Is a transfer of a Hyper Kidz franchise interest after death or disability subject to the standard transfer conditions?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
- 11.6 The grant of rights under this Agreement is personal to Developer, and on the death or permanent disability of Developer, the executor, administrator, conservator, or other personal representative of Developer shall be required to transfer Developer's interest in this Agreement within six (6) months from the date of death or permanent disability to a third party approved by Franchisor. Failure to transfer in accordance with the forgoing will constitute a material default and all that is granted by this Agreement will terminate. A transfer under this Section 11.6, including without limitation, transfer by devise or inheritance, is subject to the conditions for Transfers in this Article 11 and unless transferred by gift, devise, or inheritance, subject to the terms of Section 11 above. For purposes of this Agreement, the term "permanent disability" means a mental or physical disability, impairment or condition that is reasonably expected to prevent or actually does prevent such person from providing continuous and material supervision of the operation of Developer's Hyper Kidz outlet(s) and remaining development schedule during the six (6)-month period from its onset.
Immediately after the death or permanent disability of such person, or while the rights granted under this Agreement is owned by an executor, administrator, guardian, personal representative or trustee of that person, the Developer's Hyper Kidz outlet(s) and remaining development schedule shall be supervised by an interim successor manager satisfactory to Franchisor, or Franchisor, in its sole discretion, may provide interim management at a fee equal to twenty percent (20%) of the Gross Revenue generated by the Developer's Hyper Kidz outlet(s) during Franchisor's operation thereof, plus any and all costs of travel, lodging, meals and other expenses reasonably incurred by Franchisor, pending transfer of the Developer's Hyper Kidz outlet(s) and remaining development schedule to the deceased or disabled individual's lawful heirs or successors.
Source: Item 23 — RECEIPTS (FDD pages 52–205)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, a transfer of the Development Agreement due to death or permanent disability is subject to the standard transfer conditions outlined in Article 11 of the agreement. The executor, administrator, conservator, or other personal representative is required to transfer the Developer's interest within six months of the date of death or permanent disability to a third party approved by Hyper Kidz. Failure to transfer within this timeframe constitutes a material default, leading to the termination of the agreement.
This transfer is subject to the conditions outlined in Article 11, unless it occurs by gift, devise, or inheritance, in which case some terms of Section 11 may not apply. During the period immediately following the death or disability, or while the rights are managed by a representative, the Hyper Kidz outlet(s) must be supervised by an interim successor manager approved by Hyper Kidz. Alternatively, Hyper Kidz may provide interim management, charging a fee equal to 20% of the Gross Revenue generated by the outlet(s), plus all associated costs like travel and lodging.
This clause ensures that Hyper Kidz maintains control over who operates the franchise and that operations continue smoothly during the transition. The brand can ensure its standards are upheld even during unforeseen circumstances. The stipulation for interim management, whether by a Hyper Kidz-approved manager or by Hyper Kidz itself, aims to minimize disruption and maintain revenue flow.
For a prospective franchisee, this means that planning for business succession is essential. Franchisees should be aware of the implications for their heirs or estate and understand the costs and procedures involved in transferring the franchise in the event of death or disability. The six-month window for transfer and the potential for Hyper Kidz to take over management temporarily are critical factors to consider.