Under what conditions can a Kidokinetics franchisee pledge or encumber the Franchise Agreement to a third party?

According to Kidokinetics' 2024 Franchise Disclosure Document, a franchisee is generally restricted from pledging or encumbering the Franchise Agreement. Specifically, a franchisee cannot pledge, encumber, hypothecate, assign, or give a third party a security interest in the Franchise Agreement, Trade Names or Marks, other trade names, copyrighted materials, or the Kidokinetics Business without the franchisor's explicit consent. This consent must specifically state that the encumbrance is permissible and describe the specific nature of the encumbrance.

Any attempt to encumber the agreement or related assets without Kidokinetics' consent constitutes a breach of the Franchise Agreement and will void the security interest. This provision protects Kidokinetics by ensuring that the franchisee cannot use the franchise agreement or its associated assets as collateral without the franchisor's knowledge and approval.

For a prospective Kidokinetics franchisee, this means that obtaining financing or using the franchise as collateral for a loan is subject to Kidokinetics' approval. The franchisee must seek and receive written consent from Kidokinetics, detailing the specifics of the encumbrance. This requirement allows Kidokinetics to maintain control over who has a security interest in the franchise and ensures that any such arrangement does not negatively impact the brand or the operation of the Kidokinetics business. This is a fairly standard clause in franchise agreements, designed to protect the franchisor's interests and brand integrity.