Does Hyper Kidz have the right to purchase the Development Rights if the franchisee receives an offer?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
- 11.3 Except as provided in Section 11.2, if you receive from an unaffiliated third party and desires to accept a bona fide written offer to purchase your business, Development Rights and interests, we shall have the option, exercisable within thirty (30) days after receipt of written notice setting forth the name and address of the prospective purchaser, the price and terms of such offer, and a copy of such offer and the other information stated in this Section 11.3, to purchase such business, Development Rights and interests, including your right to develop sites within the Development Area, on the same terms and conditions as offered by said third party.
In order that we may have information sufficient to enable us to determine whether to exercise this option, we may require you to deliver to us certified financial statements as of the end of your most recent fiscal year and such other information about your business and operations as we may request.
If we decline, or do not accept the offer in writing within thirty (30) days, you may, within thirty (30) days from the expiration of the option period, sell, assign and transfer your business, Development Rights and interest to said third party, provided we have consented to such transfer as required by this Section 11.
Any material change in the terms of the offer prior to closing of the sale to such third party shall constitute a new offer, subject to the same rights of first refusal by us or our nominee, as in the case of an initial offer.
Our failure to exercise the option afforded by this Section 11.3 shall not constitute a waiver of any other provision of this Agreement, including all of the requirements of this Section with respect to the proposed transfer.
- 11.4 You acknowledge and agree that the restrictions on transfer imposed herein are reasonable and are necessary to protect the Development Rights, the System and the Marks, as well as our reputation and image, and are for the protection of us, you and other multi-unit developers and franchisees.
Source: Item 23 — RECEIPTS (FDD pages 52–205)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, Hyper Kidz has the option to purchase a franchisee's business, Development Rights, and interests if the franchisee receives a bona fide written offer from an unaffiliated third party. Hyper Kidz can exercise this option within 30 days of receiving written notice from the franchisee. The notice must include the prospective purchaser's name and address, the offer's price and terms, and a copy of the offer, along with other relevant information.
To make an informed decision, Hyper Kidz may request certified financial statements and other information about the franchisee's business and operations. If Hyper Kidz declines to exercise its option or does not accept the offer in writing within the 30-day period, the franchisee has 30 days from the expiration of the option period to sell, assign, and transfer their business, Development Rights, and interests to the third party, provided that Hyper Kidz has consented to the transfer as required by the agreement.
Any material change in the terms of the offer before the sale to the third party constitutes a new offer, which is subject to the same right of first refusal by Hyper Kidz. Hyper Kidz's failure to exercise its option does not waive any other provisions of the agreement, including all requirements related to the proposed transfer. These restrictions on transfer are acknowledged by the franchisee as reasonable and necessary to protect the Development Rights, the System, the Marks, and Hyper Kidz's reputation and image, as well as the interests of other multi-unit developers and franchisees.
This clause ensures that Hyper Kidz retains control over who enters their franchise system and on what terms, even when a franchisee wishes to sell their Development Rights. It also protects the brand's integrity and the interests of other franchisees by ensuring that any new owner meets Hyper Kidz's standards and qualifications.