What constitutes a 'Competing Business' according to the Kidokinetics agreement?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
t, without Franchisor's written consent.
2. COVENANTS NOT TO COMPETE.
- a. In order to protect the goodwill and unique qualities of the System, and in consideration for the disclosure to Covenantor of the Confidential Information, Covenantor further agrees and covenants that during Covenantor's association with the Kidokinetics Business, Covenantor shall not, for Covenantor 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 youth fitness business or any other business offering any other goods or services offered or authorized for sale by System franchisees (a "Competing Business").
- b. In further consideration for the disclosure to Covenantor of the Confidential Information and to protect the goodwill and unique qualities of the System, Covenantor further agrees and covenants that, upon the termination of Covenantor's association with the Kidokinetics Business and continuing for twenty-four months, Covenantor shall not, for Covenantor 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;
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics' 2024 Franchise Disclosure Document, a 'Competing Business' is defined within the context of covenants not to compete. During the franchisee's association with Kidokinetics, they are prohibited from participating as an owner, partner, director, officer, employee, consultant, or agent in any youth fitness business or any other business offering goods or services that are also offered or authorized for sale by Kidokinetics franchisees.
After the termination of the franchise agreement, the franchisee is further restricted from involvement in a Competing Business within a 20-mile radius of their former Kidokinetics territory or any other territory licensed by Kidokinetics. This post-termination restriction lasts for 24 months. These restrictions aim to protect Kidokinetics' goodwill, unique qualities, and confidential information.
These non-compete clauses are designed to prevent franchisees from using the knowledge and experience gained while operating a Kidokinetics franchise to unfairly compete with the brand after they leave the system. Prospective franchisees should carefully consider the scope and duration of these restrictions, as they could limit their future business opportunities. It is important to note that owning a small stake (5% or less) in a publicly-traded company that is a Competing Business is an exception to these restrictions.