Under what condition can Kidokinetics place the purchase price of the franchisee's assets in escrow?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
- 17.2.2. With respect to the options described in Sections 17.2.1, Franchisee must deliver to Franchisor in a form satisfactory to Franchisor, such warranties, deeds, releases of lien, bills of sale, assignments and such other documents and instruments that Franchisor deems necessary in order to perfect Franchisor's title and possession in and to the properties being purchased or assigned and to meet the requirements of all tax and government authorities. If, at the time of closing, Franchisee has not obtained all of these certificates and other documents, Franchisor may, in its sole discretion, place the purchase price in escrow pending issuance of any required certificates or documents.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, Kidokinetics may place the purchase price of a franchisee's assets in escrow if the franchisee has not obtained all necessary certificates and documents at the time of closing. This is contingent on Kidokinetics exercising its option to purchase the franchisee's assets upon termination or expiration of the franchise agreement.
This provision protects Kidokinetics by ensuring they receive all required documentation to perfect their title and possession of the purchased assets and to meet tax and governmental requirements. By placing the funds in escrow, Kidokinetics can ensure compliance without disbursing funds prematurely.
For a prospective franchisee, this means that it is crucial to maintain thorough records and ensure all necessary certificates and documents are readily available when the franchise term ends, especially if Kidokinetics is considering purchasing the assets. Failure to do so could delay the final payment, as the funds will be held in escrow until all requirements are met. This is a fairly standard practice in business transactions involving asset transfers, as it protects both parties and ensures compliance with legal and regulatory requirements.