Does Hyper Kidz have a fiduciary obligation to franchisees in connection with the establishment of the Fund or the collection, control or administration of monies paid into the Fund?

According to the 2024 Hyper Kidz Franchise Disclosure Document, Hyper Kidz explicitly states that it has no fiduciary duty to franchisees regarding the advertising fund. This means that Hyper Kidz is not legally obligated to act in the best financial interests of its franchisees when establishing the fund or managing the money contributed to it.

This disclaimer of fiduciary duty gives Hyper Kidz considerable latitude in how it manages the advertising fund. While Hyper Kidz is expected to use the fund for advertising and promotional purposes, franchisees have limited recourse if they believe the funds are being mismanaged or used ineffectively. The FDD states that Hyper Kidz will endeavor to utilize the Fund to develop advertising and marketing materials and programs and to place advertising in order to benefit all Hyper Kidz Businesses, we undertake no obligation to ensure that expenditures by the Fund in or affecting any geographic area are proportionate or equivalent to the contributions to the Fund by Hyper Kidz Businesses operating in that geographic area or that any Hyper Kidz Business will benefit directly or in proportion to its contribution to the Fund from the development of advertising and marketing materials or the placement of advertising.

Franchisees are required to participate in all advertising and public relations programs conducted by the Fund. Hyper Kidz retains the right to terminate the Fund at its sole discretion, but only after all monies in the fund have been expended for advertising and promotional purposes. Hyper Kidz also has the right to reinstate the fund if it is terminated.

Prospective franchisees should carefully consider the implications of this lack of fiduciary responsibility and conduct thorough due diligence to understand how the advertising fund is managed and how it benefits franchisees. It would be prudent to discuss the fund's management and historical performance with existing franchisees to assess whether their contributions are being used effectively.