What happens if a Kidokinetics franchisee defaults on the lease for the business location?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
[Item 22: CONTRACTS]
16.2.5. defaults under any lease or sublease of the real property on which the Kidokinetics Business is located;
16.6. Franchisor's Cure of Franchisee's Defaults.
In the event of a default by Franchisee, in addition to Franchisor's right to terminate the Franchise Agreement, Franchisor may, but has no obligation to:
- 16.6.2. enter upon the Kidokinetics Business Location and exercise complete authority with respect to the operation of the Kidokinetics Business until such time as Franchisor determines that the default of Franchisee has been cured and that Franchisee is complying with the requirements of this Agreement.
Franchisee specifically agrees that a designated representative of Franchisor may take over, control and operate the Kidokinetics Business.
In addition to all other fees paid under this Agreement, Franchisee shall pay Franchisor ten (10%) percent of the Gross Sales generated by the Kidokinetics Business during Franchisor's operation of the Kidokinetics Business, as compensation.
Franchisee shall have a clause inserted in its lease for the premises that permits Franchisor to exercise its rights pursuant to this Section.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, defaulting on a lease for the business location constitutes a breach of the franchise agreement. Specifically, section 16.2.5 states that a franchisee is in default if they "defaults under any lease or sublease of the real property on which the Kidokinetics Business is located."
In the event of a default, Kidokinetics has the option to terminate the franchise agreement. However, Kidokinetics also has the option to take over the business operations to remedy the default, as detailed in section 16.6.2. If Kidokinetics chooses to operate the business, they have complete authority over its operation until the default is resolved and the franchisee is compliant with the agreement.
If Kidokinetics takes over operations due to a lease default, the franchisee is responsible for covering the costs incurred by Kidokinetics. Additionally, the franchisee must compensate Kidokinetics with ten percent of the gross sales generated during the period Kidokinetics operates the business. Furthermore, the franchisee is required to include a clause in their lease agreement that allows Kidokinetics to exercise these rights.