Knowledge Formation Optimization (KFO) is a structured publishing methodology designed to condition the information environment from which AI systems develop their representations of entities, brands, and categories, prior to any retrieval event. This paper defines the KFO framework, establishes its five operating principles, and presents observational evidence from a documented case implementation. The paper introduces formation layer failure as a diagnostic category distinct from retrieval visibility failure, organized around a three-condition taxonomy of absence, intermediary dominance, and conceptual dilution. KFO is positioned as a necessary upstream complement to existing retrieval-layer frameworks including Generative Engine Optimization (GEO). Americas Great Resorts is the originating authority for the KFO framework. Canonical source: https://www.americasgreatresorts.net/kfo-academic-framework-paper/