What is the purpose of the Indemnity Deposit required by Management Recruiters for Pay Card Services?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
s Direct Deposit Services. Given the likely total volume of direct deposits required by Franchisee, and the banking expenses, labor and administrative costs associated therewith, Hire Quest shall charge a minimum monthly fee of $25.00; assessable at the beginning of each month ("Direct Deposit Service Fee."). Franchisee agrees to pay and/or allow the Direct Deposit Service Fee to be deducted from any payments or disbursements by Hire Quest to Franchisee should Franchisee utilize Direct Deposit Services.
3. Pay Card Obligations:
a. During the term of the Franchise Agreement, Hire Quest may facilitate electronic payroll card services ("Pay Card Services"). These Pay Card Services will be facilitated by Hire Quest in
association with third party independent contractors. Franchisee may elect to utilize Pay Card Services. Franchisee is ultimately liable for any payment of workers/employees on Pay Cards and for obligations arising in relation thereto. However, to indemnify Hire Quest from potential or temporary losses, and in exchange for providing Pay Card Services, Franchisee shall issue a good faith, indemnity deposit to Hire Quest ("Indemnity Deposit"). The Indemnity Deposit shall amount to the average of one day's payroll for the branch, during the first quarter of the calendar year in which Pay Card Services are being provided. If a branch has no payroll for the first quarter of the calendar year (e.g. a new Franchisee), then the Indemnity Deposit shall be based on the next full quarter of the calendar year in which payroll occurred but, in no event, shall the deposit amount be less than $500. The Indemnity Deposit shall be issued to Hire Quest before Pay Card Services are provided. If Pay Card Services are provided prior to receipt of the deposit, Hire Quest may discontinue the services until the Indemnity Deposit is issued.
- b. Franchisee agrees that Hire Quest shall be entitled to utilize the Indemnity Deposit to cover funds which are improperly disbursed via Pay Card or for other indemnity purposes as may arise from abuse, misuse or negligent application of the Pay Card system; or for failures by Franchisee in upholding its obligations
Source: Item 23 — RECEIPTS (FDD pages 67–327)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, the Indemnity Deposit is required from franchisees who elect to use Pay Card Services. This deposit serves to protect Hire Quest (likely a related entity) from potential losses associated with these services. The franchisee is ultimately responsible for payments to workers/employees via Pay Cards and related obligations. The Indemnity Deposit acts as a safeguard for Hire Quest against potential or temporary losses.
The Indemnity Deposit amount is determined by calculating the average of one day's payroll for the Management Recruiters branch during the first quarter of the calendar year in which Pay Card Services are provided. For new franchisees without payroll during that period, the deposit is based on the next full quarter with payroll, but will not be less than $500. This deposit must be issued to Hire Quest before Pay Card Services are initiated; otherwise, Hire Quest may suspend services until the deposit is received.
Hire Quest is entitled to use the Indemnity Deposit to cover improperly disbursed funds via Pay Card, issues arising from abuse or misuse of the Pay Card system, or failures by the franchisee to meet obligations under the agreement. Furthermore, in the event a Management Recruiters franchisee fails to pay any debt or obligation under the Franchise Agreement, the Indemnity Deposit can be used to cover these liabilities for Hire Quest's benefit. The deposit is refundable to the franchisee upon completion or termination of the Pay Card Services program, provided that the funds are not needed to cover any indemnification or reimbursement to Hire Quest.