What is the 'Initial Fee Collection Period' for a Management Recruiters franchise?
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, the 'Initial Fee Collection Period' is defined as 156 weeks following the effective date of the franchise agreement. This period applies if Management Recruiters, at its discretion, allows a qualified franchisee to pay the initial franchise fee through deductions from the franchisee's contract staffing share and recruiter share. These deductions are set at 2% of all franchise receivables, referred to as the 'Continuing Fee Increase.'
If a franchisee is permitted to pay the initial franchise fee through this 'Continuing Fee Increase' method, any remaining unpaid portion of the initial franchise fee at the end of the 156-week 'Initial Fee Collection Period' must be immediately paid to Management Recruiters. However, there is an exception: if the franchisee achieves aggregate franchise receivables of at least $400,000 in the third year following the effective date, they can elect to continue paying the initial franchise fee through the 2% 'Continuing Fee Increase' until the entire fee is paid.
In summary, while the standard 'Initial Fee Collection Period' is 156 weeks, Management Recruiters offers some franchisees the option to extend this period based on their financial performance, specifically their ability to generate significant franchise receivables. This provides some flexibility in managing the initial investment, but it also places importance on achieving certain revenue targets to avoid a lump-sum payment at the end of the initial collection period.