What are some examples of non-curable defaults that could lead to termination of a Management Recruiters franchise agreement?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
which can be cured | | |
| "Cause" defined – non- curable | Section 20.2 | Defaults of obligations under the franchise agreement as defined in Sections 20.2 including Franchisee has not generated sufficient Gross Funds to pay a Gross Continuing Fee of at least three thousand dollars ($3,000.00) within six (6) months following the Effective Date; Franchisee is declared bankrupt or judicially determined to be insolvent, or all or a substantial part of the assets of Franchisee or the Franchise Business are assigned to or for the benefit of any creditor, or Franchisee admits his inability to pay Franchisee's debts as they come due; Franchisee abandons the Franchise Business by failing to operate for five (5) consecutive days during which Franchisee is required to operate the Franchise Business under this Agreement's terms, or any shorter period after which it is not unreasonable under the facts and circumstances for Franchisor to conclude that Franchisee does not intend to continue to operate the Franchise Business; Franchisee has made any material misrepresentation relating to acquisition of the Franchise Business or to induce Franchisor to enter into this Agreement; Franchisee engages in conduct that, in Franchisor's sole determination, materially and unfavorably reflects upon the operation and reputation of the Franchise Business or the System; | |-----------------------------------|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | | | determination, materially and unfavorably reflects upon the operation and reputation of the Franchise | | | | federal, state, or local Law or regulation applicable to operation of the Franchise Business; after curing any failure described in Section 20.1 Franchisee engages in the same noncompliance, regardless of whether such noncompliance is corrected | | | | after notice; Franchisee repeatedly fails to comply with one or more requirements of this Agreement regardless of whether corrected after notice; | | | | the Franchise Business is seized, taken over or foreclosed by a Governmental Authority in the exercise of such official's duties, or seized, taken over, or foreclosed by a creditor, lien holder or lessor, provided that a final judgment against Franchisee remains unsatisfied for thirty (30) days, unless a supersedes or other appeal bond has been filed; | | | | a levy of execution is made upon the Franchise Business or upon any property used in the Franchise Business and is not discharged within five (5) days after such levy; | | | | Franchisee, or any of its Principals, shareholders, members, officers, directors, or partners is convicted of, or pleads guilty or no contest to, any crime punishable as a felony or involving moral turpitude or immoral conduct; |
| Your obligations on termination/non-renewal | Section 21, | Cease using trademarks, deidentify, cancel assumed name registrations, pay all sums owed immediately, , cease use of domain names and URLs, destroy all tangible copies of Trade Secret materials and delete all electronic copies of Trade Secret materials. Comply with post-termination obligations related to non-solicitation of clients for a period of two (2) years.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION (FDD pages 49–54)
What This Means (2024 FDD)
According to Management Recruiters's 2024 Franchise Disclosure Document, certain defaults of the franchise agreement are considered non-curable and can lead to termination. These are outlined in Section 20.2 of the agreement. One such default occurs if a franchisee fails to generate sufficient Gross Funds to pay a Gross Continuing Fee of at least $3,000 within six months of the Effective Date. This means that if a new Management Recruiters franchisee doesn't reach a minimum revenue threshold to cover their ongoing fees within the initial six months, Management Recruiters can terminate the agreement.
Other non-curable defaults include scenarios related to financial instability, such as the franchisee being declared bankrupt or insolvent, or assigning a substantial part of their assets for the benefit of creditors. Abandoning the franchise by failing to operate for five consecutive days, or any shorter period that leads Management Recruiters to reasonably believe the franchisee doesn't intend to continue operating, also constitutes a non-curable default. Making any material misrepresentation during the acquisition of the franchise to induce Management Recruiters to enter the agreement is another example.
Furthermore, engaging in conduct that materially and unfavorably reflects on the operation and reputation of the Franchise Business or the System, as determined solely by Management Recruiters, is a non-curable default. Conviction of the franchisee, or any of its Principals, shareholders, members, officers, directors, or partners of any crime punishable as a felony or involving moral turpitude or immoral conduct also constitutes a non-curable default. These stipulations highlight the importance of maintaining ethical and legal compliance, as well as financial stability, to avoid potential termination of the Management Recruiters franchise agreement.
Additionally, the Franchise agreement can be terminated if the Franchise Business is seized, taken over or foreclosed by a Governmental Authority or by a creditor, lien holder or lessor, provided that a final judgment against Franchisee remains unsatisfied for thirty (30) days, unless a supersedes or other appeal bond has been filed. Also, a levy of execution is made upon the Franchise Business or upon any property used in the Franchise Business and is not discharged within five (5) days after such levy. Finally, repeatedly failing to comply with one or more requirements of this Agreement regardless of whether corrected after notice, or after curing any failure described in Section 20.1 Franchisee engages in the same noncompliance, regardless of whether such noncompliance is corrected after notice.