If a receiver is appointed for a Kidokinetics franchisee's business, does this automatically terminate the agreement?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
Default and Automatic Termination. Franchisee will be deemed to be in default under this Agreement, 16.1. and all rights granted herein will automatically terminate without notice to Franchisee, if Franchisee becomes insolvent or makes a general assignment for the benefit of creditors; or if Franchisee or any Principal files a voluntary petition under any section or chapter of federal bankruptcy law or under any similar law or statute of the United States or any state thereof, or admits in writing its inability to pay its debts when due; or if Franchisee or any Principal is adjudicated as bankrupt or insolvent in proceedings filed against Franchisee or any Principal under any section or chapter of federal bankruptcy laws or under any similar law or statute of the United States or any state; or if a bill in equity or other proceeding for the appointment of a receiver of Franchisee or other custodian for Franchisee's business or assets is filed and consented to by Franchisee; or if a receiver or other custodian (permanent or temporary) of Franchisee's assets or property, or any part thereof, is appointed by any court of competent jurisdiction; or if proceedings for a composition with creditors under any state or federal law should be instituted by or against Franchisee; or if a final judgment remains unsatisfied or of record for 30 days or longer (unless supersedeas bond is filed); or if Franchisee is dissolved; or if execution is levied against Franchisee's business or property; or if suit to foreclose any lien or mortgage against the Kidokinetics Business premises or equipment is instituted against Franchisee and not dismissed within 30 days. No provision
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to the 2024 Kidokinetics Franchise Disclosure Document, the franchise agreement can be automatically terminated without notice if a receiver is appointed for the franchisee's business under certain conditions. Specifically, if a bill in equity or other proceeding for the appointment of a receiver or other custodian for the franchisee's business or assets is filed and consented to by the franchisee, it will result in automatic termination. Similarly, if a receiver or other custodian (permanent or temporary) of the franchisee's assets or property, or any part thereof, is appointed by any court of competent jurisdiction, the agreement will automatically terminate.
This means that if a Kidokinetics franchisee faces financial difficulties leading to the appointment of a receiver, whether consented to or court-ordered, the franchise agreement can be terminated immediately. This is a significant risk for franchisees, as it means they could lose their franchise rights without any prior warning if such an event occurs.
It is important to note that the termination is automatic under these specific circumstances, meaning Kidokinetics does not need to provide a notice or an opportunity to cure the default. This is a stricter condition compared to defaults where the franchisee might have a chance to rectify the situation. Prospective franchisees should carefully consider the financial risks associated with the business and the potential for such events to occur, leading to immediate termination of the franchise agreement.