Is a Hyper Kidz franchisee protected from competition from other franchisees?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
it E. The Operations Manual includes approximately 96 pages.
Item 12: TERRITORY
Franchise Agreement
Your Franchise Agreement will specify the site that will be the Approved Location for your Hyper Kidz Business. Your Franchise Agreement will also specify a Designated Territory, which will be a minimum of 65,000 kids ages 13 & under within a 15-mile radius (Driving Distance), whichever comes first around the Approved Location. Your Designated Territory may be described in terms of street, municipal or other boundaries, and may be depicted on a map that is attached to your Franchise Agreement. If you do not yet have a location at the signing of the Franchise Agreement, you will receive a non-exclusive site search area list as Attachment 3.
During the term of the Franchise Agreement, we will not establish or operate, nor license any other person to establish or operate, a Hyper Kidz Business in your Designated Territory, except as may be permitted under the Franchise Agreement and those exceptions are described below. Your territorial protection does not depend on your achieving a certain sales volume, market penetration, or other factor, other than compliance with the Franchise Agreement.
You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.
If, during the term of the Franchise Agreement, you wish to relocate your Hyper Kidz Business, or if your Hyper Kidz Business is damaged or destroyed and cannot be repaired within 60 days, you must submit to us in writing the materials we require to consider your request, including information concerning
the proposed new location for your Hyper Kidz Business. You must also meet certain other requirements, such as being in compliance with the Franchise Agreement, the location meets our then-current requirements for a Hyper Kidz Business and is located within your Designated Territory, and you must sign our then-current form of Franchise Agreement. If we permit you to relocate, you will not pay a new initial franchise fee when you sign the new Franchise Agreement. We do not charge a relocation fee.
Except as expressly limited by the Franchise Agreement, we and our affiliates retain all rights with respect to Hyper Kidz Businesses, the Marks, and any products and services anywhere in the world including the right: (a) to produce, offer and sell and to grant others the right to produce, offer and sell the products offered at Hyper Kidz Businesses 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 Businesses located outside the Designated Territory under any terms and conditions we deem appropriate and regardless of proximity to your Hyper Kidz Business; and (c) the right to acquire and operate a business with one or more indoor recreation facilities located or operating in your Designated Territory, but if we do acquire this business any facilities located or operating within your Designated Territory will not use the Marks.
You may sell our products and services to customers who live anywhere but who choose to use your Franchised Business. You may not engage in any promotional activities or sell our products or services, whether directly or indirectly, through or on the internet, the world wide web, or any other similar proprietary or common carrier electronic delivery system, except for party bookings made through our website; through catalogs or other mail order devices sent or directed to customers or prospective customers located anywhere; or by telecopy or other telephonic or electronic communications, including toll-free numbers, directed to or received from customers or prospective customers located anywhere. While you may place advertisements in printed media and on television and radio that are targeted to customers and prospective customers located within your Designated Territory, you will not be deemed to be in violation of the Franchise Agreement if those advertisements, because of the natural circulation of the printed media or reach of television and radio, are viewed by prospective customers outside of your Designated Territory. You may not make any sales or deliver any products to customers located outside of your Designated Territory unless the customer is located in an area where there is no Hyper Kidz Business in operation. You may not directly solicit customers outside of your Designated Territory. You may not sell any products to any business or other customer at wholesale.
During the term of your Franchise Agreement, if we have a prospective franchisee who is interested in establishing a Hyper Kidz Business in an area that is contiguous to your Designated Territory, we may offer you a right of first refusal to purchase the Franchised Business and establish it in the proposed area. We may offer you this right of first refusal if you are in full compliance with the Franchise Agreement, if all fees owed to us have been paid in full and have not been late during the immediately preceding 12 month period, and if we believe you are financially capable of constructing and operating another Hyper Kidz Business.
Source: Item 12 — TERRITORY (FDD pages 33–36)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, franchisees receive a Designated Territory, but this territory is not exclusive. The Franchise Agreement specifies the Approved Location and Designated Territory, which is a minimum of 65,000 kids ages 13 & under within a 15-mile radius (Driving Distance), whichever comes first around the Approved Location.
While Hyper Kidz will not establish or license another Hyper Kidz Business in the Designated Territory during the Franchise Agreement term, there are exceptions. A Hyper Kidz franchisee may face competition from other franchisees, from outlets that Hyper Kidz owns, or from other channels of distribution or competitive brands that Hyper Kidz controls. This means that while another brick-and-mortar Hyper Kidz location cannot be opened in your Designated Territory, other franchisees and the franchisor can still compete for customers in that area through other means.
Hyper Kidz and its affiliates retain the right to sell products and services under the Proprietary Marks within and outside a franchisee's Designated Territory through alternative distribution channels like the internet, catalog sales, or telemarketing. Franchisees are not compensated for sales made through these alternative channels, even if the order originates from or is delivered to an address within their Designated Territory. Hyper Kidz also retains the right to acquire and operate a business with one or more indoor recreation facilities located or operating in a franchisee's Designated Territory, as long as these facilities do not use the Hyper Kidz Marks.
For franchisees entering into a Multi-Unit Development Agreement, Hyper Kidz typically grants exclusive rights to develop and operate Hyper Kidz Businesses within a defined Development Area. However, this exclusivity is contingent on the franchisee's compliance with the Multi-Unit Development Agreement and all Franchise Agreements signed under it. The exclusivity can be terminated if the franchisee fails to meet the minimum performance schedule outlined in the agreement. After the last Hyper Kidz Business under the minimum performance schedule has opened, the exclusive rights under the Multi-Unit Development Agreement terminate, although the franchisee retains a right of first refusal to develop additional Hyper Kidz Businesses in the Development Area.