Does the expiration or termination of the Hyper Kidz Franchise Agreement release the franchisee from liabilities that continue beyond the termination date?

According to the 2024 Hyper Kidz Franchise Disclosure Document, the expiration or termination of the Franchise Agreement does not automatically release a franchisee from all obligations. Certain obligations, by their nature, are designed to continue even after the agreement ends.

Specifically, any obligations of the franchisee or Hyper Kidz that are intended to survive the expiration or termination of the agreement will remain in full effect. This continuation lasts until these obligations are either fully satisfied or naturally expire. This clause ensures that responsibilities like payment of outstanding fees, confidentiality, and non-compete agreements remain enforceable.

This means a franchisee needs to understand which obligations extend beyond the agreement's term. For example, the franchisee must immediately pay any outstanding Royalty Fees, Brand Development Fees, amounts owed for purchases, and any interest due to Hyper Kidz or its affiliates upon termination or expiration of the agreement. Additionally, franchisees are obligated to cease using Hyper Kidz's confidential information and may be subject to a covenant not to compete, restricting their involvement with similar businesses within a specified radius for a certain period.

Prospective Hyper Kidz franchisees should carefully review the Franchise Agreement to identify all obligations that survive termination or expiration. Understanding these continuing obligations is crucial for planning an exit strategy, whether through sale, renewal, or closure, to avoid potential legal or financial repercussions.