Can Kidokinetics refuse a franchise transfer if the proposed transferee is a competitor?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
- (g) A provision which permits us to refuse to permit a transfer of ownership of a Franchise, except for good cause. This subdivision does not prevent us from exercising a right of first refusal to purchase the Franchise. Good cause shall include, but is not limited to:
- (i) the failure of the proposed transferee to meet our then-current reasonable qualifications or standards.
- (ii) the fact that the proposed transferee is a competitor of us or our subfranchisor.
- (iii) the unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
- (iv) your or proposed transferee's failure to pay any sums owing to us or to cure any default in the Franchise Agreement existing at the time of the proposed transfer.
- (i) the failure of the proposed transferee to meet our then-current reasonable qualifications or standards.
Source: Item 23 — RECEIPT (FDD pages 59–205)
What This Means (2024 FDD)
According to Kidokinetics' 2024 Franchise Disclosure Document, Kidokinetics can refuse a franchise transfer if the proposed transferee is a competitor. This is outlined within the context of transfer restrictions under Michigan law.
Specifically, the FDD excerpt states that a provision permitting Kidokinetics to refuse a transfer of ownership is acceptable "except for good cause." The document clarifies that "good cause" includes several factors, one of which is the proposed transferee being a competitor of Kidokinetics or its subfranchisor.
This condition protects Kidokinetics from having its proprietary information, methods, and business practices fall into the hands of a competitor through a franchise transfer. For a potential franchisee, this means that if they ever decide to sell their Kidokinetics franchise, the buyer will need to be vetted not only for financial and operational capabilities but also for any competitive conflicts of interest. This could potentially limit the pool of eligible buyers and impact the resale value or ease of transfer for the franchise.