During the term of the Kidokinetics agreement, is a franchisee allowed to divert business from other franchisees to a competitor?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
In consideration for such specialized training, trade secrets, Confidential Information and rights, Franchisee and each Principal, if any, covenant that, except as otherwise approved in writing by Franchisor:
- 18.5.1.
During the term of this Agreement, Franchisee, each Principal, and the spouse of Franchisee and each Principal if any, shall not, either directly or indirectly, for themselves or through, on behalf of, or in conjunction with, any person or entity: (i) divert, or attempt to divert, any business or customer of the Kidokinetics Business or of other franchisees in the System to any competitor, by direct or indirect inducement or otherwise; (ii) participate as an owner, partner, director, officer, employee, consultant or agent or serve in any other capacity in any youth fitness business or any other business offering any other goods or services offered or authorized for sale by System franchisees ("Competing Business"); (iii) do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the System; or (iv) in any manner interfere with, disturb, disrupt, decrease or otherwise jeopardize the business of the Franchisor or any Kidokinetics franchisees.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to the 2024 Kidokinetics Franchise Disclosure Document, franchisees are prohibited from diverting business or customers to competitors during the term of the agreement. Specifically, the franchisee, principals, and their spouses cannot directly or indirectly divert or attempt to divert any business or customer of the Kidokinetics Business or other franchisees in the System to any competitor. This includes any direct or indirect inducement or other means of diversion.
This restriction is in place to protect the Kidokinetics system and goodwill. It prevents franchisees from using their access to the Kidokinetics network and customer base to benefit a competing business. This covenant not to compete is designed to ensure that franchisees remain committed to growing their Kidokinetics business and supporting the overall brand.
This obligation extends not only to the franchisee but also to their principals and spouses, indicating Kidokinetics's intention to prevent any indirect competitive activities. The FDD also states that these restrictions are considered fair and reasonable, acknowledging that franchisees have other skills and experiences to derive income from other endeavors, should they choose to leave the Kidokinetics system.