How must each Development Right be exercised for a Hyper Kidz Business?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
ill execute the Franchise Agreement for the first Hyper Kidz Business to be developed hereunder contemporaneously with the execution of this Agreement and we will apply a portion of the Development Fee to satisfy in full the initial franchise fee for this first Hyper Kidz Business. For each additional Hyper Kidz Business you develop hereunder, when you execute the Franchise Agreement for that Hyper Kidz Business we will apply a pro rata portion of the Development Fee toward the initial franchise fee due for such Hyper Kidz Business and the balance of the initial franchise fee, or Nineteen Thousand Seven Hundred Fifty Dollars ($19,750), is payable in a lump sum upon execution of such Franchise Agreement.
SECTION 3: SCHEDULE AND MANNER FOR EXERCISING DEVELOPMENT RIGHTS
- 3.1 Recognizing that time is of the essence, you agree to exercise each of the Development Rights granted hereunder in the manner specified herein, and to satisfy the Minimum Performance Schedule in a timely manner. Your failure to adhere to the Minimum Performance Schedule shall constitute a default under this Agreement as provided in Section 9.1. Under no circumstances, however, may you open a Hyper Kidz Business for business unless and until there is a fully executed Franchise Agreement in place for such Hyper Kidz Business and you have complied with all requirements under the Franchise Agreement for opening such Hyper Kidz Business.
- 3.2 You shall exercise each Development Right granted herein only by executing a Franchise Agreement for each Hyper Kidz Business in accordance with the Minimum Performance Schedule. The Franchise Agreement for the first Development Right exercised hereunder has been executed contemporaneously with this Agreement. The Franchise Agreement for each additional Development Right
exercised hereunder shall be the then-current Hyper Kidz Business Franchise Agreement.
Source: Item 23 — RECEIPTS (FDD pages 52–205)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, a developer must exercise each Development Right by executing a Franchise Agreement for each Hyper Kidz Business, following the Minimum Performance Schedule. The Franchise Agreement for the first Hyper Kidz Business is expected to be executed at the same time as the Multi-Unit Development Agreement. For each additional Hyper Kidz Business, a pro rata portion of the Development Fee will be applied toward the initial franchise fee. The balance of the initial franchise fee, which is $19,750, must be paid as a lump sum when the Franchise Agreement is executed.
Hyper Kidz emphasizes that time is crucial, and developers must adhere to the Minimum Performance Schedule. Failure to meet this schedule constitutes a default under the Development Agreement. A key requirement is that a Hyper Kidz Business cannot be opened until a fully executed Franchise Agreement is in place and all requirements under that agreement are met.
In practical terms, this means a developer must be prepared to manage the administrative and financial aspects of opening multiple locations in a timely manner. They need to coordinate the execution of Franchise Agreements and ensure that the balance of the initial franchise fee is paid on time to avoid defaulting on the Development Agreement. This also highlights the importance of having sufficient capital to cover these costs as each new location is developed.
This requirement is fairly standard in multi-unit franchise development, as franchisors need to ensure that developers are committed and capable of opening the agreed-upon number of locations. The Minimum Performance Schedule and the financial obligations tied to each Franchise Agreement act as a mechanism to enforce this commitment and protect the Hyper Kidz brand.