What is the focus of Article 9 in the Hyper Kidz Franchise Agreement?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
ARTICLE 9: EXCLUSIVE RELATIONSHIP; NON-COMPETITION
9.1 You acknowledge and agree that we would be unable to protect the Confidential Information against unauthorized use or disclosure and would be unable to encourage a free exchange of ideas and information among Hyper Kidz Businesses if franchisees, their Principals, or members of any of their immediate families were permitted to engage in, hold interests in, or perform services for a Competitive Business. You further acknowledge and agree that the restrictions contained in this Article will not hinder your activities or the activities of your Principals under this Agreement or in general. We have entered into this Agreement with you on the express condition that, with respect to the operation of Competitive Businesses, you and your Principals and members of their respective immediate families will
deal exclusively with us. You therefore agree that during the term of this Agreement neither you nor any of your Principals nor any member of your or their immediate family shall, directly or indirectly:
- (a) have any interest as a disclosed or beneficial Principal in any Competitive Business; or
- (b) perform services as a director, officer, manager, employee, consultant, representative, agent, or otherwise for any Competitive Business;
- 9.2 These restrictions of clause (a) of Section 9.1 shall not be applicable to the ownership of shares of a class of securities listed on a stock exchange or traded on the over-the-counter market (a publicly owned company) that represents less than five percent (5%) of the number of shares of that class of securities issued and outstanding.
- 9.3 The restrictions of Section 9.1 shall not be construed to prohibit you, any of your Principals, or any member of your or their immediate family from having a direct or indirect ownership interest in any Hyper Kidz Business Franchise Agreement for the operation of any Hyper Kidz Business, or any entity owning, controlling or operating a Hyper Kidz Business, or from providing services to any such Hyper Kidz Business pursuant to other agreements with us.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, Article 9 of the franchise agreement focuses on the franchisee's exclusive relationship with Hyper Kidz and non-competition during the term of the agreement. This means Hyper Kidz franchisees, their principals, and their immediate families must deal exclusively with Hyper Kidz and cannot engage in competitive businesses.
Specifically, Article 9 states that franchisees, their principals, and their immediate family members cannot have any interest as a principal in any competitive business, nor can they perform services for any competitive business as a director, officer, manager, employee, consultant, representative, or agent. However, there are exceptions to these restrictions. Franchisees can own less than 5% of shares in a publicly owned company. Also, these restrictions do not prevent franchisees from having an ownership interest in another Hyper Kidz franchise or providing services to another Hyper Kidz business.
This clause ensures that franchisees remain committed to the Hyper Kidz system and do not divert resources or knowledge to competing ventures. It aims to protect Hyper Kidz's confidential information and encourage the free exchange of ideas among franchisees. By agreeing to these terms, prospective franchisees acknowledge that these restrictions will not hinder their activities under the Hyper Kidz agreement or in general.