What is the minimum Fixed Charge Coverage Ratio that Management Recruiters must maintain on a consolidated basis?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
| Three months ended | ||||
|---|---|---|---|---|
| December 31, 2022 | December 31, 2021 | |||
| Franchise royalties | $ | 7,671 | $ 6,067 | |
| Service revenue | 378 | 471 | ||
| Total revenue | 8,049 | 6,538 | ||
| Selling, general and administrative expenses | 4,723 | 4,401 | ||
| Depreciation and amortization | 544 | 486 | ||
| Income from operations | 2,782 | 1,651 | ||
| Other miscellaneous (expense) income | (26) | 724 | ||
| Interest income | 49 | 127 | ||
| Interest and other financing expense | (112) | (90) | ||
| Net income before income taxes | 2,693 | 2,412 | ||
| Provision for income taxes | 49 | 227 | ||
| Net income from continuing operations | 2,644 | 2,185 | ||
| Income from discontinued operations, net of tax | 74 | 9 | ||
| Net income | $ | 2,718 | $ 2,194 | |
| Basic earnings per share | ||||
| Continuing operations | $ | 0.19 | $ 0.16 | |
| Discontinued operations | 0.01 | - | ||
| Total | $ | 0.20 | $ 0.16 | |
| Diluted earnings per share | ||||
| Continuing operations | $ | 0.19 | $ 0.16 | |
| Discontinued operations | 0.01 | - | ||
| Total | $ | 0.20 | $ 0.16 | |
| Weighted average shares outstanding | ||||
| Basic | 13,676 | 13,514 | ||
| Diluted | 61 | 13,741 | 13,635 | #### Note 16 - Subsequent Events |
On February 28, 2023 HireQuest, Inc. (the "Company") and all of its subsidiaries as borrowers (collectively with the Company, the "Borrowers") entered into a Revolving Credit and Term Loan Agreement with Bank of America, N.A. (the "Bank") for a $50 million revolving facility (the "Senior Credit Facility"), which includes a $20 million sublimit for the issuance of standby letters of credit (each a "Letter of Credit"). The Borrowers also have a one-time right, upon at least ten Business Days' prior written notice to the Bank to increase the maximum amount of the Senior Credit Facility to $60 million. The Senior Credit Facility replaces the Company's prior $60 million credit agreement with Truist Bank. The Senior Credit Facility provides for certain financial covenants i
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 65–66)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, Management Recruiters, along with its subsidiaries, entered into a Revolving Credit and Term Loan Agreement with Bank of America, N.A. on February 28, 2023. This agreement includes a $50 million revolving facility and replaces the prior $60 million credit agreement with Truist Bank.
The Senior Credit Facility mandates that Management Recruiters maintain certain financial covenants. One of these covenants is maintaining, on a consolidated basis, a Fixed Charge Coverage Ratio of at least 1.25:1.0. This ratio is a measure of the company's ability to cover its fixed charges, such as debt payments, with its earnings.
For a prospective franchisee, this information is relevant because it indicates the financial stability and obligations of the parent company. A healthy Fixed Charge Coverage Ratio suggests that Management Recruiters is managing its debt effectively, which can provide reassurance to franchisees about the long-term viability of the franchise system. However, it is important to note that this ratio is just one aspect of the company's financial health, and prospective franchisees should consider other financial metrics and factors as well.