How many defaults in obligations under the Kidokinetics Franchise Agreement can lead to termination?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
16.2.17. defaults in the performance of Franchisee's obligations under this Agreement three (3) or more times during the term of this Agreement or any renewals or has been given at least two notices of default in any consecutive 12-month period, whether or not the defaults have been corrected;
16.2.18.has insufficient funds to honor a check or electronic funds transfer three or more times within any consecutive 12-month period, whether or not the defaults have been corrected;
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, there are multiple instances of default that can lead to the termination of the franchise agreement. These defaults are categorized based on the notice and opportunity to cure provided to the franchisee. Some defaults result in automatic termination without any notice or opportunity to cure, while others require a 5-day, 15-day, or 30-day notice period to cure the default.
Kidokinetics can terminate the agreement without an opportunity to cure if the franchisee becomes insolvent, files for bankruptcy, conceals revenues, threatens public health, refuses inspections, or makes unauthorized use of trademarks. Additionally, termination can occur if the franchisee is convicted of a felony, receives an adverse judgment related to fraud, or defaults under other agreements with Kidokinetics. Failing to open the business as specified, falsifying reports, or abandoning the business also constitute defaults without a cure period.
For defaults with an opportunity to cure, Kidokinetics will provide either a 5-day, 15-day, or 30-day notice. A 5-day notice applies to failures to pay amounts due to Kidokinetics. A 15-day notice applies to issues such as failing to endorse payments to Kidokinetics, not maintaining operational hours, or failing to supervise the business adequately. A 30-day notice is required for failing to maintain quality controls, acting in a manner that reflects poorly on the Kidokinetics system, or failing to maintain necessary licenses and permits. Furthermore, any failure to comply with the terms of the agreement can lead to termination if not cured within 30 days after notice.
Notably, repeated defaults can also trigger termination. If a franchisee defaults three or more times during the term or receives at least two notices of default in a 12-month period, Kidokinetics can terminate the agreement, regardless of whether the defaults were corrected. Similarly, having insufficient funds for checks or electronic transfers three or more times in a 12-month period can lead to termination. This highlights the importance of consistent compliance with the franchise agreement to avoid potential termination.