Under what circumstances might a Management Recruiters franchisee be required to pay a supplemental royalty?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
ation.** Franchisee may not relocate the Franchise Business without Franchisor's written approval of the new location. Franchisee acknowledges that MRI, in the past, granted exclusive territories and some of these territories may still exist within the MRINetwork (the "Legacy Territories"). Franchisor will not deny relocation unless, in its sole judgment, such relocation would be a violation of another Franchisee's territorial rights. In the event a Franchisee seeks to relocate into any of the Legacy Territories, Franchisee acknowledges that it may be required to make payment of a supplemental royalty over and above the Continuing Fees described in Section 5, which supplemental royalty will be paid, in full, by Franchisor to the owner of the Legacy Territory.
Source: Item 23 — RECEIPTS (FDD pages 67–327)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, a franchisee may be required to pay a supplemental royalty under specific circumstances related to relocation. If a Management Recruiters franchisee seeks to relocate their franchise into a territory that is considered a "Legacy Territory," they may be required to pay a supplemental royalty. These Legacy Territories are areas that Management Recruiters previously granted as exclusive territories, and some of these may still exist within the MRINetwork.
The decision to allow a relocation into a Legacy Territory is at the sole discretion of the Legacy Territory owner. If the relocation is approved, the supplemental royalty is paid in full by Management Recruiters to the owner of the Legacy Territory. This supplemental royalty is in addition to the standard continuing fees that the franchisee pays as outlined in Section 5 of the Franchise Agreement.
Furthermore, if a Management Recruiters franchisee relocates their franchise business without obtaining the franchisor's approval, they will be responsible for reimbursing Management Recruiters for any supplemental royalty that Management Recruiters is required to pay to the Legacy Territory owner for the remaining term of the Franchise Agreement. This provision underscores the importance of obtaining franchisor approval before making any relocation decisions, as unapproved relocations can result in unexpected financial obligations for the franchisee.