Does Aw's inclusion of the late payment paragraph indicate an intention to extend credit or finance the franchisee's Papa Ray's Pizza Restaurant operation?
Aw Franchise · 2025 FDDAnswer from 2025 FDD Document
(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 des
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 indicate an intention to extend credit or finance the franchisee's Papa Ray's Pizza Restaurant operation. The franchise agreement outlines that late payments will incur a charge equal to the greater of $150 or 1.5% per month on all overdue payments, up to the highest interest rate permitted by law. Aw retains the right to debit these interest charges from the franchisee's designated bank account.
This late payment clause is designed to encourage prompt payment and cover the costs associated with processing late payments. However, Aw explicitly states that this clause does not imply any intention to offer credit or finance the franchisee's business. This is a fairly standard practice in franchising, as franchisors typically do not act as lenders for their franchisees.
Prospective Aw franchisees should be aware that they are responsible for securing their own financing to cover startup costs, ongoing operational expenses, and any potential late fees. Understanding this distinction is crucial for franchisees to manage their finances effectively and avoid accumulating unnecessary debt. Franchisees should have sufficient capital to cover all expenses and ensure timely payments to Aw to avoid late payment charges.