What must the Kidokinetics franchisee do if they incur debt on behalf of the franchisor?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee agrees to pay all current obligations and liabilities to suppliers, lessors, and creditors on a timely basis.
Franchisee agrees to indemnify Franchisor in the event that Franchisor is held responsible for debts owed by Franchisee if Franchisor elects to pay any of Franchisee's obligations in order to preserve the relationship between any System suppliers and System franchisees.
Franchisee agrees to make prompt payment of all federal, state and local taxes, including individual and corporate taxes, sales and use taxes, franchise taxes, gross receipts taxes, employee withholding taxes, FICA taxes,
personal property and real estate taxes arising from Franchisee's operation of the Kidokinetics Business. Franchisee agrees to indemnify Franchisor in the event that Franchisor is held responsible for these taxes.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics' 2024 Franchise Disclosure Document, if a franchisee incurs debt and the franchisor is held responsible, the franchisee is obligated to indemnify the franchisor. This means the franchisee must protect the franchisor from financial loss or damage. Specifically, the franchisee agrees to cover any debts they owe if the franchisor elects to pay those obligations to maintain relationships with system suppliers and other franchisees.
This requirement extends beyond typical supplier debts. The Kidokinetics franchisee must also indemnify the franchisor if the franchisor becomes responsible for the franchisee's federal, state, and local taxes. These taxes include individual and corporate taxes, sales and use taxes, franchise taxes, gross receipts taxes, employee withholding taxes, FICA taxes, personal property, and real estate taxes arising from the franchisee's operation of the Kidokinetics business.
In practical terms, this means a Kidokinetics franchisee needs to manage their business finances carefully and ensure all obligations, including taxes and payments to suppliers, are met on time. Failure to do so could result in the franchisor stepping in to settle these debts and then seeking reimbursement from the franchisee. This indemnification clause highlights the importance of sound financial management and compliance with all applicable tax laws for a Kidokinetics franchisee.