Can Kidokinetics acquire a competitive franchise network regardless of the location of that chain's facilities?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisor.
- 2.2. Reservation of Rights. Franchisee acknowledges and agrees that Franchisor and any parties Franchisor designates will have the right to: (i) establish and operate, and license third parties the right to establish and operate, other franchised businesses using the Marks and System at any location outside of the Territory; (ii) acquire, merge with, engage in joint ventures with, or otherwise affiliate with, and thereafter own and operate and franchise others the right to own and operate, any business of any kind, including businesses that offer products that are similar to those provided by a Franchised Business, within or outside the Territory; (iii) open and operate, or license third parties the right to open or operate, businesses that offer products and services similar to the Franchised Business under marks other than the Marks at any location; (iv) sell and distribute, directly or indirectly, or license others to sell and distribute, directly or indirectly, any products, services or merchandise, from any location or to any purchaser, through any channel or method of distribution (including, but not limited, to virtual classes, sales made by or through telemarketing, and/or on the Internet); (v) provide the services or sell products authorized for Kidokinetics Businesses to customers whose principal residence (or principal business office, if the customer is a business entity) is within Franchisee's Territory if contact with the customer is initiated by the customer and not Franchisor; (vi) to use and license the use of technology to non-franchisee locations inside and outside the Territory; and (vii) engage in any other activities not expressly prohibited under this Agreement.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, Kidokinetics retains significant rights regarding business ventures, including the ability to acquire other businesses, even those that might be considered competitive. Specifically, Kidokinetics has the right to "acquire, merge with, engage in joint ventures with, or otherwise affiliate with, and thereafter own and operate and franchise others the right to own and operate, any business of any kind, including businesses that offer products that are similar to those provided by a Franchised Business, within or outside the Territory".
This clause in the franchise agreement means that Kidokinetics is not restricted from affiliating with or acquiring businesses that compete with existing franchises, regardless of their location. This could potentially lead to increased competition for franchisees, especially if Kidokinetics acquires a similar business within or outside a franchisee's territory. However, Kidokinetics makes one representation regarding acquired facilities operating within a franchisee's territory, stating that it "will not convert any such acquired facilities that are operating within the Territory to a Kidokinetics franchise."
For a prospective franchisee, this highlights the importance of understanding the competitive landscape and the potential for Kidokinetics to expand its reach through acquisitions. While Kidokinetics states they will not convert acquired facilities operating within a franchisee's territory to a Kidokinetics franchise, the company could still operate them under a different brand or service offering. This clause underscores the need for franchisees to conduct thorough market research and assess the potential impact of Kidokinetics's broader business strategies on their individual franchise.