What deductions can Kidokinetics make from the payment to the franchisee if it exercises its option to purchase the franchisee's assets?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
If Franchisor elects to exercise its option to purchase, it will have the right to set off (i) all fees for any such independent appraiser due from Franchisee, (ii) all amounts due from Franchisee to Franchisor or any of its affiliates and (iii) any costs incurred in connection with any escrow arrangement (including reasonable legal fees), against any payment and will pay the remaining amount in cash.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, if Kidokinetics elects to exercise its option to purchase a franchisee's assets, it has the right to offset certain amounts from the payment made to the franchisee. These deductions include fees owed to any independent appraiser if one was required to determine fair market value, any outstanding amounts the franchisee owes to Kidokinetics or its affiliates, and any costs associated with an escrow arrangement, including reasonable legal fees. The remaining balance will then be paid to the franchisee in cash.
This provision protects Kidokinetics by allowing them to recover outstanding debts and expenses related to the asset purchase before making a final payment to the franchisee. It ensures that Kidokinetics does not have to pursue separate legal action to recover these amounts.
For a prospective franchisee, this means that if Kidokinetics decides to purchase their assets upon termination or expiration of the franchise agreement, the franchisee should expect these potential deductions. It is important to maintain good financial standing with Kidokinetics and its affiliates and to understand the costs associated with any appraisal or escrow arrangements to avoid surprises during the asset purchase process.