When is the Initial Franchise Fee fully earned by Management Recruiters?

According to Management Recruiters' 2024 Franchise Disclosure Document, the initial franchise fee is considered fully earned upon the execution of the Franchise Agreement. This means that once the agreement is signed, Management Recruiters has fulfilled its obligation to grant the franchise, and the fee is non-refundable under any circumstances.

For a prospective franchisee, this implies that the initial franchise fee, which is $40,000 as defined elsewhere in the document, becomes non-refundable immediately upon signing the agreement. Even if the franchisee later decides not to proceed with opening the franchise, or if the agreement is terminated, the initial fee will not be returned. This is a standard practice in franchising, as the fee compensates the franchisor for the initial costs of granting the franchise, including training, market analysis, and administrative expenses.

However, Management Recruiters may, at its discretion, allow certain qualified franchisees to pay the initial franchise fee through a deduction from the franchisee's Contract Staffing Share and Recruiter Share. This deduction, referred to as the "Continuing Fee Increase," amounts to 2% of all Franchise Receivables. This payment method continues until the initial franchise fee is paid in full or for a period of 156 weeks following the Effective Date, whichever comes first. If any portion of the initial franchise fee remains unpaid after this period, the franchisee must immediately pay the remaining balance. Franchisees with aggregate Franchise Receivables of at least $400,000.00 in the third year following the Effective Date may continue to pay the Initial Franchise Fee pursuant to the 2% Continuing Fee Increase until the date that the entirety of the Initial Franchise fee is paid to Franchisor.

Additionally, if Management Recruiters allows payment via the Continuing Fee Increase, and if the franchisee's aggregate Contract Staffing Gross Billings exceed the Contract Staffing Incentive Billing Threshold before the initial franchise fee is fully paid, Management Recruiters will waive the remaining balance of the initial franchise fee. This provides a potential incentive for franchisees to quickly build their contract staffing business.