What are the ongoing fees for a Kidokinetics franchise (Item 6) and how do they relate to the franchisee's obligations under the franchise agreement (Item 9)?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
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.
- Fees.
All fees paid to us or our affiliates are uniform and not refundable under any circumstances 1. once paid.
We currently require you to pay fees and other amounts due to us or our affiliates via electronic funds transfer ("EFT") or other similar means.
We can require an alternative payment method or payment frequency for any fees or amounts owed to us or our affiliates under the Franchise Agreement.
Certain fees that we have indicated may increase over the term of the Franchise Agreement.
Also, any fee expressed as a fixed dollar amount is subject to adjustment based on changes to the Consumer Price Index ("CPI") in the United States.
We may periodically review and increase these fees based on changes to the CPI (in addition to any other increase), but only if the increase to the CPI is more than 5% higher than the corresponding CPI in effect on: (a) the effective date of your Franchise Agreement (for the initial fee adjustments); or (b) the date we implemented the last fee adjustment (for subsequent fee adjustments).
We will notify you of any CPI adjustment at least 60 days before the fee adjustment becomes effective.
We will implement no more than one CPI-related fee adjustment during any calendar year.
- 17.1.4. promptly pay all sums owing to Franchisor and its affiliates. Such sums will include all damages, costs and expenses, including reasonable attorneys' fees, incurred by Franchisor as a result of any default by Franchisee. The payment obligation gives rise to and remains until paid in full, a lien in favor of Franchisor against any and all of the personal property, furnishings, equipment, fixtures and vehicles owned by Franchisee and used in the operation of the Kidokinetics Business at the time of default;
- 5.8. Method of Payment. Franchisee will, together with the submission of the Gross Sales Report, pay to Franchisor each Wednesday, via an electronic funds transfer program ("EFT Program") the Royalty and the Brand Development Fund, as defined and more particularly described in Article 13, then due. Franchisee must deposit all revenues from the operation of Franchisee's Kidokinetics Business into one bank account within three days of receipt, including cash, checks, and credit card receipts. Before opening Franchisee's Kidokinetics Business, Franchisee must provide Franchisor with Franchisee's bank name, address and account number, a voided check from the bank account, and sign and give to Franchisor and Franchisee's bank, all documents, including Attachment "G" to this Agreement, necessary to effectuate the EFT Program and Franchisor's ability to withdraw funds from such bank account via electronic funds transfer. Franchisee will immediately notify Franchisor of any change in Franchisee's banking relationship, including changes in account numbers. Franchisor reserves the right to require Franchisee to pay any fees due under this Agreement by such other means as Franchisor may specify from time to time. Franchisee's failure to allow electronic funds transfers on an ongoing basis is a breach of this Agreement.
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, franchisees are subject to several ongoing fees, most notably a royalty fee and potentially a minimum royalty. Franchisees must pay a royalty fee equal to 8% of Gross Sales each Wednesday for the previous week's sales. At the end of the month, if the total percentage royalty paid is less than the specified minimum royalty for that month, the franchisee must pay the difference. Franchisees receive a 90-day grace period after initial training before the minimum royalty requirement begins, but the percentage royalty is effective immediately.
These fees are detailed in Item 6, which specifies that all fees paid to Kidokinetics or its affiliates are uniform and non-refundable once paid. The document also states that Kidokinetics requires franchisees to pay fees via electronic funds transfer (EFT) and complete an ACH authorization form. Kidokinetics retains the right to change the payment method or frequency for any fees owed under the Franchise Agreement. The fees listed are current as of the issuance date of the FDD and may increase over the term of the Franchise Agreement. Any fixed dollar amount fees are subject to adjustment based on changes to the Consumer Price Index (CPI), provided the CPI increase is more than 5% higher than the CPI in effect on the Franchise Agreement's effective date or the date of the last fee adjustment. Franchisees will receive 60 days' notice before any CPI adjustment, and no more than one CPI-related fee adjustment will occur in a calendar year.
Item 22, which covers contracts, further clarifies the franchisee's obligations regarding payments. Franchisees must promptly pay all sums owed to Kidokinetics and its affiliates, including damages, costs, and expenses resulting from any default by the franchisee. This payment obligation creates a lien in favor of Kidokinetics against the franchisee's personal property used in the business operation until all debts are paid. Additionally, franchisees must deposit all revenues into one bank account within three days of receipt and provide Kidokinetics with their bank details and authorization for electronic funds transfers. Failure to allow electronic funds transfers is considered a breach of the Franchise Agreement. These financial obligations are critical components of the franchisee's responsibilities under the Franchise Agreement, ensuring Kidokinetics receives its due compensation and maintains financial control over the franchise operations.