What is the meaning of 'Principals' in the context of the Hyper Kidz franchise agreement?

According to the 2024 Hyper Kidz Franchise Disclosure Document, 'Principals' are defined as individuals or entities with direct or indirect legal or beneficial ownership interests in the franchisee, the franchise agreement, the Hyper Kidz Business, or other property rights related to these. Principals are also designated as 'Owners' on Attachment 7 of the agreement if they have an equity ownership interest.

This definition is important because the actions and obligations of the Principals can significantly impact the franchisee's standing with Hyper Kidz. For example, if a franchisee wants to transfer ownership, the agreement stipulates that both the franchisee and its Principals must be in full compliance with the franchise agreement. Additionally, the proposed transferee and its Principals must meet Hyper Kidz's standards for franchisees, including demonstrating good moral character.

Furthermore, Principals are subject to certain restrictions, such as non-competition agreements. During the term of the agreement, neither the franchisee nor its Principals can have an interest in a Competitive Business or perform services for one. These restrictions typically extend for a period of two years after the transfer of interest, within a 15-mile radius of the Hyper Kidz Business or any other Hyper Kidz location. These stipulations ensure that individuals with significant control or ownership in the franchise are committed to the success of Hyper Kidz and do not engage in activities that could harm the brand.