In the world of retail, sometimes a business does not succeed or encounters issues matching the timeline of sales outlined in their Co-Op. They might be trying to leverage the wrong sales channel, might miss the prime season for selling, or maybe a competitor put out a better product. Whatever the reason, when the Co-Op does not perform according to expectations Kickfurther follows a process that gives buyers control over what happens next. There are four primary ways a Co-Op can go off track prior to cancellation by the buyers, they include:
1.) Reports sales for any sales period set that, when taken cumulatively with all other previously reported sales, is less than the sum of all the estimated sales amounts for all other previous sales periods plus 50% of the estimated sales amount for the current sales period (the “Sales Report Troubled Amount”). However, you can pay Kickfurther the difference between the actual invoice amounts and the Sales Report Troubled Amount within fourteen days of the invoice being issued for the sales period to avoid going into troubled status,
2.) Business makes a payment for any Payout Date identified in Exhibit B that when taken cumulatively with all other payments, is less than the sum of all previous estimated paybacks prior to such Payout Date plus 50% of the current estimated payback for such Payout Date,
3.) Business does not provide a Inventory Report by no later than fourteen days after the Reporting Day,
4.) Business does not provide payment, in full, for invoiced or reported sales for any Sales Period or Inventory Report within fourteen days after the corresponding Payment Due Date set forth in Exhibit B or once the payment term has elapsed after the report is made if the Co-Op has passed its estimated Completion Date, or
5.) If KF has not received the Total Payout Amount with fourteen days after the Completion Date.
If a co-op is not performing as expected it will be flagged as troubled due to the above circumstances and the buyers on that co-op will have the opportunity to vote to cancel the consignment contract and push the co-op into our cancellation pipeline.
If more than 50% of the buyers, weighted by ownership, vote to cancel the co-op the cancellation process begins and follows the below process.
- Cure period - 15 days – When a co-op reaches cancellation we will inform the business owner of the formal cancellation of their consignment contract. In the cure period they have 15 days to exercise the following options.
- Exercise option price (buyout the inventory)
- Provide proof of delivery of inventory
- Agree to KF settlement (6 month promissory note secured by a personal guarantee)
- Offer alternative settlement to buyers
- Review period – 15 days – After the cure period we will account for the various methods the business used to close out their consignment obligation to Kickfurther. Any balance not accounted for through the above (a-d) methods will be sent to a collections agency.
- Collection period – 30 days + - For any settlement agreement made between the business and the buyers (c or d) Kickfurther will work to collect payment directly from the business for distribution to the buyers. There is a 14-day grace period for payments to arrive, if any payments are later than this we may send the balance of the promissory note to collections.
While this is how we anticipate handling cancelled co-ops, from time to time, circumstances require that these exact guidelines aren't adhered to in order to attempt to reach the best outcome. We account for the value of co-ops that are in collections based on how delinquent on payments they are. This gives everyone the ability to reasonably assess what their expected performance on Kickfurther will be. It will follow the below guidelines.
- 0-30 days delinquent – 50% - As soon as a co-op is sent to collections we decrement the value of the co-op to 50%.
- 30-60 days delinquent – 25% - If attempts at collections are late by more than 30 days we will decrement the expected value of the outstanding balance to 25% of the total value.
- 60-90 days – 10% - If attempts at collections are late by more than 60 days we will decrement the expected value of the outstanding balance to 10% of the total value.
- 90+ days – 1% - If attempts at collections are late by more than 90 days we will decrement the expected value of the outstanding balance to 1% of the total value.
Inventory received in the cure will be governed by our liquidation process which is as follows.
- Delivery and retail period – 0-30 days – In the first 30 days buyers will have the following options.
- Sell discounted – We will list the inventory at a discounted price to give buyers the ability to sell and get first out sales on the inventory that has been delivered.
- Take delivery – Buyers can take delivery of the packs of inventory they originally purchased.
- Direct sale – Kickfurther will try to find a buyer at the option price to recoup payout of the co-op in full.
- Tally and wholesale period – 30-60 days – In the following 30-60 days Kickfurther will count the total remaining inventory and package it for sale on wholesale platforms like overstock.com or bstock.com. The goal is for a 50% recovery of the cost of goods in this period.
- Liquidation period – 60+ days – If the inventory fails to sell in the above pipelines the inventory will be sold at any price through any means possible to recoup whatever is possible.
Costs associated with collections, legal action, or liquidations will be paid out of collected funds before they are distributed to buyers.
Below is a graphic that visualizes the above information.