May Kidokinetics derive income from a franchisee's purchases or leases from approved suppliers?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
vendors. We may derive income, consideration and other benefits from your purchases or lease of any products, services, supplies or other items from us and from approved and designated suppliers. This income may be derived in any form, including as a rebate from various suppliers based on the quantity of System franchisee purchases. We do not guarantee the availability of independent sources of supply for any particular product or service required to establish or operate your Kidokinetics Business.
You will also pay us a Software License Fee of $3,000 prior to opening for our proprietary KIDOLINK software ($1,000 for additional Kidokinetics Businesses). Except as disclosed above, as of the Issuance Date of this Franchise Disclosure Document, neither we, nor our affiliates are approved suppliers of any item, although we may become one in the future. Some of our officers own an equity interest in us, an approved supplier.
You must use the computer hardware and software, including the point-of-sale system that we periodically designate to operate your Kidokinetics Business.
Source: Item 8 — RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES (FDD pages 22–24)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, Kidokinetics may derive income from franchisee purchases or leases from both Kidokinetics itself and from approved and designated suppliers. This income can come in various forms, including rebates from suppliers that are based on the quantity of purchases made by Kidokinetics franchisees. During the fiscal year ended December 31, 2023, Kidokinetics derived $511,370 in revenue from required franchisee purchases in the form of sales from shirts and other apparel. This represents 14.5% of their total revenue of $3,509,206.
Kidokinetics estimates that a significant portion of a franchisee's expenditures, specifically 30% to 80% during the establishment phase and 25% to 30% on an ongoing basis, will be directed towards Kidokinetics or its approved suppliers. This requirement ensures that franchisees adhere to the Kidokinetics system and specifications, maintaining uniformity and quality across all franchise locations. Franchisees are obligated to purchase or lease products, services, supplies, equipment, computer hardware and software, and inventory from designated sources.
If a franchisee wishes to use items or services not already approved by Kidokinetics, they must submit sufficient information, specifications, or samples for evaluation. The franchisee is responsible for reimbursing Kidokinetics for all reasonable expenses associated with this approval process. Kidokinetics will then determine whether the item, service, or supplier meets their standards and criteria, typically within 30 days. However, Kidokinetics reserves the right to withdraw approval based on supplier performance, changes in specifications, or other reasons.
It is important to note that Kidokinetics does not guarantee the availability of independent sources of supply for any particular product or service required to establish or operate a Kidokinetics Business. Additionally, while Kidokinetics does not provide material benefits to franchisees based on their purchasing choices, non-compliance with approved suppliers can lead to termination of the Franchise Agreement. Some of Kidokinetics' officers may also have equity interests in approved suppliers, creating a potential conflict of interest that franchisees should be aware of.