After leaving a position with a Hyper Kidz franchisee, for how long is an individual restricted from engaging in a Competitive Business?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
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- Except as otherwise approved in writing by the Company, I shall not, while in my position with the Franchisee, either directly or indirectly for myself, or through, on behalf of, or in conjunction with any person, persons, partnership, or corporation, own, maintain, operate, engage in, act as a consultant for, perform services for, or have any interest in any retail business or e-commerce business which: (a) is the same as, or substantially similar to, a Franchised Business; or (b) offers to sell or sells any products or services which are the same as, or substantially similar to, any of the products or services offered by a Franchised Business (a "Competitive Business"); and for a continuous uninterrupted period commencing upon the cessation or termination of my position with Franchisee, regardless of the cause for termination, or upon the expiration, termination, transfer, or assignment of the Franchise Agreement, whichever occurs first, and continuing for two (2) years thereafter, either directly or indirectly, for myself, or through, on behalf of, or in conjunction with any person, persons, partnership, or corporation, own, maintain, operate, engage in, act as a consultant for, perform services for, or have any interest in any Competitive Business that is, or is intended to be, located at or within:
- 7.1 Franchisee's Designated Territory, as defined in the Franchise Agreement ("Franchisee's Designated Territory");
- 7.2 Fifteen (15) miles of Franchisee's Designated Territory; or
- 7.3 Fifteen (15) miles of any Franchised Business operating under the System and the Proprietary Marks.
The prohibitions in this Paragraph 7 do not apply to my interests in or activities performed in connection with a Franchised Business. This restriction does not apply to my ownership of less than five percent (5%) beneficial interest in the outstanding securities of any publicly held corporation.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, an individual is restricted from engaging in a Competitive Business for two years after leaving a position with a Hyper Kidz franchisee. Specifically, this restriction applies for a "continuous uninterrupted period commencing upon the cessation or termination of my position with Franchisee, regardless of the cause for termination, or upon the expiration, termination, transfer, or assignment of the Franchise Agreement, whichever occurs first, and continuing for two (2) years thereafter".
This non-compete agreement prevents former employees from leveraging their knowledge of Hyper Kidz's operations to benefit a competing business within a specific geographic area. The restricted area includes the franchisee's designated territory, fifteen miles of the franchisee's designated territory, and fifteen miles of any franchised business operating under the Hyper Kidz system.
This type of restriction is common in franchising to protect the brand and the investments of franchisees. However, the agreement does not restrict ownership of less than 5% of a publicly held corporation's securities. This allows former employees to invest in publicly traded companies that may have some competitive overlap with Hyper Kidz without violating the agreement.