Under what condition will Hyper Kidz not unreasonably withhold approval of a transfer of interest in the Franchise Agreement?
Hyper_Kidz Franchise · 2024 FDDAnswer from 2024 FDD Document
- 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.
Source: Item 22 — CONTRACTS (FDD page 52)
What This Means (2024 FDD)
According to Hyper Kidz's 2024 Franchise Disclosure Document, Hyper Kidz will not unreasonably withhold approval of a transfer of interest in the Franchise Agreement if the transfer meets all the requirements outlined in Section 16.3 of the agreement. This applies to transfers of interest in the agreement itself, the franchisee, the Hyper Kidz Business, or any of the business's assets.
To gain approval, several conditions must be met. First, the franchisee and their principals must be in full compliance with the existing agreement. Second, the proposed transferee and their principals must meet Hyper Kidz's standards for franchisees, demonstrating good moral character. If the transferee or their affiliates have other agreements with Hyper Kidz, those must also be in full compliance. Additionally, if the transfer involves ownership in the Hyper Kidz Business or its assets (excluding inventory), it must occur alongside a transfer of the Franchise Agreement.
Furthermore, both the transferring party and the transferee (if already a Hyper Kidz franchisee) must execute a general release of claims against Hyper Kidz and its affiliates. The franchisee must also comply with the right of first refusal provisions outlined in Section 16.7, giving Hyper Kidz the opportunity to purchase the interest before it is transferred to a third party. These conditions ensure that any transfer maintains the integrity and standards of the Hyper Kidz franchise system.