What rights do Hyper Kidz and its affiliates retain regarding Hyper Kidz Businesses?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
pay a new initial franchise fee when you sign the new Franchise Agreement. We do not charge a relocation fee.
Except as expressly limited by the Franchise 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 produce, offer and sell and to grant others the right to produce, offer and sell the products offered at Hyper Kidz Businesses and any other goods through similar or dissimilar channels of distribution, both within and outside the Designated Territory, 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 Designated Territory under any terms and conditions we deem appropriate and regardless of proximity to your Hyper Kidz Business; and (c) the right to acquire and operate a business with one or more indoor recreation facilities located or operating in your Designated Territory, but if we do acquire this business any facilities located or operating within your Designated Territory will not use the Marks.
You may sell our products and services to customers who live anywhere but who choose to use your Franchised Business. You may not engage in any promotional activities or sell our products or services, whether directly or indirectly, through or on the internet, the world wide web, or any other similar proprietary or common carrier electronic delivery system, except for party bookings made through our website; through catalogs or other mail order devices sent or directed to customers or prospective customers located anywhere; or by telecopy or other telephonic or electronic communications, including toll-free numbers, directed to or received from customers or prospective customers located anywhere. While you may place advertisements in printed media and on television and radio that are targeted to customers and prospective customers located within your Designated Territory, you will not be deemed to be in violation of the Franchise Agreement if those advertisements, because of the natural circulation of the printed media or reach of television and radio, are viewed by prospective customers outside of your Designated Territory. You may not make any sales or deliver any products to customers located outside of your Designated Territory unless the customer is located in an area where there is no Hyper Kidz Business in operation. You may not directly solicit customers outside of your Designated Territory. You may not sell any products to any business or other customer at wholesale.
During the term of your Franchise Agreement, if we have a prospective franchisee who is interested in establishing a Hyper Kidz Business in an area that is contiguous to your Designated Territory, we may offer you a right of first refusal to purchase the Franchised Business and establish it in the proposed area. We may offer you this right of first refusal if you are in full compliance with the Franchise Agreement, if all fees owed to us have been paid in full and have not been late during the immediately preceding 12 month period, and if we believe you are financially capable of constructing and operating another Hyper Kidz Business. You will have 30 days after receiving the right of first refusal to notify us whether you will purchase the additional Franchised Business. If you decline the right of first refusal, or if you fail to notify us within the 30-day period, we will be free to sell the Franchised Business to the prospective franchisee and you will have no further interest in the proposed area.
We and our affiliates may sell products and services under the Proprietary Marks within and outside your Designated Territory through any method of distribution other than a dedicated Hyper Kidz Business, including sales through channels of distribution such as the internet, catalog sales, telemarketing or other direct marketing sales (together, "alternative distribution channels").
Source: Item 12 — TERRITORY (FDD pages 33–36)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, Hyper Kidz and its affiliates retain significant rights regarding Hyper Kidz businesses, the Marks, and any products and services worldwide, except as expressly limited by the Franchise Agreement or Multi-Unit Development Agreement. This includes the right to produce, offer, and sell products offered at Hyper Kidz businesses, as well as other goods, through various distribution channels, both within and outside a franchisee's designated territory, under different trade and service marks and terms. They also retain the right to operate or grant others the right to operate Hyper Kidz businesses outside the designated territory, regardless of proximity to a franchisee's location. Additionally, Hyper Kidz reserves the right to acquire and operate businesses with indoor recreation facilities, even within a franchisee's designated territory, provided these facilities do not use the Hyper Kidz Marks.
For a prospective franchisee, this means that while you are granted a designated territory, Hyper Kidz maintains considerable control and freedom to operate and expand its brand through other channels and locations. Hyper Kidz can sell products and services under the Proprietary Marks within and outside your Designated Territory through any method of distribution other than a dedicated Hyper Kidz Business, including sales through channels of distribution such as the internet, catalog sales, telemarketing or other direct marketing sales. The franchisee will not receive any compensation for sales made through these alternative distribution channels. This could potentially impact a franchisee's revenue if Hyper Kidz or its affiliates establish alternative distribution channels that compete within the franchisee's market.
Furthermore, Hyper Kidz retains the right to offer a right of first refusal to a franchisee for establishing a Hyper Kidz Business in an area contiguous to their Designated Territory. However, this is contingent on the franchisee's compliance with the Franchise Agreement, payment of all fees, and financial capability. If the franchisee declines or fails to respond within 30 days, Hyper Kidz is free to sell the franchise to another party. Hyper Kidz also intends to forward all inquiries generated through their website to the appropriate Hyper Kidz Business in the System. However, if a franchisee chooses not to respond to the inquiry or fulfill any request, Hyper Kidz, its affiliate, or another franchisee may fulfill the request, and the original franchisee will not be entitled to any revenue generated from the request. All leads generated through the Hyper Kidz website will be the property of Hyper Kidz.
Hyper Kidz also reserves the right to merge with, acquire, or be acquired by, an existing competitive or non-competitive franchise network, chain, or other business; however, they will not convert any acquired business in your Territory to a franchise using their primary trademarks during the Term of your Franchise Agreement. This clause protects the franchisee from direct competition using the Hyper Kidz brand within their territory due to acquisitions. However, Hyper Kidz retains considerable latitude in how it manages and expands the brand, which could impact a franchisee's business. Therefore, prospective franchisees should carefully consider these retained rights and their potential impact on their investment.