What is the focus of Article 17 in the Hyper Kidz Franchise Agreement?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
ARTICLE 17: GRANT OF SUCCESSOR FRANCHISES
17.1 Successor Agreement
If you satisfy each of the requirements set forth below, you may renew for one (1) additional term of ten (10) years.
- 17.1.1 You shall have been, throughout the initial term of this Agreement, in substantial compliance, and at the expiration of such initial term are in full compliance, with this Agreement, your lease or sublease and all other agreements between you and us or companies or persons associated or affiliated with us.
- 17.1.2 You shall, within six (6) months before the expiration of the initial term, but not later than three (3) months before the expiration of the initial term, provide written notice to us that you wish to sign a Successor Agreement, and we, in turn, shall provide you with any documents that you are required to execute for the successor term, which documents may include, but are not limited to, a general release, our Successor Agreement and all other ancillary agreements, instruments and documents then customarily used by us in the granting of Hyper Kidz Franchises and will require payment of the Successor Agreement Fee. (the "Successor Franchise Documents").
- 17.1.3 You shall execute the Successor Franchise Documents and all other documents and instruments that we require in order to renew. You shall return the executed Successor Franchise
Documents to us, together with payment of a Successor Agreement Fee equal to fifty percent (50%) of our then-current initial franchise fee, by no later than the expiration date of this Agreement. If we do not receive the executed documents and Successor Agreement Fee by such expiration date, then this Agreement shall expire, you shall have no further rights under this Agreement, and you shall comply with the provisions of Article 19 and any other provisions that survive termination or expiration of this Agreement.
17.1.4 After we have received from you all executed Successor Franchise Documents and the Successor Agreement Fee, we shall inspect your Hyper Kidz Business to determine the extent of any required updating, remodeling, redecorating or other refurbishment for the Hyper Kidz Business in order to bring the Hyper Kidz Business up to our then-current image and standards for new Hyper Kidz Businesses. We will provide notice to you of the modifications you shall be required to make and you shall have six (6) months from the date of such notice to effectuate such modifications. If you fail or refuse to make the required modifications, we shall have the right to terminate the Successor Franchise Documents.
17.2 Refusal to Renew Franchise Agreement
We can refuse to renew your franchise if your lease, sublease or other document by which you have the right to occupy the Site is not extended before your successor term is to take effect to cover the period of the renewal or if you do not have a written commitment from your landlord to renew the lease or sublease for a period at least equal to the successor term. We may also refuse to renew your franchise under other circumstances, including, but not limited to, your failure to substantially comply with the terms of this Agreement, your failure to pay amounts owed to us when due, or your failure to cure of any defaults incurred during the initial term of this Agreement, if applicable.
17.3 Successor Agreement Under Law
Even though we decline the renewal of your Franchise, it is possible that we can be required to renew it under a law, rule, regulation, statute, ordinance, or legal order that is applicable at the time. If that happens, to the extent it is allowed by the applicable law, rule, regulation, statute, ordinance or order, your successor term will be subject to the conditions of the Franchise Agreement we are using for new franchisees at the time the successor period begins. If we are not then offering new franchises, your successor period will be subject to the terms in the then-current Franchise Agreement that we indicate. If for any reason that is not allowed, the renewal term will be governed by the terms of this Agreement.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, Article 17 of the franchise agreement outlines the conditions and procedures for franchisees to renew their franchise for an additional term. This section details the requirements a franchisee must meet to be eligible for renewal, including compliance with the existing agreement and other related obligations. It also specifies the timeframe for providing notice of intent to renew and the associated fees.
To renew their Hyper Kidz franchise, franchisees must be in substantial compliance with the franchise agreement, lease, and any other agreements with Hyper Kidz or its affiliates throughout the initial term. They must also provide written notice of their intent to renew within a specific timeframe, no later than three months before the expiration of the initial term, and execute the necessary successor franchise documents. A Successor Agreement Fee, equal to fifty percent of the then-current initial franchise fee, is required for renewal.
Hyper Kidz also retains the right to refuse renewal under certain circumstances, such as if the franchisee's lease is not extended or if the franchisee has failed to comply with the terms of the agreement. Even if Hyper Kidz declines renewal, local laws might require them to offer it, in which case the terms of the new franchise agreement for new franchisees will apply, or the current agreement if a new one isn't available. This article is important for Hyper Kidz franchisees to understand as it defines their rights and obligations regarding the continuation of their franchise beyond the initial term.