Does the Hyper Kidz franchise agreement grant an exclusive territory to the franchisee?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
d diligently perform your obligations hereunder and that you will continuously exert your best efforts to promote and enhance the business of the Hyper Kidz Business and the goodwill of the Marks. You shall not conduct the business of the Hyper Kidz Business from any location other than the Site.
3.2 Territorial Rights
This Agreement grants Franchisee the right to operate the Franchised Business at a single location and from within the Territory. Subject to Section 3.2 below, Franchisor agrees that during the Term of this Agreement, Franchisor will not operate, and will not authorize any other franchisees to operate, a Hyper Kidz outlet in the Territory using the same Marks as licensed to Franchisee in this Agreement so long as Franchisee is not in default under this Agreement or this Agreement has not been terminated. Except as otherwise specified in this Agreement, Franchisor reserves the right to open, operate or franchise Hyper Kidz franchises bordering and adjacent to the Territory. Except as set forth in this Agreement, Franchisee is prohibited from serving and soliciting customers outside of the Territory and from alternative methods of distribution as more fully specified herein. You expressly acknowledge that this Franchise is nonexclusive, but that this Agreement does grant you a protected area or territory for your Hyper Kidz Business referred to herein as your "Designated Territory". Your Designated Territory is described in Attachment 3 hereof.
3.3 Rights Retained by Us
We retain all rights with respect to Hyper Kidz Businesses, the Marks and the sale of Approved Products and Services and any other products and services anywhere in the world including, without limitation:
- (a) to produce, offer and sell and to grant others the right to produce, offer and sell the Products offered at Hyper Kidz Outlets and any other goods through similar or dissimilar channels of distribution, both within and outside the Designated Territory, under trade and service marks other than the Marks and under any terms and conditions we deem appropriate;
- (b) to operate and to grant others the right to operate Hyper Kidz Outlets located outside the Designated Territory under any terms and conditions we deem appropriate and regardless of proximity to your Hyper Kidz Outlet;
- (c) the right to acquire and operate a business operating one or more child development Outlets located or operating in your Designated Territory; provided, however, that if we do acquire this business any facilities located or operating within your Designated Territory will not operate using the Marks.
You expressly acknowledge and agree that we shall have the unbridled right to exercise all of the rights reserved to us in this Section 3.3 at any location, regardless of the proximity of such location to your Hyper Kidz Outlet.
3.4 Limitations on Sale of Approved Products and Services
This license does not include any right to provide any product or service at or from any location except from the Site. Your use, directly or indirectly, of the System, the Marks licensed hereunder, or the sale of any Approved Product or Service at any location other than from the Site, except as we may specifically approve, shall be a material breach of this Agreement and shall give us, in addition to all other rights and remedies hereunder, the right to terminate this Agreement.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, the franchise agreement grants the franchisee the right to operate their franchised business at a single location within a designated territory. Hyper Kidz agrees not to operate or authorize other franchisees to operate a Hyper Kidz outlet in the franchisee's territory using the same marks, as long as the franchisee is not in default and the agreement has not been terminated. However, this right is subject to certain conditions and is not entirely exclusive. Hyper Kidz retains the right to open, operate, or franchise Hyper Kidz franchises bordering and adjacent to the franchisee's territory. The franchisee is also prohibited from serving or soliciting customers outside of their designated territory, with specific limitations on alternative methods of distribution. The franchisee's designated territory is described in Attachment 3 of the Franchise Agreement.
While the Hyper Kidz franchise is nonexclusive, the agreement does grant a protected area or territory. The franchisee cannot directly solicit customers outside of their Designated Territory and cannot sell any products at wholesale. However, franchisees may place advertisements in printed media, television, and radio that are targeted to customers within their Designated Territory, even if those advertisements are viewed by prospective customers outside of the territory due to the natural circulation or reach of the media.
Furthermore, Hyper Kidz retains all rights to Hyper Kidz Businesses, the Marks, and the sale of approved products and services anywhere in the world. This includes sales and solicitations made directly or indirectly through the internet, except for party bookings made through the Hyper Kidz website. If Hyper Kidz has a prospective franchisee interested in establishing a Hyper Kidz Business in an area contiguous to the existing franchisee's Designated Territory, the existing franchisee may be offered a right of first refusal to purchase the franchised business in the proposed area. This is contingent on the franchisee being in full compliance with the agreement, including timely payment of all fees, and Hyper Kidz believing the franchisee is financially capable of operating another Hyper Kidz Business. The franchisee has 30 days to respond to the offer.