During the term of the Hyper Kidz franchise, can a multi-unit developer operate a competitive business?

According to Hyper Kidz's 2024 Franchise Disclosure Document, multi-unit developers are restricted from operating a competitive business during the term of their agreement. Specifically, the FDD states that a multi-unit developer "Can’t divert business or operate a Competitive Business anywhere". This restriction is part of the non-competition covenants outlined in Section 12 of the Multi-Unit Development Agreement.

This means that while a franchisee is developing and operating Hyper Kidz locations under the Multi-Unit Development Agreement, they are prohibited from engaging in any other business that offers similar products or services. This restriction applies to all locations, meaning the franchisee cannot operate a competitive business anywhere, not just within a certain radius of their Hyper Kidz locations.

This non-compete agreement is a standard practice in franchising to protect the brand and market share of Hyper Kidz. It ensures that franchisees are fully committed to the success of their Hyper Kidz locations and are not diverting resources or customers to competing ventures. Violation of this covenant could lead to termination of the Multi-Unit Development Agreement, as "participating in a Competitive Business" is listed as a curable default that can lead to termination if not corrected.

After the Multi-Unit Development Agreement is terminated or expires, the franchisee is still subject to certain non-competition restrictions. Specifically, they cannot participate in a Competitive Business for two years within 15 miles of any Hyper Kidz Business in the System. This post-term restriction is more limited in scope than the during-term restriction, but it still serves to protect Hyper Kidz's interests after the franchise relationship ends.