What financial responsibility must an assignee have to take over Hyper Kidz's obligations under the franchise agreement?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
liates and our respective shareholders, officers, directors, employees and agents; and
- (e) you have complied with the provisions of Section 16.7 below relating to our right of first refusal.
- 16.3.2 In addition to the above, if the transfer is of this Agreement, a Principal's interest in you, or is one of a series of transfers which, in the aggregate, constitute the transfer of this Agreement, all of the following conditions must be met prior to or concurrently with the effective date of the transfer:
- (a) the transferee must have sufficient business experience, aptitude and financial resources to operate the Hyper Kidz Business and perform the obligations of the transferor under this Agreement, and neither the transferee nor its Principals may be engaged in or intend to engage in a Competitive Business;
- (b) you and the transferee (if it is then a franchisee of ours) must pay such Royalty Fees, Brand Development Fees, amounts owed for purchases by you (or such transferee) from us and our Affiliates, and all other amounts owed to us or our Affiliates which are then due and unpaid;
- (c) the transferee and its personnel who will have access to the Confidential Information must have signed the Confidentiality and Non-Competition Agreement and have completed our training program to our satisfaction;
- (d) the transferee and its Principals, at our option, must agree in a manner satisfactory to us to be bound by all terms and conditions of this Agreement for the remainder of its term or execute our then-current form of franchise agreement and such ancillary documents, including guarantees, as are then customarily used by us in the grant of franchises for Hyper Kidz Businesses, modified as necessary to provide for the same Royalty Fees required hereunder and a term equal to the remaining term of this Agreement;
- (e) you or the transferee must have paid us a transfer fee of Fifteen Thousand Dollars ($15,000) to cover our reasonable costs in effecting the transfer and in providing initial assistance to transferee;
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, a transferee must demonstrate sufficient business experience, aptitude, and financial resources to operate the Hyper Kidz Business and fulfill the transferor's obligations under the franchise agreement. The transferee and its principals must not be involved in or intend to engage in a competitive business.
Additionally, both the franchisee and the transferee (if already a Hyper Kidz franchisee) must settle any outstanding Royalty Fees, Brand Development Fees, amounts owed for purchases from Hyper Kidz and its affiliates, and all other due and unpaid amounts to Hyper Kidz or its affiliates. The transferee must also cover a transfer fee of $15,000 to Hyper Kidz to cover costs associated with the transfer and initial assistance provided to the transferee.
Hyper Kidz also requires approval of the material terms and conditions of the transfer, ensuring that the price and payment terms do not negatively impact Hyper Kidz's rights and interests under the agreement. The transferring franchisee may need to subordinate any financing they provide to the transferee to ensure Hyper Kidz's fees are prioritized. The transferee may also need to upgrade the Hyper Kidz Business to meet the current standards for new franchises.