What is the geographic radius of the non-compete restriction following a Hyper Kidz franchise transfer?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
If a Principal is transferring his/her interest, such Principal must execute a non-competition agreement in favor of us and the transferee.
In either case, the non-competition agreement shall provide that neither you, your Principal(s) nor your transferring Principal(s) (whichever is applicable) nor any member of their immediate families shall directly or indirectly for a period of two (2) years commencing on the effective date of such transfer:
(1) have any interest as a disclosed or beneficial owner in any Competitive Business located or operating within fifteen (15) miles of your Hyper Kidz Business or any other Hyper Kidz Business in the System; or
(2) perform services as a director, officer, manager, employee, consultant, representative, agent, or otherwise for any Competitive Business located or operating within fifteen (15) miles of your Hyper Kidz Business or any other Hyper Kidz Business in the System.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, if you transfer your franchise, you and your principals must sign a non-competition agreement. This agreement restricts you, your principals, and your immediate family members from having an interest in or working for a competitive business within a 15-mile radius of your Hyper Kidz Business or any other Hyper Kidz location. This restriction lasts for two years, starting from the transfer date.
This non-compete clause is designed to protect Hyper Kidz and the new franchisee from direct competition from the previous owner who possesses knowledge of the business operations and customer base. The 15-mile radius is a defined geographic area where the non-compete applies, ensuring that the seller does not immediately set up a competing business nearby.
It is important to note that these restrictions do not apply to ownership of less than 5% of shares in a publicly traded company. This exception allows former franchisees to invest in larger companies without violating the non-compete agreement. Additionally, these restrictions do not prevent you or your family from owning or working for another Hyper Kidz franchise.
Prospective franchisees should carefully consider the implications of this non-compete agreement, especially if they have other business interests or plan to remain in the same geographic area after selling their Hyper Kidz franchise. Understanding the terms and limitations of the non-compete is crucial for making informed decisions about the franchise opportunity.