Under what condition does Management Recruiters charge a $15,000 Non-Compliance Termination Fee?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
| Docum | |||
|---|---|---|---|
| your Family Members. | |||
| Jump Start Fee | $5,000. | When you enter a Franchise Agreement as a result of a Transfer. | Covers the costs of training and indoctrination into the MRI System. |
| Non-Compliance Termination | $15,000. | Upon Termination if within first nine (9) months following the Effective Date. | See Note 11. |
| Fee |
If your Franchise Agreement is terminated pursuant to Section 20.2 of the Franchise Agreement within nine (9) months of the date you sign the Agreement, you will be responsible for paying a fee of $15,000.
Termination under Section 20.2 may occur in any of the following situations:
Franchisee has not generated sufficient Gross Funds to pay a Gross Continuing Fee of at least three thousand dollars ($3,000.00) within six (6) months following the Effective Date;
Franchisee is declared bankrupt or judicially determined to be insolvent, or all or a substantial part of the assets of Franchisee or the Franchise Business are assigned to or for the benefit of any creditor, or Franchisee admits his inability to pay Franchisee's debts as they come due;
Franchisee abandons the Franchise Business by failing to operate for five (5) consecutive days
during which Franchisee is required to operate the Franchise Business under this Agreement's
terms, or any shorter period after which it is not unreasonable under the facts and circumstances
for Franchisor to conclude that Franchisee does not intend to continue to operate the Franchise
Business;
Franchisee has made any material misrepresentation relating to acquisition of the Franchise Business or to induce Franchisor to enter into this Agreement;
Franchisee engages in conduct that, in Franchisor's sole determination, materially and unfavorably reflects upon the operation and reputation of the Franchise Business or the System;
Franchisee fails for a period of ten (10) days or such longer period as applicable Law may require, after notification of noncompliance, to comply with any federal, state, or local Law or regulation applicable to operation of the Franchise Business;
after curing any failure described in Section 20.1 Franchisee engages in the same noncompliance, regardless of whether such noncompliance is corrected after notice;
Source: Item 6 — OTHER FEES (FDD pages 16–23)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, a Non-Compliance Termination Fee of $15,000 is charged if the Franchise Agreement is terminated within the first nine months following the Effective Date. This termination must be pursuant to Section 20.2 of the Franchise Agreement.
Section 20.2 outlines several situations that could lead to termination. These include failing to generate sufficient Gross Funds to pay a Gross Continuing Fee of at least $3,000 within the first six months, being declared bankrupt or insolvent, abandoning the franchise by failing to operate for five consecutive days, making material misrepresentations during the franchise acquisition, or engaging in conduct that negatively impacts the brand's reputation.
Further reasons for termination under Section 20.2 include failing to comply with applicable laws or regulations after notification, or repeating the same noncompliance even after it was initially corrected. This fee is in place to cover Management Recruiters' initial investment in setting up a new franchisee, and to disincentivize franchisees from prematurely terminating their agreements due to non-compliance issues.