hyper Kidz Business developed after the first one, a pro rata portion of the development fee is applied toward the initial franchise fee due for that Hyper Kidz Business. The balance of the initial franchise fee ($19,750) is payable in a lump sum when the franchisee signs the Franchise Agreement for that Hyper Kidz Business. This means that while the initial development fee is substantial and due upfront, it effectively pre-pays a significant portion of the franchise fees for subsequent locations, reducing the immediate financial burden when opening those additional units.