Under what circumstances are agreements or amendments binding on either party in the Hyper Kidz Franchise Agreement?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
ity convertible to voting Ownership Interests of you or any agreement granting the right to exercise or control the exercise of the voting rights of any holder of an Ownership Interest; or
- (d) transfer in a divorce, insolvency, corporate or partnership dissolution proceeding, or in the event of the death of you or one of your Principals, by will, declaration of or transfer in trust, or under the laws of intestate succession or otherwise by operation of law.
16.3 Conditions for Approval of Transfer
- 16.3.1 We will not unreasonably withhold our approval of a transfer of an interest in this Agreement, you, the Franchise, the Hyper Kidz Business, or any of the Hyper Kidz Business's assets that meets all the applicable requirements of this Section. All of the following conditions must be met prior to or concurrently with the effective date of the transfer:
- (a) you and your Principals shall be in full compliance with this Agreement;
- (b) the proposed transferee and its Principals must be individuals of good moral character and otherwise meet our then-applicable standards for Hyper Kidz Business franchisees, and if the proposed transferee, its owners or Affiliates have any other franchise agreements or development agreements with us, they are in full compliance with any such agreements and comply with clause (f) of Section 16.3.2;
- (c) a transfer of ownership in the Hyper Kidz Business or the assets of the Hyper Kidz Business, other than inventory in the ordinary course of business, may only be made in
conjunction with a transfer of this Agreement. If the transfer is of an Owner's interest in you then the transferee's name and relevant information shall be added as Attachment 7 hereto and the transferee shall then be bound by all provisions applicable to Principals;
- (d) you and your Principals or the transferring Principal(s) and the transferee (if it is then a franchisee of ours) must execute a general release in form satisfactory to us of any and all claims against us, our Affiliates and our respective shareholders, officers, directors, employees and agents; and
- (e) you have complied with the provisions of Section 16.7 below relating to our right of first refusal.
- 16.3.2 In addition to the above, if the transfer is of this Agreement, a Principal's interest in you, or is one of a series of transfers which, in the aggregate, constitute the transfer of this Agreement, all of the following conditions must be met prior to or concurrently with the effective date of the transfer:
- (a) the transferee must have sufficient business experience, aptitude and financial resources to operate the Hyper Kidz Business and perform the obligations of the transferor under this Agreement, and neither the transferee nor its Principals may be engaged in or intend to engage in a Competitive Business;
- (b) you and the transferee (if it is then a franchisee of ours) must pay such Royalty Fees, Brand Development Fees, amounts owed for purchases by you (or such transferee) from us and our Affiliates, and all other amounts owed to us or our Affiliates which are then due and unpaid;
- (c) the transferee and its personnel who will have access to the Confidential Information must have signed the Confidentiality and Non-Competition Agreement and have completed our training program to our satisfaction;
- (d) the transferee and its Principals, at our option, must agree in a manner satisfactory to us to be bound by all terms and conditions of this Agreement for the remainder of its term or execute our then-current form of franchise agreement and such ancillary documents, including guarantees, as are then customarily used by us in the grant of franchises for Hyper Kidz Businesses, modified as necessary to provide for the same Royalty Fees required hereunder and a term equal to the remaining term of this Agreement;
- (e) you or the transferee must have paid us a transfer fee of Fifteen Thousand Dollars ($15,000) to cover our reasonable costs in effecting the transfer and in providing initial assistance to transferee;
- (f) we must approve the material terms and conditions of such transfer including, without limitation, that the price and terms of payment are not so burdensome as to adversely affect our rights and interests under this Agreement, and you must furnish to us a copy of the executed contract of assignment;
- (g) if you and/or your transferring Principal(s) finances any part of the sale price of the transferred interest, you and/or your transferring Principal(s) must agree in a manner satisfactory to us that all obligations of the transferee under or pursuant to any promissory notes, agreements or security interests reserved by you and/or your transferring Principal (s) in the assets of the Hyper Kidz Business shall be subordinate to the obligations of the transferee to pay Royalty Fees, Brand Development
Fees, Technology Fees, and other amounts due to us and our Affiliates, and otherwise to comply with this Agreement or the franchise agreement executed by the transferee;
- (h) if this Agreement is being transferred, you and your Principals must execute a non-competition agreement in favor of us and the transferee. If a Principal is transferring his/her interest, such Principal must execute a non-competition agreement in favor of us and the transferee.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to the 2024 Hyper Kidz Franchise Disclosure Document, several conditions must be met for agreements or amendments to be binding, particularly in the context of transferring ownership. Hyper Kidz will not unreasonably withhold approval of a transfer if all requirements are met. These conditions ensure that the integrity and standards of the Hyper Kidz franchise system are maintained during any transfer of ownership or interest.
For a transfer to be approved, both the franchisee and their Principals must be in full compliance with the existing Franchise Agreement. The proposed transferee and their Principals must meet Hyper Kidz's standards for franchisees, including demonstrating good moral character. If the transferee has other agreements with Hyper Kidz, those must also be in full compliance. Any transfer of ownership must occur alongside a transfer of the Franchise Agreement itself. The transferee's information will be added to Attachment 7, binding them to the Principal's obligations.
Additional conditions apply specifically to the transfer of the Franchise Agreement or a Principal's interest. Both the transferring parties and any existing Hyper Kidz franchisees involved must execute a general release of claims against Hyper Kidz. A non-competition agreement must be executed, preventing involvement in any competitive business within 15 miles of any Hyper Kidz location for two years. The proposed transferee must provide necessary information and attend a personal interview. The lessor of the Hyper Kidz Business location must consent to the lease assignment. If the transferee is acquiring partial interest, they must execute Hyper Kidz's form of guaranty. The Hyper Kidz Business must be upgraded to current standards at the transferee's expense, and the transfer must comply with all applicable laws. These conditions do not apply to transfers by gift, bequest, or inheritance.
Hyper Kidz also retains a right of first refusal. If a franchisee or Principal intends to sell their interest, they must obtain a bona fide written offer with an earnest money deposit of at least 5% of the offering price from a qualified purchaser. This offer must be submitted to Hyper Kidz, giving them the option to purchase the interest on the same terms. This ensures Hyper Kidz has control over who enters their franchise system and can maintain brand consistency.