During the term of the Hyper Kidz agreement, is a franchisee allowed to divert business to a competitor?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
You covenant that during the term of this Agreement, except as otherwise approved in writing by us your principals, you shall not:
12.1.1 Divert or attempt to divert any business or client of the business to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the System.
12.1.2 Own, maintain, advise, help, invest in, make loans to, be employed by, engage in or have any interest in any business other than the Hyper Kidz Businesses (including any business operated by you prior to entry into this Agreement), which business is of a character and concept similar to a Hyper Kidz Business, including a business which offers the same or substantially similar products and services (a "Competitive Business").
Source: Item 23 — RECEIPTS (FDD pages 52–205)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, during the term of the agreement, franchisees are prohibited from diverting business to competitors. Specifically, franchisees cannot attempt to divert any business or client of the Hyper Kidz business to any competitor, whether directly or indirectly. They also cannot perform any action that could be harmful or prejudicial to the goodwill associated with the Hyper Kidz marks and the System.
This restriction is in place to protect the Hyper Kidz brand and its established customer base. By preventing franchisees from diverting business, Hyper Kidz aims to maintain consistency and quality across all locations, ensuring that customers remain loyal to the brand. This covenant helps to preserve the value of the Hyper Kidz franchise system for all franchisees.
Furthermore, franchisees are also restricted from owning, maintaining, advising, investing in, or being employed by any business that is similar to a Hyper Kidz Business, including those offering substantially similar products and services, without written approval from Hyper Kidz. This includes businesses operated by the franchisee prior to entering the agreement. This ensures that franchisees remain fully committed to the Hyper Kidz system and do not use their knowledge and resources to benefit competing businesses.