Under what condition does Kidokinetics defer the collection of initial fees from franchisees?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
to state: Based upon the franchisor's financial condition, the Maryland Securities Commissioner has required a financial assurance.
Therefore, all initial fees and payments owed by franchisees shall be deferred until the franchisor completes its pre-opening obligations under the franchise agreement. In addition, all initial payments by franchisees that purchase multiple franchises shall be deferred until the first franchise opens.
FRANCHISOR: KIDOKINETICS FRANCHISE LLC Entity name (if any) _ Date:
MICHIGAN
THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU.
Each of the following provisions is void and unenforceable if contained in any documents relating to a franchise:
- (a) A prohibition on your right to join an association of franchisees.
- (b) A requirement that you assent to a release, assignment, novation, waiver, or estoppel which deprives you of rights and protections provided in this act. This shall not preclude you, after entering into a Franchise Agreement, from settling any and all claims.
- (c) A provision that permits us to terminate a Franchise prior to the expiration of its term except for good cause. Good cause shall include your failure to comply with any lawful provision of the Franchise Agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure.
Source: Item 23 — RECEIPT (FDD pages 59–205)
What This Means (2024 FDD)
According to Kidokinetics' 2024 Franchise Disclosure Document, the collection of initial fees from franchisees is deferred under specific conditions, which vary by state. Generally, Kidokinetics defers initial fees until it has completed its pre-opening obligations as outlined in the franchise agreement. This means a new franchisee won't have to pay the initial franchise fee until Kidokinetics has fulfilled its responsibilities in setting up the franchise location.
For franchisees purchasing multiple Kidokinetics franchises, all initial payments are deferred until the first franchise location opens. This provides a financial benefit to multi-unit franchisees, allowing them to delay initial investments until they start generating revenue from their first location. This can significantly reduce the upfront financial burden on franchisees looking to expand quickly.
It's important to note that specific states like California, Illinois, and Virginia have additional requirements or stipulations regarding fee deferral. For example, California requires Kidokinetics to defer the collection of all initial fees until it has completed all pre-opening obligations and the franchise is open for business. Similarly, in Illinois, the Attorney General's Office mandates that all initial fees, including the Franchise Fee, be deferred until after Kidokinetics' initial obligations are complete and the Franchise is open for business. In Virginia, the State Corporation Commission's Division of Securities and Retail Franchising also requires deferral of payment of the initial franchise fee and other initial payments until Kidokinetics has completed its pre-opening obligations.
These deferral policies are designed to protect franchisees and ensure that Kidokinetics fulfills its obligations before receiving payment. Prospective franchisees should carefully review Item 7 of the FDD and Section 5.1 of the Franchise Agreement, as revised by state-specific addenda, to understand the exact conditions and requirements for fee deferral in their specific state.