If the Franchise Agreement is terminated, does the agreement survive for Hyper Kidz?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
than five percent (5%) of the number of shares of that class of securities issued and outstanding.
- 19.4.3 The restrictions of Section 19.4.1 shall not be construed to prohibit you, any Principal of yours or any member of your respective immediate families from having a direct or indirect ownership interest in any Hyper Kidz Business Franchise Agreement for the operation of any Hyper Kidz Business, or any entity owning, controlling or operating a Hyper Kidz Business or from providing services to a Hyper Kidz Business.
19.5 Continuing Obligations
All obligations of ours and yours which expressly or by their nature survive or are intended to survive the expiration or termination of this Agreement shall continue in full force and effect subsequent to and notwithstanding its expiration or termination and until they are satisfied in full or by their nature expire.
19.6 Our Right to Purchase Assets of the Hyper Kidz Business
Upon termination of this Agreement by us in accordance with its terms and conditions or upon expiration of this Agreement without the grant of a Renewal Franchise, we shall have the option to purchase from you all or a portion of the assets used in the Hyper Kidz Business. We may exercise this option by giving written notice thereof within sixty (60) days from the date of such expiration or termination. Assets shall include, without limitation, leasehold improvements, equipment, furniture, fixtures, signs, inventory and the lease or sublease for the Site. We shall have the unrestricted right to assign this option to purchase. We or our assignee shall be entitled to all customary warranties and representations given by the seller of a business including, without limitation, representations and warranties as to (a) ownership, condition and title to assets; (b) liens and encumbrances relating to the assets; (c) validity of contracts inuring to us or affecting the assets; and (d) contingent or other liabilities.
The purchase price for the assets of the Hyper Kidz Business shall be the fair market value determined as of the date of termination of expiration of this Agreement in a manner consistent with reasonable depreciation of leasehold improvements owned by you and the equipment, furniture, fixtures, signs and inventory of the Hyper Kidz Business. The purchase price shall not contain any factor or increment for any trademark, service mark or other commercial symbol used in connection with the operation of the Hyper Kidz Business, goodwill or "going concern" value for the Hyper Kidz Business. We may exclude from the assets purchased hereunder any equipment, furniture, fixtures, signs and inventory that are not approved as meeting quality standards for Hyper Kidz Businesses. The length of the remaining term of the lease or sublease for the Site of the Hyper Kidz Business shall also be considered in determining the fair market value hereunder. If we and you are unable to agree on the fair market value of the assets, the fair market value shall be determined by an independent appraiser selected by us and you. If we and you are unable to agree on an appraiser, we shall each select one (1) appraiser who shall select a third appraiser and the fair market value shall be deemed to be the average of the three (3) independent appraisals. Nothing contained herein shall restrict the manner in which the appraisers so selected value the leasehold improvements, equipment, furniture, fixtures, signs and inventory.
The purchase price shall be paid in cash, a cash equivalent, or marketable securities of equal value at the closing of the purchase, which shall take place no later than ninety (90) days after receipt by you of our notice of exercise of this option to purchase. At that time, you shall deliver instruments transferring to us or our assignee: (a) good and merchantable title to the assets purchased free and clear of all liens and encumbrances, other than liens and security interests acceptable to us or our assignee, with all sales and other transfer taxes paid by you; (b) all licenses and permits of the Hyper Kidz Business which may be assigned or transferred; and (c) the lease or sublease for the Site. In the event that you cannot deliver clear title to all of the purchased assets as aforesaid or in the event there shall be other unresolved issues, the closing of the sale shall be accomplished through an escrow. Prior to closing, you and we shall comply with all applicable legal requirements including the bulk sales provisions of the Uniform Commercial Code of the state in which the Hyper Kidz Business is located.
We shall have the right to set off against, and reduce the purchase price by, any and all amounts owed by you to us and the amount of any encumbrances or liens against the assets or any obligations assumed by us. If we or our assignee exercise this option to purchase, we shall have the right to appoint a manager to maintain the operation of the Hyper Kidz Business pending the closing of such purchase. Alternatively, we may require you to close the Hyper Kidz Business during such time period without
removing any assets from the Site. You shall maintain in force all insurance policies required pursuant to this Agreement until the date of closing. If the Site is leased, we agree to use reasonable efforts to effect a termination of the existing lease for the Site and enter into a new lease on reasonable terms with the landlord. In the event we are unable to enter into a new lease, we will indemnify and hold you harmless from any ongoing liability under the lease from the date we assume possession of the Site.
19.7 Liquidated Damages
Upon termination of this Agreement by us for cause as described in Article 18, you agree to pay to us within fifteen (15) days after the effective date of this Agreement's termination, in addition to the amounts owed hereunder, liquidated damages equal to the average monthly Royalty Fees you paid during the twelve (12) months of operation preceding the effective date of termination multiplied by (a) thirty-six (36), or (b) the number of months remaining in the Agreement had it not been terminated, whichever is lower.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, certain obligations within the Franchise Agreement survive its termination or expiration. Specifically, all obligations of the franchisee and Hyper Kidz that expressly or by their nature are intended to survive the termination will remain in effect. This means that even after the agreement ends, some of the responsibilities and duties outlined in the contract will continue to bind both parties until they are fully satisfied or naturally expire.
Several specific obligations of the franchisee survive termination. The franchisee must immediately cease using any of Hyper Kidz's confidential information and return all copies of the Operations Manual and other confidential materials. Additionally, a covenant not to compete restricts the franchisee and their principals from having an interest in or performing services for a competitive business within a 15-mile radius of the Hyper Kidz Business for two years after termination. The franchisee must also stop identifying themselves as a current or former Hyper Kidz franchisee and remove all signs and materials bearing Hyper Kidz's marks.
Hyper Kidz also has rights that survive termination. Hyper Kidz has the option to purchase the assets of the Hyper Kidz Business upon termination or expiration of the agreement. Furthermore, Hyper Kidz can enforce the assignment of telephone numbers, listings, internet domains, and social media accounts associated with the franchise. These clauses ensure Hyper Kidz can protect its brand and market presence even after a franchise agreement concludes.