What working capital amount must a Kidokinetics franchisee maintain to properly operate the business?
Kidokinetics Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisee will, at all times, maintain sufficient working capital to fulfill its obligations under this Agreement; and
- 10.2.8.
Each Principal and each Principal's spouse will personally execute and bind himself or herself to the Guaranty and Confidentiality and Non-Compete Agreement, in the forms of Attachments E and F to this Agreement, respectively.
Each shall jointly and severally guarantee Franchisee's performance of all of Franchisee's obligations, covenants and agreements under the Agreement, and otherwise bind themselves to the terms of this Agreement as stated herein, pursuant to the terms and conditions of the Guaranty and Confidentiality and Non-Compete Agreement.
- 10.3. Appointment of Manager.
Franchisee, or its shareholder or member if Franchisee is an entity, must devote his/her full-time attention and best efforts to the management and operation of the Franchised Business,
or may delegate the day-to-day operations of the Franchised Business to a manager ("Manager"). Franchisee may not appoint a Manager who is not the Franchisee or Principal of the Franchisee, if an entity, without the approval of Franchisor. All requests regarding appointment of a Manager must be in writing. The Manager shall meet Franchisor's standards and criteria, as set forth in the Franchise Operations Manual or otherwise in writing by Franchisor, and will be an individual otherwise acceptable to Franchisor in its sole discretion. The Manager will devote his or her full time and best efforts to the supervision and management of the Kidokinetics Business, and may not engage in any other business activity without the Franchisor's consent, which may be withheld in Franchisor's sole discretion. The Manager will satisfy the training requirements set forth in Article 6. If the Franchised Business is operated by a Manager, then a Principal of Franchisee must devote at least 20 hours of work per month to the operation of the Franchised Business.
- 10.3.1.
Source: Item 22 — CONTRACTS (FDD page 59)
What This Means (2024 FDD)
According to the 2024 Kidokinetics Franchise Disclosure Document, franchisees must maintain sufficient working capital to meet their obligations under the franchise agreement. Specifically, Kidokinetics franchisees must have enough capital to properly perform all duties, obligations, and responsibilities, and to operate the Kidokinetics business in a businesslike, proper, and efficient manner.
This requirement ensures that franchisees can cover ongoing operational expenses such as employee wages, marketing costs, insurance, and other overhead. Maintaining adequate working capital is crucial for the financial health and stability of the franchise. It allows the franchisee to handle unexpected expenses or revenue shortfalls without jeopardizing the business's operations or reputation.
While the FDD specifies the necessity of maintaining sufficient working capital, it does not provide a specific dollar amount. This means the required amount can vary based on factors like the franchisee's location, sales volume, and operational efficiency. Prospective franchisees should carefully assess their financial situation and develop a detailed budget to determine the appropriate level of working capital needed to sustain their Kidokinetics business.
To gain clarity on the specific working capital requirements, prospective Kidokinetics franchisees should discuss this matter with the franchisor during their due diligence. They should inquire about any recommended or minimum working capital levels based on the franchisor's experience with other franchisees. Additionally, consulting with financial advisors and experienced Kidokinetics franchisees can provide valuable insights into managing cash flow and ensuring financial stability.