What happens to the goodwill associated with a Kidokinetics franchisee's use of the Intellectual Property upon termination or expiration of the franchise agreement?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
- 13.3 Goodwill.
Franchisee understands and agrees that any and all goodwill arising from Franchisee's use of the Intellectual Property and the System inures solely and exclusively to the benefit of Franchisor and Licensor, and upon expiration or termination of this Agreement and the license granted, no monetary amount will be assigned as attributable to any goodwill associated with Franchisee's use of the Intellectual Property.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, any goodwill that arises from a franchisee's use of Kidokinetics's intellectual property and system benefits the franchisor and licensor exclusively. Upon the expiration or termination of the franchise agreement, the franchisee will not receive any monetary compensation or assignment of value for any goodwill associated with their use of the intellectual property. This means that the goodwill built up during the franchise term reverts entirely to Kidokinetics.
This provision is standard in franchising, as the brand and its associated goodwill are considered the franchisor's assets. Franchisees are essentially renting the brand and system for a specific period. The franchisee agrees that they will not take any actions that would negatively impact Kidokinetics's intellectual property rights.
For a prospective Kidokinetics franchisee, this underscores the importance of understanding that the value they build through their efforts primarily benefits the franchisor in the long term. While a successful franchise operation can provide income and build a business for the franchisee during the term of the agreement, the intangible value of the business, represented by goodwill, remains with Kidokinetics upon termination or expiration.