What happens if the Franchisee fails to comply with the Kidokinetics Manager replacement requirements?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
operation of the Franchised Business.
- 10.3.1. If the Manager is not able to continue to serve in such capacity, or no longer qualifies to act as such in accordance with this Agreement, Franchisee will promptly notify Franchisor and request approval for a replacement within 30 days after the Manager ceases to serve, such replacement being subject to the same qualifications required by this Agreement (including, but not limited to, completing all training and obtaining all certifications required by Franchisor). Franchisor will approve or disapprove of the replacement Manager within 30 days. Until such replacement is designated, Franchisee will provide for interim management of the Kidokinetics Business, who will act in accordance with the terms of this Agreement. Any failure to comply with the requirements of this Section is deemed an event of default under this Agreement.
- 10.3.2. Franchisor, in Franchisor's sole discretion, may provide interim management support and charge Franchisee an interim management support fee ("Interim Management Fee") until such Manager is properly trained or certified in accordance with Franchisor's requirements. The Interim Management Fee will be in the amount of 10% percent of Gross Sales earned during the interim management period plus the subsequent three weeks, payable in addition to all regularly occurring fees including Royalty and Brand Development Fund Contributions, plus any and all costs of travel, lodging, meals and other expenses reasonably incurred by Franchisor, and be withdrawn from Franchisee's designated bank account.
- 10.4. Legal Compliance.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, failing to comply with the manager replacement requirements constitutes an event of default under the Franchise Agreement. If the franchisee's manager is unable to continue in their role or no longer meets the agreement's qualifications, the franchisee must promptly inform Kidokinetics and request approval for a replacement within 30 days. The replacement manager must meet the same qualifications, including completing all required training and certifications. Kidokinetics has 30 days to approve or disapprove the proposed replacement. Until a replacement is designated, the franchisee must provide interim management that adheres to the terms of the agreement.
Kidokinetics, at its discretion, may provide interim management support and charge the franchisee an Interim Management Fee until a qualified manager is in place. This fee is 10% of Gross Sales earned during the interim management period and the subsequent three weeks. This is payable in addition to all regularly occurring fees including Royalty and Brand Development Fund Contributions, plus any and all costs of travel, lodging, meals and other expenses reasonably incurred by Kidokinetics, and be withdrawn from Franchisee's designated bank account.
This default could potentially lead to termination of the franchise agreement if not resolved. It also gives Kidokinetics the option to provide interim management at the franchisee's expense, significantly impacting the franchisee's revenue during the transition period. Franchisees should ensure they have a plan for manager succession and are prepared to cover the costs associated with interim management if necessary.