Can the Hyper Kidz Development Rights be sold, assigned, transferred or encumbered?
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. Therefore, you agree that any attempt to assign this Agreement prior to the time that at least twenty-five percent (25%) of the Hyper Kidz Businesses to be constructed hereunder are opened or under construction shall be deemed to be an event of default.
- 11.3 Except as provided in Section 11.2, if you receive from an unaffiliated third party and desires to accept a bona fide written offer to purchase your business, Development Rights and interests, we shall have the option, exercisable within thirty (30) days after receipt of written notice setting forth the name and address of the prospective purchaser, the price and terms of such offer, and a copy of such offer and the other information stated in this Section 11.3, to purchase such business, Development Rights and interests, including your right to develop sites within the Development Area, on the same terms and conditions as offered by said third party. In order that we may have information sufficient to enable us to determine whether to exercise this option, we may require you to deliver to us certified financial statements as of the end of your most recent fiscal year and such other information about your business and operations as we may request. If we decline, or do not accept the offer in writing within thirty (30) days, you may, within thirty (30) days from the expiration of the option period, sell, assign and transfer your business, Development Rights and interest to said third party, provided we have consented to such transfer as required by this Section 11. Any material change in the terms of the offer prior to closing of the sale to such third party shall constitute a new offer, subject to the same rights of first refusal by us or our nominee, as in the case of an initial offer. Our failure to exercise the option afforded by this Section 11.3 shall not constitute a waiver of any other provision of this Agreement, including all of the requirements of this Section with respect to the proposed transfer.
- 11.4 You acknowledge and agree that the restrictions on transfer imposed herein are reasonable and are necessary to protect the Development Rights, the System and the Marks, as well as our reputation and image, and are for the protection of us, you and other multi-unit developers and franchisees. Any assignment or transfer permitted by this Section 11 shall not be effective until we receive a completely executed copy of all transfer documents, and we consent in writing thereto.
- 11.5 Except as provided in Section 11.2 hereof, we agree not to unreasonably withhold our consent to a sale, assignment or transfer by you hereunder. Consent to such transfer otherwise permitted or permissible as reasonable may be refused unless:
- 11.5.1 All of your obligations created by this Agreement, all other franchise documents, including all Franchise Agreements, and the relationship created hereunder are assumed by the transferee.
- 11.5.2 All ascertained or liquidated debts of you to us or our affiliated or subsidiary corporations are paid.
- 11.5.3 You are not in default hereunder.
- 11.5.4 We are reasonably satisfied that the transferee meets all of our requirements for new multi-unit developers, including but not limited to, good reputation and character, business acumen, operational ability, management skills, financial strength and other business considerations.
Source: Item 23 — RECEIPTS (FDD pages 52–205)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, the Development Rights granted to a developer are personal and generally cannot be sold, assigned, transferred, or encumbered without prior written consent from Hyper Kidz. Any attempt to do so without consent constitutes a material breach of the Development Agreement. Hyper Kidz emphasizes that franchisees enter the agreement intending to comply with its terms, not to resell the development rights.
However, there are some exceptions. A franchisee may receive a bona fide written offer from an unaffiliated third party to purchase their business, Development Rights, and interests. In this case, Hyper Kidz has the option to purchase the franchisee's business, Development Rights, and interests on the same terms as the third party's offer. Hyper Kidz must exercise this option within 30 days of receiving written notice of the offer. If Hyper Kidz declines or does not accept the offer in writing within the 30-day period, the franchisee may sell, assign, and transfer their business, Development Rights, and interest to the third party, provided Hyper Kidz has consented to the transfer.
In the event of the death or permanent disability of the developer, their interest in the Development Agreement must be transferred within six months to a third party approved by Hyper Kidz. Failure to do so constitutes a material default, leading to the termination of the agreement. Any transfer, including by devise or inheritance, is subject to the conditions outlined in the Development Agreement. Additionally, Hyper Kidz has the right to assign the Development Agreement and its rights to another entity if the assignee is financially responsible and capable of fulfilling Hyper Kidz's obligations under the agreement.