What happens if a Kidokinetics franchisee attempts to create a security interest in the Franchise Agreement without the franchisor's consent?

According to Kidokinetics's 2024 Franchise Disclosure Document, a franchisee is prohibited from pledging, encumbering, hypothecating, assigning, or giving a third party a security interest in the Franchise Agreement, Trade Names or Marks, other trade names, copyrighted materials, or the Kidokinetics Business without the franchisor's explicit consent. This consent must specifically state that the encumbrance is permissible and describe the specific nature of the encumbrance.

If a Kidokinetics franchisee attempts to create a security interest in violation of this requirement, it constitutes a breach of the Franchise Agreement.

The consequence of such a breach is that the security interest is voided. This means the lender or third party would not have a valid claim against the franchise assets based on the unauthorized security interest. This provision protects Kidokinetics from having its franchise rights or assets being used as collateral without its knowledge and approval, ensuring control over who has a financial interest in the franchise.