Does Aw's inclusion of the late payment paragraph imply acceptance or condoning of late payments?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
us (once we have determined the true and correct amount of Gross Revenue), we will transfer from your account the balance of the royalty and Marketing Fund contribution due or we will credit the excess against the next transfer for royalty and Marketing Fund contribution due, as applicable.
- 10.6 Interest on Late Payments. To encourage prompt payment of all amounts due to us and to cover the costs and expenses involved in handling and processing late payments, you will pay a late payment charge equal to the greater of (i) One Hundred Fifty Dollars ($150.00) or (ii) one and one-half percent (1 ½%) per month on all payments due to us during the period of time said payments are due and unpaid, but no more than the highest interest rate permitted by law. (You acknowledge that the inclusion of this Paragraph in this Agreement does not mean we agree to accept or condone late payments, nor does it indicate that we have any intention to extend credit to, or otherwise finance your operation of the Papa Ray's Pizza Restaurant.) We shall have the right to transfer from your bank account designated for making payments to us in the amount of any interest due and owing under this Paragraph. In addition, you will pay us any and all service charges we incur for each rejected electronic transfer or if you submit to us a check that is not honored and/or returned for insufficient funds.
- 10.7 Application of Payments. When we receive a payment from you, we have
Source: Item 22 — CONTRACTS (FDD pages 39–40)
What This Means (2025 FDD)
According to Aw's 2025 Franchise Disclosure Document, the inclusion of a late payment paragraph in the franchise agreement does not imply that Aw agrees to accept or condone late payments. The paragraph explicitly states that it is included to encourage prompt payment and cover the costs of handling late payments. It also clarifies that Aw is not intending to extend credit or finance the franchisee's operation of the Papa Ray's Pizza Restaurant.
Aw charges a late payment fee equal to the greater of $150 or 1.5% per month on overdue payments, up to the highest interest rate permitted by law. Aw also has the right to transfer funds from the franchisee's designated bank account to cover any interest due. Additionally, the franchisee is responsible for any service charges incurred by Aw due to rejected electronic transfers or dishonored checks.
This clause protects Aw from losses associated with late payments and incentivizes franchisees to pay on time. While Aw outlines the penalties for late payments, it explicitly states that this does not indicate an acceptance or condoning of such behavior. Franchisees should be aware of these terms and ensure they have sufficient capital and financial management practices in place to avoid incurring these charges.
Furthermore, Aw retains the right to apply any payment received from the franchisee to any past due indebtedness, regardless of how the franchisee designates the payment to be applied. This means Aw can prioritize covering outstanding royalties, marketing fund contributions, or other debts before allocating the payment to current obligations. This provision gives Aw significant control over how payments are applied and reduces the risk of accumulating debt.