After termination or expiration of a Hyper Kidz franchise agreement, can a principal's immediate family member own a Competitive Business within the restricted radius?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
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19.3 Confidential Information
You agree that, upon termination of the Franchise or expiration of the Franchise without grant of a Renewal Franchise: (a) you will immediately cease to use any of our Confidential Information disclosed to or otherwise learned or acquired by you in any business or otherwise; and (b) you will return to us all copies of the Operations Manual and any other confidential materials which have been loaned or made available to you by us and you shall retain no copies thereof.
19.4 Covenant Not to Compete
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- 19.4.1 Upon termination of this Agreement by us in accordance with its terms and conditions, or upon expiration of this Agreement without the grant of a Renewal Franchise, neither you nor any of your Principals shall directly or indirectly, through a member of the immediate family of you or a Principal or otherwise for a period of two (2) years commencing on the effective date of such termination or expiration or the date on which you cease to operate the Hyper Kidz Business, whichever is later:
- (a) have any interest as a disclosed or beneficial owner in any Competitive Business located or operating within a fifteen (15) mile radius of the Hyper Kidz Business or any other Hyper Kidz Business; or
- (b) perform services as a director, officer, manager, employee, consultant, representative, agent or otherwise for any Competitive Business located or operating within a fifteen (15) mile radius of the Hyper Kidz Business or any other Hyper Kidz Business in operation or under construction on the effective date of such termination or expiration;
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, after the Hyper Kidz franchise agreement is terminated or expires without renewal, neither the franchisee nor their Principals can have a direct or indirect interest in a Competitive Business within a 15-mile radius of the Hyper Kidz Business. This restriction extends to members of the immediate family of the franchisee or a Principal. This non-compete obligation lasts for two years, starting from the termination or expiration date, or the date the Hyper Kidz Business ceases operation, whichever is later.
This restriction means that if a franchisee's agreement is terminated or expires, their immediate family members are also restricted from owning or operating a competitive business within the specified radius for the two-year period. This is a significant restriction that could impact the family's ability to pursue other business ventures in the same geographic area.
However, there is an exception: the restrictions do not prevent the franchisee, any Principal, or their immediate family from having an ownership interest in another Hyper Kidz Business franchise. They are also not restricted from providing services to another Hyper Kidz Business. This exception allows for continued involvement with the Hyper Kidz franchise system, even after the termination or expiration of a specific franchise agreement.
It is important for prospective franchisees to understand these non-compete terms and their implications, especially concerning family members, before entering into a franchise agreement with Hyper Kidz. Franchisees should consider how these restrictions might affect their future business opportunities and discuss any concerns with the franchisor before signing the agreement.