What rights does Hyper Kidz have regarding the collection and retention of allowances from suppliers based on a Hyper Kidz franchisee's purchases?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
We have the right to collect and retain any and all allowances, rebates, credits, incentives, or benefits (collectively, "Allowances") offered by manufacturers, suppliers, and distributors to you, to us, or to our affiliates, based upon your purchases of products and services from manufacturers, suppliers, and distributors. We or our affiliates will have all of your right, title, and interest in and to any and all of these Allowances. We or our affiliates may collect and retain any or all of these Allowances without restriction (unless otherwise instructed by the manufacturer, supplier, or distributor). We may also choose to contribute these Allowances to the Brand Development Fund, but if we do so it does not reduce or eliminate your obligation to pay the Brand Development Fee. During the fiscal year ended December 31, 2023, we did not earn any Allowances.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 19–22)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, Hyper Kidz has extensive rights regarding allowances, rebates, credits, incentives, or benefits (collectively, "Allowances") offered by manufacturers, suppliers, and distributors based on a franchisee's purchases of products and services. Hyper Kidz, or its affiliates, has the right to collect and retain any and all of these Allowances. This means Hyper Kidz has full rights to the financial benefits resulting from franchisee purchases from suppliers.
Hyper Kidz or its affiliates will possess all rights, title, and interest in these Allowances, and can collect and retain them without restriction, unless the manufacturer, supplier, or distributor provides other instructions. This indicates that Hyper Kidz benefits directly from the purchasing activities of its franchisees, potentially increasing the franchisor's revenue streams.
Hyper Kidz also has the option to contribute these Allowances to the Brand Development Fund; however, this contribution does not reduce or eliminate the franchisee's obligation to pay the Brand Development Fee. This is an important distinction for prospective franchisees, as it clarifies that the financial benefits gained by Hyper Kidz through Allowances do not offset the franchisee's marketing obligations. The FDD states that Hyper Kidz did not earn any Allowances during the fiscal year ended December 31, 2023.