What is the geographic limit of the non-competition covenant after termination or expiration of a Hyper Kidz franchise?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
---------------------|-------------| | (a) Length of the franchise term | Section 3.1 | 10 years |
| Provision | Section or Article in Franchise Agreement | Summary |
|---|---|---|
| (q) Non-competition covenants during the term of the franchise | Article 9 and Section 11.7.3 | No involvement by you and members of your immediate families in a Competitive Business anywhere. If you are a corporate entity, you may not engage in any business other than the development and operation of Hyper Kidz Businesses. |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 41–49)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, both the Franchise Agreement and the Multi-Unit Development Agreement contain non-competition covenants that apply after the franchise is terminated or expires. Under the Franchise Agreement, the franchisee and their immediate family members are prohibited from involvement in a Competitive Business for two years within 15 miles of the Franchised Business or any other Hyper Kidz Business in the System. The Multi-Unit Development Agreement also stipulates that for two years after termination or expiration, the franchisee cannot participate in a Competitive Business within 15 miles of any Hyper Kidz Business in the System.
These post-term non-compete clauses restrict a former Hyper Kidz franchisee's ability to engage in a similar business after their franchise agreement ends. The 15-mile radius serves to protect Hyper Kidz's market share and customer base by preventing former franchisees from directly competing with existing locations. This restriction applies regardless of whether the franchisee operated a single unit or multiple units under a development agreement.
For a prospective franchisee, it's crucial to understand the implications of these non-compete agreements. If they decide to leave the Hyper Kidz system, they will be unable to operate a similar business within the specified radius for two years. This could limit their future business opportunities and should be carefully considered before investing in a Hyper Kidz franchise. Franchisees should also note that these restrictions apply to immediate family members, extending the reach of the non-compete obligations.