Is the Hyper Kidz Spousal Guaranty affected by changes in ownership or control of the Franchisee entity?

Based on the 2024 Hyper Kidz Franchise Disclosure Document, if a proposed transferee is acquiring a portion of the interest in the legal entity that is the franchisee, then the proposed transferee must execute Hyper Kidz's form of guaranty. This means that if the ownership of the Hyper Kidz franchise changes, the new owner may be required to provide a guaranty, ensuring they are responsible for the franchise's obligations.

Furthermore, the FDD states that the rights and duties created by the franchise agreement are personal to the franchisee and their Principals. Hyper Kidz grants these rights in reliance on the individual or collective character, skill, aptitude, attitude, business ability, and financial capacity of the franchisee and their Principals. Consequently, any transfer of ownership or interest in the franchise requires Hyper Kidz's prior written approval. This approval process allows Hyper Kidz to assess the suitability of the proposed transferee and ensure they meet the brand's standards.

Specifically, the term "transfer" includes various events such as the transfer of ownership of shares, partnership interests, or other Ownership Interests, merger or consolidation, issuance of additional securities representing Ownership Interests, or any sale of Ownership Interests carrying voting rights. It also includes transfers in divorce, insolvency, or in the event of death. Each of these scenarios could potentially trigger the need for a new guaranty from the incoming party, as determined by Hyper Kidz.

Therefore, a prospective Hyper Kidz franchisee should understand that changes in ownership or control of the franchise entity may necessitate a new guaranty from the incoming owner or Principal. This requirement protects Hyper Kidz's interests and ensures that the franchise remains in capable hands. Franchisees should carefully review the conditions for approval of transfer outlined in the FDD and consult with Hyper Kidz to understand the specific requirements for their situation.