Regarding Hyper Kidz Cooperative rules and procedures, what restrictions apply to the Cooperative's ability to restrict or expand a franchisee's rights or obligations under the Franchise Agreement?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
- 12.3.3 the Cooperative may adopt its own rules and procedures, but such rules or procedures must be approved by us and must not restrict or expand your rights or obligations under this Agreement;
- 12.3.4 except as otherwise provided in this Agreement, and subject to our approval, any lawful action of the Cooperative at a meeting attended by members possessing more than fifty percent (50%) of the total voting power in the Cooperative is binding upon you if approved by members possessing more than fifty percent (50%) of the total voting power possessed by members in attendance, with each
Hyper Kidz Business having one (1) vote, but no franchisee (or commonly controlled group of franchisees) may have more than twenty-five percent (25%) of the vote in the Cooperative regardless of the number of Hyper Kidz Businesses owned. In the event of a tie vote, the franchisor is the tie breaking vote;
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, any marketing cooperative formed must adhere to specific rules that protect the franchisee's rights and obligations as defined in the Franchise Agreement. Hyper Kidz retains significant control over these cooperatives to ensure brand consistency and compliance.
The Cooperative may adopt its own rules and procedures, but Hyper Kidz must approve them. These rules and procedures cannot restrict or expand a franchisee's rights or obligations under the Franchise Agreement. This ensures that the Cooperative cannot unilaterally alter the contractual agreement between Hyper Kidz and its franchisees.
Furthermore, any lawful action of the Cooperative is binding if approved by members possessing more than 50% of the total voting power, provided that each Hyper Kidz Business has one vote. However, no franchisee (or commonly controlled group) can hold more than 25% of the vote, regardless of the number of Hyper Kidz Businesses they own. In the event of a tie, Hyper Kidz, as the franchisor, holds the tie-breaking vote. This structure ensures that no single franchisee or group can dominate the Cooperative's decision-making process, and Hyper Kidz maintains ultimate control in case of a deadlock.