Is a transfer of stock in the Kidokinetics franchisee considered a Transfer?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee shall not directly or indirectly sell, assign, transfer, give, devise, convey or encumber this Agreement or any right or interest herein or hereunder (a "Transfer"), the Kidokinetics Business or any assets thereof (except in the ordinary course of business) or suffer or permit any such assignment, transfer, or encumbrance to occur by operation of law unless it first obtains the written consent of Franchisor, except as provided in Section 15.6 of this Agreement.
A transfer of any stock in the Franchisee if it is a corporation or a transfer of any ownership rights in Franchisee if it is a partnership, a limited liability company or limited partnership is a Transfer and is prohibited without prior written consent of Franchisor.
If Franchisee has complied fully with this Agreement, Franchisor will not unreasonably withhold its consent of a Transfer that meets the following requirements:
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, a transfer of stock in a franchisee corporation, or a transfer of ownership rights in a franchisee partnership, limited liability company, or limited partnership, is considered a Transfer. This means that any such transfer is prohibited without the prior written consent of Kidokinetics.
This provision is significant for prospective franchisees who may consider structuring their Kidokinetics business as a corporation, partnership, or LLC. If they later decide to sell or transfer ownership, they must first obtain approval from Kidokinetics. This approval is not guaranteed and is subject to certain conditions outlined in the franchise agreement.
Kidokinetics does outline conditions under which they will not unreasonably withhold consent, such as the proposed transferee meeting the franchisor's standards for franchisees. However, Kidokinetics retains the right to withhold or condition consent based on the specific circumstances of the transfer. This gives Kidokinetics significant control over who becomes a franchisee within their system.
It is important for prospective franchisees to carefully review the transfer provisions in the Franchise Agreement and to understand the conditions under which Kidokinetics will approve a transfer. Franchisees should also be aware of the transfer fee, which is $10,000 for the first Kidokinetics business transferred and $5,000 for each subsequent business transferred, although this fee may be replaced by the then-current initial franchise fee if the transferee's term is extended to ten years under a new franchise agreement.