What happens to any remaining Franchise Receivables upon termination of the Management Recruiters Agreement?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
iter Share on the Wednesday following the end of the Accounting Period during which Franchisor actually collects of such Franchise Receivable. Franchisor has no obligation to pay any Franchisee Recruiter Share to Franchisee unless and until payment is received by Franchisor and all applicable fees set forth in Section 5 have been paid. If that Wednesday is a banking holiday, then Franchisor will pay to Franchisee's Recruiter Share on the next business banking day. Upon termination of this Agreement, the final payment of the Franchisee's Recruiter Share shall be withheld and retained by Franchisor until an equivalent amount of Franchise Receivables, plus an amount of Franchise Receivables equal to any unpaid Continuing Fees or other fees payable to Franchisor hereunder, have been collected and remitted to Franchisor at which time (or as soon as reasonably practicable thereafter): (i) Franchisor shall remit to Franchisee the Franchisee's Recruiter Share, if any, as determined in accordance with Section 5 hereof; and (ii) Franchisor shall assign to Franchisee any remaining Franchise Receivables.
6.2. Contract Staffing, Invoicing, Payment, and Other Obligations.
- 6.2.1.Employment of Temporary and Contract Employees. Temporary and contract employees shall be employees of the Franchisor or its designated Affiliate, and Franchisor or its designated Affiliate shall pay all Temporary and Contract Employee Expenses, subject to full reimbursement from collections of Franchise Receivables;
Source: Item 23 — RECEIPTS (FDD pages 67–327)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, upon termination of the Franchise Agreement, the final payment of the Franchisee's Recruiter Share or Franchisee's Share will be withheld by Management Recruiters. This withheld amount serves as a temporary hold until an equivalent value of Franchise Receivables, in addition to any unpaid Continuing Fees or other outstanding fees owed to Management Recruiters, has been collected and remitted to Management Recruiters.
Once the equivalent amount of Franchise Receivables and outstanding fees are collected, Management Recruiters will remit to the franchisee the Franchisee's Share, if any, as determined in accordance with Section 5 of the agreement. Following this remittance, Management Recruiters will assign any remaining Franchise Receivables to the franchisee. This means that the franchisee will then be responsible for collecting any outstanding receivables that were generated during the term of the agreement.
This process ensures that Management Recruiters recovers any outstanding fees owed by the franchisee before relinquishing control of the remaining receivables. For a prospective franchisee, this means that upon termination, they may need to continue collection efforts on outstanding invoices to realize the full value of their Franchisee's Share. It is important for franchisees to understand the terms of Section 5, which dictates how the Franchisee's Share is calculated, to accurately anticipate their final payment upon termination.
It is also important to note that "Franchise Receivables" are defined as all receivables generated at the Franchisee's Location(s), which receivables are the exclusive property of the Franchisor, including all Contract Staffing Receivables and all Recruiter Receivables.