Can a Kidokinetics franchise agreement be terminated before its expiration for reasons other than 'good cause'?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
l payments by franchisees that purchase multiple franchises shall be deferred until the first franchise opens.
FRANCHISOR: KIDOKINETICS FRANCHISE LLC Entity name (if any) _ Date:
MICHIGAN
THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU.
Each of the following provisions is void and unenforceable if contained in any documents relating to a franchise:
- (a) A prohibition on your right to join an association of franchisees.
- (b) A requirement that you assent to a release, assignment, novation, waiver, or estoppel which deprives you of rights and protections provided in this act. This shall not preclude you, after entering into a Franchise Agreement, from settling any and all claims.
- (c) A provision that permits us to terminate a Franchise prior to the expiration of its term except for good cause. Good cause shall include your failure to comply with any lawful provision of the Franchise Agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure.
- (d) A provision that permits us to refuse to renew your Franchise without fairly compensating you by repurchase or other means for the fair market value at the time of expiration of your inventory, supplies, equipment, fixtures, and furnishings. Personalized materials which have no value to us and inventory, supplies, equipment, fixtures, and furnishings not reasonably required in the conduct of the Franchise business are not subject to compensation. This subsection applies only if: (i) the term of the Franchise is less than five years; and (ii) you are prohibited by the Franchise Agreement or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising, or other commercial symbol in the same area subsequent to the expiration of the Franchise or you do not receive at least six months' advance notice of our intent not to renew the Franchise.
- (e) A provision that permits us to refuse to renew a Franchise on terms generally available to
other franchisees of the same class or type under similar circumstances. This section does not require a renewal provision.
- (f) A provision requiring that arbitration or litigation be conducted outside the State of Michigan. This shall not preclude you from entering into an agreement, at the time of arbitration, to conduct arbitration at a location outside this state.
Source: Item 23 — RECEIPT (FDD pages 59–205)
What This Means (2024 FDD)
According to Kidokinetics' 2024 Franchise Disclosure Document, the ability to terminate a franchise agreement prior to its expiration, without good cause, is restricted in certain states. Specifically, Michigan prohibits such provisions, stating that any clause allowing Kidokinetics to terminate a franchise before the term expires, except for good cause, is void and unenforceable. Good cause is defined as the franchisee's failure to comply with the Franchise Agreement, provided they are given written notice and a reasonable opportunity (no more than 30 days) to correct the failure.
Similarly, Indiana law supersedes any conflicting provisions in the Franchise Agreement, prohibiting unilateral termination without good cause or in bad faith. Good cause, under Indiana law, includes any material breach of the Franchise Agreement. These state-specific regulations aim to protect franchisees from potentially unfair termination practices by Kidokinetics.
In Virginia, it is unlawful for Kidokinetics to cancel a franchise without reasonable cause, and any grounds for default or termination stated in the Franchise Agreement that do not constitute "reasonable cause" under Virginia law may not be enforceable. Furthermore, the Illinois Franchise Disclosure Act states that the termination and non-renewal provisions in the Franchise Agreement and the FDD may not be enforceable under Sections 19 and 20 of the Illinois Franchise Disclosure Act. Therefore, prospective franchisees should be aware of these state-specific protections, which may modify the standard termination clauses found in the Kidokinetics Franchise Agreement.