What must the by-laws or operating agreement of a Kidokinetics franchisee entity state regarding the issuance and assignment of interests?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
idokinetics Business Location and the Territory;
- 10.2.3. Franchisee's organizational documents will, at all times, provide that the activities of Franchisee are confined exclusively to the operation of the Franchised Business granted herein, unless otherwise consented to in writing by Franchisor, which consent may be withheld by Franchisor in Franchisor's sole discretion;
- 10.2.4. The execution of this Agreement and the consummation of the transactions contemplated in this Agreement are within Franchisee's power and have been duly authorized by Franchisee;
- 10.2.5. Copies of Franchisee's organizational documents, other governing documents, resolutions or consents of the governing board authorizing entry into and performance of this Agreement, and any certificates, buy-sell agreements or other documents restricting the sale or transfer of equity interests in Franchisee, and any other documents as may be reasonably required by Franchisor will be furnished to Franchisor prior to the execution of this Agreement;
- 10.2.6. The ownership interests in Franchisee are accurately and completely described on Attachment D of this Agreement.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics' 2024 Franchise Disclosure Document, if a franchisee operates as a business entity, its organizational documents must stipulate that its activities are exclusively limited to operating the Kidokinetics franchised business. Any deviation from this requires written consent from Kidokinetics, which the franchisor can withhold at its discretion.
This restriction ensures that the franchisee's focus remains solely on the Kidokinetics business, preventing potential conflicts of interest or diversion of resources to other ventures. Kidokinetics aims to maintain a consistent brand image and service quality across all its franchise locations, and limiting the franchisee's activities helps achieve this goal.
Furthermore, Kidokinetics requires franchisees to furnish copies of their organizational documents, governing documents, resolutions, consents, buy-sell agreements, or any documents restricting equity interest sales to Kidokinetics before the Franchise Agreement is executed. Franchisees must also provide an accurate and complete description of the ownership interests in the franchise on Attachment D of the agreement and must update this list immediately upon any ownership changes. Kidokinetics must also have access to a list of the owners at any time upon request.
These measures enable Kidokinetics to maintain control over its brand and ensure that franchisees are fully committed to the Kidokinetics system. Prospective franchisees should carefully consider these restrictions and disclosure requirements before investing in a Kidokinetics franchise.