What monetary obligations must a Kidokinetics franchisee satisfy to the franchisor, its affiliates, or designated suppliers and vendors?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
s Agreement.
- 5.3. Software License Fee. Franchisee must pay Franchisor a "Software License Fee" of $3,000 for use of Franchisor's proprietary software when Franchisee signs this Agreement. This fee is uniform and non-refundable. Franchisee must also sign the "Software License Agreement," the form of which is attached to Franchisor's Franchise Disclosure Document in Exhibit H, when Franchisee signs the Franchise Agreement. If this Agreement is for an additional Kidokinetics Business, Franchisee shall pay Franchisor a reduced Software License Fee of $1,000 when Franchisee signs this Agreement.
- 5.4. Business Coaching and Training Services. If this Franchise Agreement is for Franchisee's first Kidokinetics Business or if Franchisor approves Franchisee's request to do so in connection with the launch of an additional Kidokinetics Business, Franchisor or its affiliate will provide certain in-person business coaching and training services initial launch of the Kidokinetics Business. Franchisee shall pay a fee of $7,500. This fee is due upon signing the Franchise Agreement and is not refundable under any circumstances. Franchisor will determine when this service within 6 months after the Kidokinetics Business opens, subject to the parties' mutual availability.
- 5.5. Recurring Fees.
Kidokinetics
5.5.1. Royalty. On Wednesday of each week (or such other date as we designate, you agree to pay us a royalty fee equal to eight percent (8%) of Gross Sales during the previous week (Monday through Sunday) ("Percentage Royalty"). At the end of the month, if the Percentage Royalty for that month is less than the minimum royalty in the chart below, you will pay us the difference ("Minimum Royalty") to meet your Minimum Royalty obligation. You will receive a 90-day grace period ("Grace Period"), beginning on the day you successfully complete the initial training class, before you are required to begin paying the Minimum Royalty, but the Percentage Royalty will be in effect immediately. The Minimum Royalty is as follows:
| Timeframe | Minimum Royalty |
|---|---|
| First 12 months (Beginning after the Grace Period) | $600 per month |
| Months 13 to 24 | $800 per month |
| Months 25+ | $1,000 per month |
If you purchased multiple franchises at the same time and this is your second, third or fourth franchise in that purchase, you will receive an increased Grace Period according to the following table:
| Franchise Number | Additional Minimum Royalty Grace Period after |
|---|---|
| expiration of the first franchise's Grace Period | |
| 2 | 12 months |
| 3 | 24 months |
| 4 | 36 months |
The total amount you contribute is referred to herein as the ("Royalty"). "Gross Sales" means the revenues you receive from the sales of all goods, services and products sold at, from, or through the Kidokinetics Business or made pursuant to the rights granted hereunder, and all other income of every kind and nature related to the Kidokinetics Business, whether from cash, or credit, and regardless of collection in the case of credit, including the full redemption value of any gift card, gift certificate or coupon sold for use in the Kidokinetics Business (fees retained by or paid to third-party sellers of such gift cards, gift certificates or coupons are not excluded from this calculation), and all proceeds from any business interruption insurance. It does not include (i) any sales tax or other taxes collected from customers for, and turned over to, the governmental authority imposing the tax, (ii) properly documented refunds to customers, or (iii) properly documented employee discounts (limited to 3% of Gross Sales). Gross Sales include sales of gift cards and gift certificates at the time Franchisee receives the funds from the purchase of such gift cards and gift certificates. For purposes of clarification and not by way of limitation, there are no deductions, discounts, refunds, or allowances from the definition of Gross Sales except as expressly set forth in the preceding sentence. By way of example, each of the following expenses do not reduce the calculation of Gross Sales: (1) any facility fees incurred by the Franchised Business; and (2) revenue shares paid to schools or third parties.
5.5.2. Technology Fee. Franchisee agrees to pay Franchisor the then-current technology fee in the amount Franchisor designates each month for technology-related services ("Technology Fee"). The Technology Fee includes services for up to four Kidokinetics Businesses if they are operated by the same legal entity and have adjacent territories.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, franchisees have several monetary obligations to the franchisor, its affiliates, and designated suppliers and vendors. Franchisees must pay a $3,000 Software License Fee upon signing the Franchise Agreement for their first Kidokinetics business, or a reduced fee of $1,000 for each additional Kidokinetics business. Additionally, franchisees must pay a $7,500 fee for business coaching and training services, which is due upon signing the Franchise Agreement and is non-refundable.
Kidokinetics franchisees are also obligated to pay a weekly royalty fee equal to eight percent of gross sales. If this percentage is less than the minimum royalty amount specified, the franchisee must pay the difference. Franchisees receive a 90-day grace period before the minimum royalty payment is required, but the percentage royalty is effective immediately after completing the initial training. Franchisees must also pay for all technology required by the agreement, including computer hardware and software, internet access, license fees, help desk fees, and website-related expenses.
Furthermore, Kidokinetics franchisees must pay $5,000 for the Initial Marketing Package if it is their first territory, or $1,000 if it is for an additional territory. Franchisees are also responsible for all current obligations and liabilities to suppliers, lessors, and creditors. They must also make prompt payments of all federal, state, and local taxes, including individual and corporate taxes, sales and use taxes, franchise taxes, gross receipts taxes, employee withholding taxes, FICA taxes, personal property, and real estate taxes. If a regional advertising and promotional cooperative is established, franchisees must participate and contribute to it, with contributions credited towards local marketing requirements, but potentially exceeding them if a majority of the cooperative votes to increase the requirement. Finally, franchisees must promptly pay all sums owing to Kidokinetics and its affiliates, including damages, costs, and expenses, including reasonable attorneys' fees, incurred by Kidokinetics as a result of any default by the franchisee.