Under the Kidokinetics franchise agreement, what constitutes a default with no opportunity to cure?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
Default and Automatic Termination. Franchisee will be deemed to be in default under this Agreement, 16.1. and all rights granted herein will automatically terminate without notice to Franchisee, if Franchisee becomes insolvent or makes a general assignment for the benefit of creditors; or if Franchisee or any Principal files a voluntary petition under any section or chapter of federal bankruptcy law or under any similar law or statute of the United States or any state thereof, or admits in writing its inability to pay its debts when due; or if Franchisee or any Principal is adjudicated as bankrupt or insolvent in proceedings filed against Franchisee or any Principal under any section or chapter of federal bankruptcy laws or under any similar law or statute of the United States or any state; or if a bill in equity or other proceeding for the appointment of a receiver of Franchisee or other custodian for Franchisee's business or assets is filed and consented to by Franchisee; or if a receiver or other custodian (permanent or temporary) of Franchisee's assets or property, or any part thereof, is appointed by any court of competent jurisdiction; or if proceedings for a composition with creditors under any state or federal law should be instituted by or against Franchisee; or if a final judgment remains unsatisfied or of record for 30 days or longer (unless supersedeas bond is filed); or if Franchisee is dissolved; or if execution is levied against Franchisee's business or property; or if suit to foreclose any lien or mortgage against the Kidokinetics Business premises or equipment is instituted against Franchisee and not dismissed within 30 days. No provision
herein expressly identifying any termination or breach of this Franchise Agreement as material shall be construed to imply that any other term or breach which is not so identified is not material.
16.2. Defaults with No Opportunity to Cure.
Franchisee will be deemed to be in default and Franchisor may, at its option, terminate this Agreement and all rights granted hereunder, without affording Franchisee any opportunity to cure the default, effective immediately upon notice to Franchisee, if Franchisee, or any Principal, as the case may be:
16.2.1. fails to open the Kidokinetics Business within the time and in the manner specified in Article 7.
16.2.2. falsifies any report required to be furnished Franchisor hereunder;
16.2.3. abandons the Kidokinetics Business for a period of five consecutive days or more, with the term "abandon" including any conduct which indicates a desire or intent to discontinue operating the Kidokinetics Business in accordance with the terms of this Agreement and will apply in any event if Franchisee fails to operate the Kidokinetics Business as a Kidokinetics Franchise LLC. business for a period of 5 or more consecutive days without Franchisor's prior written approval;
16.2.4. fails to comply with any federal, state or local law, rule or regulation, applicable to the operation of the Kidokinetics Business, including, but not limited to, the failure to pay taxes;
16.2.5. defaults under any lease or sublease of the real property on which the Kidokinetics Business is located;
16.2.6. understates Gross Sales by 5% at any time, or understates Gross Sales by any amount on three occasions or more, whether or not cured on any or all of those occasions;
16.2.7. permits a Transfer in violation of the provisions of Article 15 of this Agreement;
16.2.8. fails, or Franchisee's legal representative fails, to transfer the interests in this Franchise Agreement and the Kidokinetics Business Location upon death or permanent disability of Franchisee or any Principal of Franchisee in accordance with the procedures set forth in Article 15 of this Agreement.
16.2.9. has misrepresented or omitted material facts in applying for the Franchised Business;
16.2.10.is convicted of, or pleads no contest to, a felony or a crime that could damage the goodwill associated with the Marks, or does anything to harm the reputation of the System or the goodwill associated with the Marks:
16.2.11. receives an adverse judgment or a consent decree in any case or proceeding involving allegations of fraud, racketeering, unfair or improper trade practices or similar claim which is likely to have an adverse effect on the System, or the Marks, the goodwill associated with the System or Marks or Franchisor's interest, in Franchisor's sole opinion;
16.2.12. conceals revenues, knowingly maintains false books or records, or knowingly submits any false reports;
16.2.13. creates a threat or danger to public health or safety from the maintenance or operation of the Kidokinetics Business:
16.2.14. refuses to permit Franchisor to inspect or audit Franchisee's books or records;
Kidokinetics
16.2.15. makes any unauthorized use of the Marks or other Intellectual Property or any unauthorized use or disclosure of Confidential Information (as defined in Section 18.2);
16.2.16. fails to comply with the non-competition covenants in Section 18.5;
16.2.17. defaults in the performance of Franchisee's obligations under this Agreement three (3) or more times during the term of this Agreement or any renewals or has been given at least two notices of default in any consecutive 12-month period, whether or not the defaults have been corrected;
16.2.18.has insufficient funds to honor a check or electronic funds transfer three or more times within any consecutive 12-month period, whether or not the defaults have been corrected;
16.2.19. defaults, or an affiliate of Franchisee defaults, under any other agreement, including any other franchise agreement, with Franchisor or any of its affiliates, suppliers or landlord and does not cure such default within the time period provided in such other agreement;
16.2.20. issues a press release or responds to a media inquiry without prior approval from Franchisor;
16.2.21. breaches its obligations under Section 21.12; or
16.2.22. fails to meet the Minimum Performance Requirement.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to Kidokinetics's 2024 Franchise Disclosure Document, there are several conditions under which a franchisee may be considered in default without any opportunity to cure the default. These include situations where the franchisee becomes insolvent, makes an assignment for the benefit of creditors, files for bankruptcy, or admits inability to pay debts. Similarly, the appointment of a receiver or custodian for the franchisee's assets, institution of proceedings for composition with creditors, an unsatisfied final judgment, dissolution of the franchise, or execution levied against the business also constitute defaults with no cure period.
Additionally, Kidokinetics can terminate the franchise agreement immediately if a franchisee fails to open the business as specified, falsifies reports, abandons the business for five or more days, fails to comply with laws, defaults on a lease, understates gross sales by 5% or more, or transfers the franchise improperly. Other non-curable defaults include misrepresentation in the franchise application, conviction of a felony, receiving an adverse judgment involving fraud, concealing revenues, creating a public health threat, refusing inspections, unauthorized use of intellectual property, or violating non-competition agreements.
Further, a franchisee will be in default with no opportunity to cure if they default three or more times during the term of the agreement, have insufficient funds for checks or electronic transfers multiple times, default under any other agreement with Kidokinetics, issue a press release without approval, breach obligations under Section 21.12, or fail to meet the Minimum Performance Requirement. These stipulations highlight the importance of maintaining financial stability, adhering to legal and contractual obligations, and upholding the Kidokinetics brand standards to avoid immediate termination of the franchise agreement.