What happens if a Hyper Kidz franchisee defaults on their lease or sublease for the site?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
- 18.2.11 You cause or permit to exist a default under the lease or sublease for the Site and fail to cure such default within the applicable cure period set forth in the lease or sublease;
Any default by you (or any person/company affiliated with you) under any other agreement, including, but not limited to, any lease and/or sublease, between us (or any Affiliate of ours) and you (or any Affiliate of yours), and any default by you (or any person/company affiliated with you) under any obligation to us (or any Affiliate of ours) may be regarded as a default under this Agreement. Any default by you (or any person/company affiliated with you) under any lease, sublease, loan agreement, security interest or otherwise, whether with us, any Affiliate of ours and/or any third party may be regarded as a default under this Agreement and/or any other agreement between us (or any Affiliate of ours) and you (or any Affiliate of yours).
The lease or sublease for the Site shall be in a form satisfactory to us and: (a) provide for concurrent, written notice to us of your default under said lease or sublease; (b) provide for our right, in our sole discretion, to cure your default under said lease or sublease; (c) provide for your right to assign your interest under said lease or sublease to us without the lessor's or sublessor's consent; (d) authorize and require the lessor or sublessor to disclose to us upon our request sales and other information furnished to the lessor or sublessor by you; (e) provide that we shall have the right, in our sole discretion, upon termination of this Agreement or expiration of this Agreement, without the grant of a successor franchise, to assume said lease or sublease; (f) provide for the lessor's or sublessor's consent to your display of the Marks in accordance with our specifications, subject only to applicable law; (g) provide that it may not be materially modified without our prior written consent and that we will receive copies of such modifications when proposed and when executed; and (h) include an executed copy of the Collateral Assignment of Lease, which is attached hereto as Attachment 6, or a substantially similar form.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, if a franchisee defaults on their lease or sublease for the site, it constitutes a breach of the Franchise Agreement. Specifically, if a Hyper Kidz franchisee causes or permits a default under the lease or sublease for the site and fails to cure such default within the applicable cure period outlined in the lease or sublease, this is grounds for default.
Furthermore, any default by the franchisee (or any person/company affiliated with them) under any lease, sublease, loan agreement, security interest or otherwise, whether with Hyper Kidz, any affiliate of Hyper Kidz, and/or any third party, may be regarded as a default under the Franchise Agreement and/or any other agreement between Hyper Kidz (or any affiliate) and the franchisee (or any affiliate). This means a default in one area can trigger consequences across multiple agreements.
Hyper Kidz also requires that the lease or sublease for the site includes certain provisions to protect their interests. These include receiving written notice of the franchisee's default, having the right to cure the franchisee's default, and having the right to assume the lease or sublease upon termination or expiration of the Franchise Agreement. The franchisee must also obtain Hyper Kidz's approval for the lease or sublease terms and any modifications to it. These stipulations in the lease agreement are designed to give Hyper Kidz significant control and options in case the franchisee fails to meet their lease obligations, potentially allowing Hyper Kidz to maintain control of the location even if the franchisee is in default.