If you are considering a Nextaff franchise, don’t get blindsided by these 12 important franchise fees (from the initial franchise fee, to the royalty fee, to 10 other fees found in Items 5 and 6 of Nextaff’s 2020 FDD).
1. Initial Franchise Fee: $1 to $40,000
- Nextaff’s standard initial franchise fee for each new Nextaff Office is $40,000. Nextaff’s standard initial franchise fee for a Conversion Office is $1.
- Certain franchisees will pay a lower initial franchise fee based on the following:
- (i) if a franchisee has been an employee of a Nextaff Office for a minimum of 24 months immediately before signing a Franchise Agreement, the initial franchise fee is $20,000;
- (ii) if a franchisee is a veteran of the United States Armed Forces, the initial franchise fee is $32,000; and
- (iii) if a franchisee is purchasing more than one Nextaff Office or has more than one Area of Responsibility, Nextaff may reduce the initial franchise fee for each additional location or territory.
- The initial franchise fee is paid at the time the Franchise Agreement is signed and is fully earned when paid. Nextaff charges a uniform initial franchise fee, which is not refundable under any circumstances.
2. Royalty Fee: percentage of Gross Wages, Buyout Payments, and Direct Hire Payments determined based on Gross Wages of your Office during the preceding calendar year: $0 to $1M – 8.00%; $1M to $2M – 7.75%; $2M to $3M – 7.50%; $3M to $4M – 7.25%; $4M to $5M – 7.00%; $5M to $6M – 6.75%; $6M to $7M – 6.50%; $7M to $8M – 6.25%; more than $8M – 6.00%
- Due Date: Retained by Nextaff weekly on each Friday based on collections from your clients.
- “Gross Wages” equals all money and other consideration paid to your Associates.
- “Buyout Payments” means any monies paid to Nextaff or you by a client for hiring Associates prior to fulfilling the standard temporary to hire term.
- “Direct Hire Payments” means any monies paid to Nextaff or you by a client for hiring Associates full-time immediately.
3. Marketing Fund: the greater of $100 per week or .75% of Gross Wages
- Due Date: Retained by Nextaff weekly on each Friday for the previous week’s Gross Wages, based on collections.
- You must contribute the greater of $100 per week or .75% of Gross Wages to the Marketing Fund upon commencement of the operation of your Nextaff Office. Nextaff may increase the amount you must contribute to the Marketing Fund upon written notice to you in an amount not to exceed the greater of $100 per week or 1% of Gross Wages.
4. Guaranty and Collateral Reserve: under the terms of the Franchise Agreement, you guarantee collection of accounts receivable generated from your Office. In order to secure this Guaranty, Nextaff may deduct a portion of the amounts that it collects from these accounts receivable and hold those funds as collateral security for your payment and performance of the guaranty.
- Due Date: Retained by Nextaff each Friday in addition to Royalty Fee.
- The Collateral Reserve is Nextaff’s asset but Nextaff maintains a separate ledger with the balance for the Collateral Reserve attributable to each of its franchisees.
- Currently, the maximum amount of Collateral Reserve Deduction is set at 0.5% of Gross Wages and is collected by Nextaff until the Collateral Reserve Balance of each franchisee is equal to or greater than $10,000. Once a franchisee’s Collateral Reserve Balance equals or exceeds $10,000, the Collateral Reserve Deduction shall be reduced to zero.
- Nextaff has the right to increase the minimum required Collateral Reserve Balance for each franchisee up to a maximum amount of $25,000.
5. Non-Compliance Processing Surcharge: 10% of client payment
- Due Date: According to terms assessed by Nextaff.
- You must forward any client payments that you receive to Nextaff and if you fail to do so, Nextaff has the right to assess a 10% surcharge on any payment which you fail to forward directly to it. Failure to comply may also cause a default under your Franchise Agreement.
6. Non-Compliance Weekly Finance Charge: for client accounts over 60 days old, Nextaff will charge you a non-compliance weekly finance charge of .192% per week on the amount of the account over 60 days old, until collected, written off, or charged back
- Due Date: Retained by Nextaff each Friday (if necessary) in addition to Services Royalty.
7. Staffing Software Fee: as of the date of the current disclosure document, the staffing software fee is $65 per user per month
- Due Date: The per user monthly amounts will be billed to you the first week of each month.
- Fees are remitted to the software service provider by Nextaff on your behalf.
8. Online Recruiting Software or Job Board User Fees: as of the date of the current disclosure document, $0 is required. Nextaff reserves the right to charge based on user fee requirements by the vendor.
- Due Date: Payable directly to the vendor(s).
9. Appointment Provider: all costs associated with your use of appointment setting service provider hired by Nextaff
- Due Date: As incurred.
- If your Nextaff Office is not meeting Nextaff’s standards and if you do not have a sales person or dedicated appointment setting vendor in place, Nextaff may require you to use one of its appointment setting service providers and you must pay the costs associated with your use of such service provider.
10. Transfer Fee: $10,000
- Due Date: Before transfer or assignment.
- Payable when you request approval of a transfer and assignment of your franchise.
11. Audit: cost of audit
- Due Date: 15 days after billing.
- Payable only if Nextaff requires an audit.
- If Nextaff believes gross revenue is being misrepresented, it has the right to perform an audit.
12. Insurance: cost of insurance
- Due Date: Payable before opening.
- You must acquire certain levels of insurance as required by the Franchise Agreement. If you fail to maintain these levels, Nextaff may obtain insurance coverage on your behalf and bill you for the cost of related premiums.