Under what conditions, other than termination or cancellation, will the Management Recruiters agreement term end?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
- **3.1.
Initial Term**. The Initial Term shall commence on the Effective Date of this Agreement and, unless terminated sooner pursuant to Section 20, shall expire on December 31 of the tenth (10th) full calendar year following the Effective Date of this Agreement.
- **20.5.
Buy-Out Termination.** Commencing on January 1 of the last full calendar year of the Initial Term under this Agreement, Franchisee may terminate this Agreement and
Franchisor will waive the competitive restrictions imposed by Section 17 on the following conditions:
- Franchisee must send Franchisor written notice ("Notice") six (6) months prior to the date of the proposed buy-out;
- Franchisee must pay Franchisor a buy-out price equal to fifteen percent (15%) of the Gross Funds of the Franchise Business during the immediately preceding twelve (12) calendar months;
- the Notice must include a cash deposit of one-third (1/3) of the amount due Franchisor for the buy-out, along with a promissory note ("Note") for the balance upon such terms and on such forms as Franchisor prescribes, and Franchisor's standard form of mutual termination agreement utilized in this context;
- Interest on the Note accrues from the date Franchisor receives the Notice;
- If, after sending such Notice to Franchisor, Franchisee does not consummate the transaction, Franchisor may either: (i) retain fifty percent (50%) of the deposit paid with Franchisee's Notice as liquidated damages, and not as a penalty, and keep this Agreement in force; or (ii) purchase the Franchise Business by paying to Franchisee an amount equal to the then net book value of the tangible assets of the Franchise Business, as disclosed in the balance sheet for the Franchise Business, provided that each depreciable asset shall be valued as if it had been depreciated on a "straight-line" basis from the date of its acquisition over its useful life without provision for its salvage value, retain the deposit and return the Note.
Source: Item 23 — RECEIPTS (FDD pages 67–327)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, the franchise agreement's initial term concludes on December 31st of the tenth full calendar year following the agreement's effective date, unless it is terminated sooner according to Section 20.
A Management Recruiters franchisee can end the agreement early through a buy-out termination. Starting January 1 of the last full calendar year of the initial term, the franchisee can end the agreement, and Management Recruiters will waive competitive restrictions under certain conditions.
To initiate a buy-out termination, the franchisee must provide Management Recruiters with written notice six months before the proposed buy-out date. They must also pay a buy-out price equal to 15% of the franchise's gross funds from the previous twelve calendar months. The notice must include a cash deposit of one-third of the total buy-out amount, along with a promissory note for the remaining balance, following Management Recruiters' prescribed terms and standard mutual termination agreement. Interest accrues on the note from the date Management Recruiters receives the notice. If the franchisee doesn't complete the buy-out after sending the notice, Management Recruiters can either retain 50% of the deposit as liquidated damages and keep the agreement in force, or purchase the franchise business by paying the franchisee the net book value of its tangible assets, while retaining the deposit and returning the note.