Is concealing revenues by a Kidokinetics franchisee grounds for termination?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
| Provision | Section In the Franchise or Other Agreement | Summary | |
|---|---|---|---|
| q. | Non-competition covenants during the term of the franchise | Section 18.5.1 | You, each principal, and your and your principals' spouses shall not, either directly or indirectly, for themselves or through, on behalf of, or in conjunction with, any person or entity: (i) divert, or attempt to divert, any business or customer of the Kidokinetics Business or of other franchisees in the System to any competitor, by direct or indirect inducement or otherwise; (ii) participate as an owner, partner, director, officer, employee, consultant or agent or serve in any other capacity in any children's sports or fitness business or any other business offering any other goods or services offered or authorized for sale by System franchisees ("Competing Business"); (iii) do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the System; or (iv) in any manner interfere with, disturb, disrupt, decrease or otherwise jeopardize our business or the business of any Kidokinetics franchisees (Subject to applicable state law). |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 40–46)
What This Means (2024 FDD)
Based on the 2024 Kidokinetics Franchise Disclosure Document, Item 17 outlines various provisions related to termination, but it does not explicitly state that concealing revenues is grounds for termination. However, Section 18.5.1 addresses non-competition covenants during the franchise term, stating that franchisees must not engage in actions that could harm the Kidokinetics business or brand. This includes refraining from interfering with or jeopardizing the business of Kidokinetics or its franchisees. Concealing revenues could potentially be interpreted as an act that jeopardizes the business, as it could impact royalty payments and the overall financial health of the franchise system.
Additionally, the agreement emphasizes that franchisees must not perform any act injurious or prejudicial to the goodwill associated with the Kidokinetics marks and the System. Concealing revenue could be seen as a breach of this covenant, as it undermines the transparency and integrity of the franchise system. While not explicitly stated as a termination clause, such actions could potentially lead to termination based on broader clauses related to harming the business or brand.
Prospective franchisees should carefully review Item 17 and related sections of the Franchise Agreement to fully understand the conditions under which Kidokinetics can terminate the agreement. It would be prudent to seek clarification from the franchisor regarding specific actions that could lead to termination, including those related to financial reporting and revenue transparency. Understanding these terms is crucial for maintaining a compliant and successful Kidokinetics franchise.