Can Hyper Kidz operate or grant franchises within the Development Area during the Multi-Unit Development Agreement term?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
no obligation to approve sites which do not meet our criteria so you can meet the minimum performance schedule.
Except as described below, during the term of the Multi-Unit Development Agreement, we and our affiliates will not operate or grant a franchise for the operation of Hyper Kidz Businesses to be located within the Development Area. However, we have the right to terminate this exclusivity if you are not in full compliance with all of the terms and conditions of the Multi-Unit Development Agreement and all of the Franchise Agreements signed under it.
Except as expressly limited by the Multi-Unit Development Agreement, we and our affiliates retain all rights with respect to Hyper Kidz Businesses, the Marks, and any products and services anywhere in the world including the right: (a) to offer and sell and to grant others the right to offer and sell the products and services offered at Hyper Kidz Businesses, both within and outside the Development Area, under trade and service marks other than the Marks and under any terms and conditions we deem appropriate; (b) to operate and to grant others the right to operate Hyper Kidz Businesses located outside the Development Area under any terms and conditions we deem appropriate and regardless of proximity to your Hyper Kidz Businesses; and (c) to acquire and operate a business operating one or more similar businesses located or
operating in your Development Area, but if one of these businesses is located within your Development Area, it will not operate using the Proprietary Marks.
After the last Hyper Kidz Business under the minimum performance schedule has opened, your Multi-Unit Development Agreement will expire. At this time if we believe that it is desirable to establish additional Hyper Kidz Businesses within the Development Area, and if you complied with the terms of your Multi-Unit Development Agreement and are in compliance with your Franchise Agreements, we will offer you the right to develop these additional Hyper Kidz Businesses. You must exercise this option, in full, within 60 days after our notice to you.
Source: Item 12 — TERRITORY (FDD pages 33–36)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, during the term of the Multi-Unit Development Agreement, Hyper Kidz and its affiliates generally will not operate or grant franchises for Hyper Kidz Businesses within the Development Area. However, this exclusivity is contingent upon the franchisee's full compliance with all terms and conditions of the Multi-Unit Development Agreement and all Franchise Agreements signed under it. If the franchisee fails to comply, Hyper Kidz reserves the right to terminate this exclusivity. This means that while a multi-unit developer is generally protected from direct competition from the franchisor within their designated area, maintaining that protection requires strict adherence to the agreement terms.
However, this exclusivity ends when the last Hyper Kidz Business to be developed within the Development Area opens. After that, Hyper Kidz and its affiliates have the right to operate and grant development rights and franchises to others within the Development Area. This right is only subject to the territorial rights under the Franchise Agreements signed by the franchisee for Hyper Kidz Businesses in the Development Area and the franchisee's right of first refusal to develop additional Hyper Kidz Businesses.
Even during the Multi-Unit Development Agreement, Hyper Kidz retains certain rights. They can offer and sell Hyper Kidz products and services, and grant others the right to do so, under different trade and service marks both within and outside the Development Area. They can also operate and grant others the right to operate Hyper Kidz Businesses outside the Development Area, regardless of proximity to the franchisee's locations. Additionally, Hyper Kidz can acquire and operate a similar business within the Development Area, as long as it does not operate using Hyper Kidz's Proprietary Marks. This indicates that while the franchisee has some territorial protection, Hyper Kidz retains considerable flexibility to operate and compete in various ways, even within the franchisee's Development Area.