What is the aggregate Franchise Receivables threshold that allows a Management Recruiters franchisee to continue paying the Initial Franchise Fee via the Continuing Fee Increase?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
upon execution of the Franchise Agreement and is not refundable under any circumstances**. The Initial Franchise Fee shall be payable as set forth in Section 5.2. Franchisee acknowledges and agrees that the grant of this franchise and the rights and obligations of the Parties under this Agreement constitute the sole and only consideration for the Initial Franchise Fee and that such consideration is adequate.
- 5.1.2.Initial Franchise Fee Payment.Franchisee shall pay to Franchisor the entirety of the Initial Franchise Fee contemporaneously with the execution of this Agreement, provided, however, that in Franchisor's sole discretion, certain qualified franchisees may be allowed to pay the Initial Franchise Fee via a deduction from Franchisee's Contract Staffing Share and Franchisee's Recruiter Share of 2% of all Franchise Receivables (the "Continuing Fee Increase") until the earlier of the date that the
entirety of the Initial Franchise Fee is paid to Franchisor and the date that is one hundred fifty-six (156) weeks following the Effective Date (the "Initial Fee Collection Period"). If Franchisor allows payment via the Continuing Fee Increase, and if at the end of the Initial Fee Collection Period there remains any portion of the Initial Franchise Fee unpaid, Franchisee shall immediately
Source: Item 23 — RECEIPTS (FDD pages 67–327)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, a franchisee may be allowed to pay the initial franchise fee via a deduction from Franchisee's Contract Staffing Share and Franchisee's Recruiter Share of 2% of all Franchise Receivables (the "Continuing Fee Increase"). This continues until the initial franchise fee is paid or 156 weeks following the effective date, whichever comes first. However, if a Management Recruiters franchisee has aggregate Franchise Receivables of at least $400,000 in the third year following the Effective Date, they may continue to pay the Initial Franchise Fee pursuant to the 2% Continuing Fee Increase until the initial franchise fee is paid in full.
This means that if a franchisee's receivables reach this threshold within the specified timeframe, they can extend the payment plan for the initial franchise fee beyond the initial 156-week period. This provides a financial benefit to the franchisee by allowing them to spread out the initial franchise fee payments over a longer period, potentially easing their initial financial burden.
For a prospective Management Recruiters franchisee, this is an important consideration in financial planning. If they anticipate generating significant receivables early in their operation, they may be able to take advantage of this extended payment option. However, it's crucial to note that this is contingent on achieving the $400,000 receivables threshold in the third year, and the initial franchise fee must still be paid in full eventually. The initial franchise fee is $40,000.
It is important to note that the franchisor has sole discretion in allowing qualified franchisees to pay the initial franchise fee via the Continuing Fee Increase. Franchisees should confirm eligibility and understand the terms and conditions associated with this payment option.