Are the service charges for late payments considered a penalty by Alloy?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
nts that you owe to us or to our affiliates will bear interest at the rate of 12% per annum or the maximum contract rate of interest permitted by governing law, whichever is less, from and after the date of accrual. In addition to interest charges on late Royalty Fee and Brand Development Fund Fee payments, you must pay to us a service charge of $100 for each delinquent report or payment that you owe to us under this Agreement. A payment is delinquent for any of the following reasons: (i) we do not receive the payment on or before the date due; or (ii) there are insufficient funds in your bank account to collec
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, the service charge for late payments is not considered a penalty. In addition to interest charges on late Royalty Fee and Brand Development Fund Fee payments, a franchisee must pay Alloy a $100 service charge for each delinquent report or payment.
The FDD specifies that a payment is considered delinquent if it is not received by the due date or if there are insufficient funds in the franchisee's bank account to cover the payment.
Alloy states that this service charge is not interest or a penalty but is intended to compensate Alloy for the increased administrative and management costs associated with late payments. This distinction may have legal and accounting implications for the franchisee.