Does the Kidokinetics System Protection Agreement define 'Prohibited Activities' to include attempting to divert business from Kidokinetics?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
- "Prohibited Activities" means any or all of the following: (i) owning, operating, or having any other interest (as an owner, partner, director, officer, employee, manager, consultant, shareholder, creditor, representative, agent, or in any similar capacity) in a Competitive Business (other than owning an interest of five percent (5%) or less in a publicly-traded company that is a Competitive Business); (ii) diverting or attempting to divert any business from us (or one of our affiliates or franchisees); and/or (iii) inducing or attempting to induce any customer of ours (or of one of our affiliates or franchisees) to transfer their business to you or to any other person that is not then a franchisee of ours.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics' 2024 Franchise Disclosure Document, the System Protection Agreement does define 'Prohibited Activities'. Specifically, it includes attempting to divert business from Kidokinetics, its affiliates, or its franchisees. This definition is crucial for protecting the Kidokinetics brand and its established network of franchisees.
This provision means that a franchisee is contractually obligated not to take actions that could steal customers or business opportunities away from the franchisor or other franchisees within the Kidokinetics system. Such actions are considered a breach of the agreement and could lead to legal repercussions. This restriction applies not only to the franchisee but also extends to their immediate family members, creating a presumption of violation if a family member engages in prohibited activities.
The agreement specifies that 'Prohibited Activities' include diverting or attempting to divert any business from Kidokinetics, its affiliates, or franchisees. It also includes inducing or attempting to induce any customer of Kidokinetics to transfer their business to the franchisee or any other person not a Kidokinetics franchisee. This clause aims to prevent franchisees from leveraging their access to the Kidokinetics system and customer base to unfairly compete against the brand.
For a prospective Kidokinetics franchisee, this means understanding and adhering to these restrictions is essential. It highlights the importance of maintaining ethical business practices and respecting the established network of the franchise system. Failure to comply with these covenants can result in penalties, including the extension of non-compete periods and potential legal action, as outlined in the Confidentiality Agreement and related documents.