What constitutes a 'default' of a provision in the Franchise Agreement that would prevent a Kidokinetics franchisee from renewing?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
RELATIONSHIP
| Provision | Franchise or Other | Summary | |
|---|---|---|---|
| Agreement | |||
| a. | Length of the franchise term | Article 3 | The initial term is 10 years. |
| b. | Renewal or extension of the term | Article 4 | You may renew for one additional term of 10 years, subject to our renewal requirements. If you fail to meet any one of these conditions, we may refuse to renew or extend the terms of your Franchise Agreement. |
| c. | Requirements for franchisee to renew or extend | Article 4 | Be in full compliance, provide written notice to us at least 90 days, but not more than nine months, before the end of the term, update machinery, equipment, tools and vehicles as required, not be in default of any provision of the Franchise Agreement, satisfy all monetary obligations, execute our then-current form of franchise agreement (with materially different terms and conditions than your original Franchise Agreement), comply with then-current qualifications and training requirements, including completion of additional training, pay us a Renewal Fee, execute a general release. |
| d. | Termination by franchisee | None | Not applicable. You may not terminate the Franchise Agreement. (Subject to applicable state law). |
| e. | Termination by Franchisor without cause | None | Not applicable. |
| Provision | Section In the Franchise or Other Agreement | Summary |
|---|---|---|
| f. Termination by Franchisor with cause | Article 16 | We may terminate if you default for failure to comply with the obligations of the Franchise Agreement, or if you or an affiliate of yours defaults under any other agreement, including any other franchise agreement, with us or any of our affiliates, suppliers or landlord and do not cure the default within the time period provided in the other agreement. The Franchise Agreement describes defaults throughout. Please read it carefully. |
| g. "Cause" defined- | Sections 16.3 and 16.4 | You have five days to cure non-payments. You have 15 days to cure the following defaults: your failure to immediately endorse payments that are erroneously made to you; your failure to maintain prescribed days and hours of operations; your failure to personally supervise day-to-day operations; your failure to maintain the strict quality controls reasonably required by the Franchise Agreement and/or the Franchise Operations Manuals; and your failure to obtain or maintain any required licenses, certifications or permits. |
| curable defaults | ||
| h. "Cause" defined -non-curable defaults | Sections 16.1 and 16.2 | The Franchise Agreement will terminate automatically, without notice for the following defaults: insolvency; bankruptcy; written admission of inability to pay debts; receivership; levy; composition with creditors; unsatisfied final judgment for more than 30 days; or foreclosure proceeding that is not dismissed within 30 days. We may terminate the Franchise Agreement upon notice to you if you: fail to open the Kidokinetics Business within required time frames; falsify any report to us; |
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 40–46)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, being in default of any provision of the Franchise Agreement is grounds for the company to refuse renewal of the franchise agreement. Specifically, Article 4 outlines the requirements for a Kidokinetics franchisee to renew their agreement for an additional 10-year term. These requirements include being in full compliance with the agreement, providing timely written notice of intent to renew, updating equipment as required, satisfying all monetary obligations, and executing the then-current form of the franchise agreement, which may contain materially different terms.
Several actions or inactions can trigger a default under the Kidokinetics Franchise Agreement. Article 16 specifies that Kidokinetics may terminate the agreement if a franchisee fails to comply with its obligations. These obligations are detailed throughout the agreement, so franchisees must read it carefully. Some defaults are curable, meaning the franchisee has a specific timeframe to rectify the issue, while others are non-curable and result in automatic termination.
Curable defaults include a 5-day cure period for non-payments and a 15-day cure period for issues such as failure to endorse payments made erroneously to the franchisee, failure to maintain prescribed operating hours, failure to personally supervise day-to-day operations, failure to maintain strict quality controls, and failure to obtain or maintain required licenses and permits. Non-curable defaults leading to automatic termination include insolvency, bankruptcy, admitting inability to pay debts, receivership, levy, composition with creditors, an unsatisfied final judgment for more than 30 days, or a foreclosure proceeding not dismissed within 30 days.
Other actions that may lead to termination upon notice from Kidokinetics include failing to open the business within the required timeframe, falsifying reports, abandoning the business for five or more days (unless due to damage and applying for relocation), losing possession of vehicles and equipment (unless due to a casualty), failing to reopen after a casualty within 120 days, failing to comply with applicable laws, defaulting under the premises lease, understating gross sales by 3% at any time or by any amount three or more times, attempting an unauthorized transfer, or failing to transfer the franchise as required upon death or disability. Therefore, a Kidokinetics franchisee must maintain strict compliance with all aspects of the Franchise Agreement to remain in good standing and be eligible for renewal.